Economist: Anti-sprawl rules boost home costs
Land-use planners and affordable housing advocates now are blaming the Great Recession for many of the people living on the streets — and the even larger number struggling to keep their homes.
Several recent studies show that new home and apartment construction all but stopped in the years after the housing market collapsed around 2008, creating a growing lack of available homes when the economy roared back to life and more people began moving to the Portland region, drawn by its available jobs and livability. The low vacancy rate drove up housing costs as demand exceeded supply, forcing low-income residents out of their homes as costs increased and putting many more at risk of homelessness.
But economist Randall Pozdena isn't buying all of that. He says regional housing costs were increasing far faster than the national average before the recession started, and have merely resumed that trajectory since it ended. Pozdena agrees there is a regional housing shortage driving costs up, but he also blames state and local land-use planning policies that have limited the supply of land for new home and apartment construction. They include urban growth boundaries around metropolitan areas that limit where new development can happen.
"When anti-sprawl policies were enacted, there wasn't any talk about their potential impact on housing affordability. Now it's clear — they're driving up housing costs," said Pozdena, president of QuantEcon Inc., an Oregon-based economics consulting firm.
Pozdena recently completed a study titled, "The Housing Affordability Crisis: The Role of Anti-Sprawl Policy." It claims there is a clear connection between states and cities with strong land-use control policies and high housing costs. The study compared a 1999 ranking of states with strong "anti-sprawl" policies by the Sierra Club with historic home prices in all 50 states.
The Sierra Club said Oregon had the strongest anti-sprawl policies in the country in 1999. Pozdena's study found Oregon and the Portland region had some of the highest housing costs in the country both before and after the Great Recession — and he said it's not a coincidence. States like Texas, with limited land-use policies, had the smallest increases.
"The Sierra Club rankings were a snapshot in time. They said Oregon had the strongest anti-sprawl policies. It's not an accident, not a statistical anomaly," Pozdena said.
The Sierra Club did not respond to requests for comment about Pozdena's study.
Economist worked on other studies
Pozdena admits he is a longtime skeptic of Oregon's land-use planning policies. He has been criticized for years by land-use planning advocates who say he is biased in favor of the home building industry. And his new study was published by the Cascade Policy Institute, a Portland-based free market think tank that has long been criticized by them, too.
But Pozdena also is a senior director of ECONorthwest, a local economic consulting firm that has produced a study saying it can cost less to build in existing cities than on new land brought into the urban growth boundary (UGB) administered by Metro.
In fact, Pozdena worked on that study with Mike Wikerson, the firm's project director. Titled "Housing Underproduction in Oregon," it was commissioned by Up for Growth, a national advocacy organization that promotes building housing close to jobs, shopping and transit. Wilkerson presented the study last October at an event hosted by the organization.
According to Wilkerson, Pozdena used much of the same research in both studiess. Wilkerson agrees that limiting land supply increases housing costs, but argues the solution is more complicated than expanding or even eliminating the UGB.
"Randy is right, but there is more to increasing housing than increasing the land supply. There are other issues, like the cost of the infrastructure to support the housing. If developers can't pay for it, nothing's going to be built," says Wilkerson, pointing out that few new homes have been built in some of Metro's previous UGB expansion areas.
Wilkerson also said anti-sprawl policies only affect areas where people want to live, like Portland.
"You could draw a boundary around a city like Detroit where people are leaving, and it wouldn't make a bit of difference," Wilkerson said.
Big plans for producing more housing
Pozdena's study was released as previously unthinkable proposals are being considered to increase housing in Portland. They include the current recommendations of the Residential Infill Project, which would rezone 93 percent of the city's single-family neighborhoods to allow fourplexes on practically every lot.
Kotek, D-Portland, has introduced a bill in the 2019 Oregon Legislature that would require the same thing in all cities with more than 10,000 people. And state Senate President Peter Courtney, D-Salem, has introduced a bill that would allow far higher densities within one-half mile of major transit lines and light-rail stations.
The study also was published after Metro, the regional government in charge of land-use planning in the Portland area, approved the largest UGB expansion in years. After changing the criteria for considering such expansion, the Metro Council approved requests from four cities to add 2,200 acres to the UGB to accommodate up to 9,200 new homes.
Pozdena doesn't believe such proposals and the recent UGB expansion will significantly reduce home costs, however. He said the housing shortage is now so large, most of the new housing will still be financially out of reach for the majority of Portlanders.
"It's not nearly enough," said Pozdena, who notes the current RIP recommendations would only produce 24,000 new housing units over 20 years, a fraction of the 280,000 or so homes of all kinds Metro says are needed in the region by 2038.
You can read Pozdena's study here.