My View • Is Portland really that expensive? Don't believe it

The Tribune story, 'Report: It costs more to live here,' (Dec. 23) referenced a recent Portland Business Alliance study that said '… the cost of living in Portland (the city, not the metro area) ranked higher than 84 percent of the cities surveyed. … Housing was 31.6 percent more expensive (than the national average for all cities surveyed). Housing is the main cause of the high ranking.'

To steal a phrase from the hosts of my favorite National Public Radio program, Car Talk, these claims about the housing cost of living in the city of Portland are B-O-G-U-S.

There are several factual reasons for my assertion of bogusity, including:

• Generalizing housing costs for the top 20 percent of households to the general population is clearly and brazenly wrong. Background materials for the ACCRA cost of living index (ACCRA COLI) clearly state that their data 'reflects cost differentials for professional and executive households in the top income quintile.'

• Using a new construction home price that represents a tiny slice of the total market, and is overstated by 65 percent compared to the metro median sales price, does not inspire confidence in the accuracy of the homeownership component of the index. These same background materials also indicate that the housing cost standard used is for the 'total purchase price for a 2,400-square-foot living area new house, 8,000-square-foot lot, four bedrooms and two baths.'

The ACCRA first quarter 2010 report pegs the city of Portland home purchase price at $392,967. There are two things wrong with using this standard and this value. U.S. Department of Housing and Urban Development data show that new construction accounts for 6 percent of all home sales - a tiny portion of the overall market.With regard to actual sales prices, the Regional Multiple Listing Service median price for the Portland area for the year to date, through March 2010, was $237,500. This means the cost of living index used a sales value for Portland that was 65 percent higher than the median metro Portland sales price for that time period.

• Using a rent value that is 27 percent higher than the locally benchmarked Portland rent further erodes the credibility of the housing cost in the study. ACCRA pegs the Portland apartment price at $1,026.A first quarter 2010 Marcus and Millichap Portland housing market update report put the asking price for Class A two-bedroom apartments in the Portland area at $810. The stated ACCRA apartment rent was 27 percent higher.

Given these facts, it is clear that the housing cost of living index used in the business alliance study is not representative of the costs for the median income/middle class housing market in any of the cities surveyed, including Portland. Because of the 29 percent weight given to housing in the ACCRA cost of living index, distortions in the housing component have a significant impact on the accuracy of the entire ACCRA cost of living index.

While the ACCRA cost of living index may accurately compare the cost of living for 'top income quintile professional and executive households,' those households are by definition clearly not middle class or median income households. In addition, the 89 percent share of homeowners included in the highest income quintile provides a further upward bias in computing housing costs compared to the overall market, where five-year (2005-09) home ownership rates in the city of Portland were 55.5 percent.

As a former professional and executive, I can appreciate the limited uses of the ACCRA cost of living index for mobile higher-income households. However, the facts clearly show that the ACCRA cost of living index does not accurately reflect middle-class housing costs in the city of Portland.

The media, trade groups and public agencies should therefore not use it for that purpose.

Tom Cusack is the editor of the Oregon Housing Blog and the retired director of the Oregon office of the U.S. Department of Housing and Urban Development.

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