Supply, Not Demand, Is the Problem

Portland officials are quick to blame population growth for the rapid decline in housing affordability. But Portland is hardly the fastest-growing urban area in America, and many that are growing faster remain much more affordable.

Census estimates show that, between 2010 and 2014, the Portland urbanized area gained 103,000 new residents. That’s a lot, but the Houston and Dallas-Ft. Worth urban areas both grew by more than four times that number, and Atlanta grew by three times that number, and all three remain very affordable. Portland’s median home value (American Community Survey table B25007) was 3.8 times median family income (American Community Survey table B19113) in 2014, while Houston’s was 2.2; Dallas-Fort Worth’s was 2.3; and Atlanta’s was 2.6 times incomes.

Those urban areas are all larger than Portland’s, but the Raleigh urban area is only half the size of Portland’s, and it also gained about 100,000 people between 2010 and 2014. Yet its median home value was just 2.8 times median family incomes. There’s no getting around it: Portland housing would be quite affordable if the city didn’t have an urban-growth boundary artificially limiting the amount of land available for development.

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3 thoughts on “Supply, Not Demand, Is the Problem

  1. Frank

    “There’s no getting around it: Portland housing would be quite affordable if the city didn’t have an urban-growth boundary artificially limiting the amount of land available for development.”

    In 2008, the market value of a house I rented in Portland was $235k.
    In 2009, it was $223k.
    In 2010, it was $220k.
    In 2011, it was $198k.
    In 2012, it was $194k.

    Was a bunch of land that was previously unavailable put on the market in 2008, thereby causing the value of this house to drop nearly 20% in four years?

    In 2013, it was $216k.
    In 2014, it was $258k.
    In 2015, it was $281k.

    Did all that land that was put on the market in 2008 get all built up so that it caused the house’s value to increase 45% in four years?

    Or maybe, just maybe, loose monetary policy is responsible for the majority of price fluctuations in Portland? Maybe, just maybe, the federal government and the Federal Reserve are responsible for the housing bubble that has been re-inflated in Portland?

  2. Frank

    “If it was all the Federal Reserve’s fault why were wild value fluctuations only seen in areas with stringent land use regulations?”

    I didn’t say it was all the Fed’s fault. Part of the blame lies with the federal government and their perverse incentives and their influence on monetary policy. (And I’ve argued here often that demand and amenities also drive prices.)

    Even a place like KC with no urban growth boundaries, there are wild value fluctuations. The median home value peaked in 2007 at $160k. Seven years later, values bottomed out at about $100k, a loss of nearly 40%. In the last year, prices are up 10%, or 20 times the rate of official inflation. These seem like pretty wild fluctuations to me, and I believe the primary driver is loose monetary policy.

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