Portland Addresses Housing Crisis By Making Housing More Expensive

Portland housing prices are growing faster than almost anywhere in the nation. So the Portland city council has decided to address this problem by building 1,300 units of “affordable” housing, adding less than one-half percent to the city’s housing inventory.

How are they going to pay for this? By taxing new homes 1 percent of their value. Because new and existing homes are easily substitutable for one another, when the price of new homes goes up by 1 percent, the price of existing homes will also go up by 1 percent.

The problem is that politicians don’t understand the difference (or hope voters don’t understand the difference) between “affordable housing” and “housing affordability.” The former is something governments build to help people who are too poor to afford decent housing. The latter is the general level of housing prices relative to the general level of incomes. Building “affordable homes” addresses the first problem, but not the second–except in cases such as Portland where affordable housing makes housing less affordable.

In short, Portland is using the wrong tool for the job. The result is that, instead of making housing more affordable, it is making it less so. Of course, developers who will build those 1,300 units of affordable housing will benefit, and they were probably the leading lobbyists behind this idiotic idea.


4 thoughts on “Portland Addresses Housing Crisis By Making Housing More Expensive

  1. LazyReader

    Portland’s Mayor Charlie Hales’ in one of his State of the City speeches, said
    “Portland was in danger of becoming “a city where only 10 percent of homes are affordable by the middle class.” Who’s going to live in those homes, then? Are all Portlanders rich except me?”

    Hales’ comment was part of a rhetorical flourish about how we don’t want Portland to turn into San Francisco, where that 10 percent stat has already come true. Yeah San Fran is a overpriced and too expensive for it’s original “flavor” folk

    Portland and San Francisco are the same basic cities. Once cultural hubs with thriving industries and cultures that were chased out by a progressive wave New Age mindset. Portland chased out the timber industry, the forest products industry. It’s largest employer is a Hospital. The timber industry of Southern Oregon has shrunk because of environmental protection, mechanization and consolidation, leaving once-prosperous towns looking in new directions.

    By the late-’90s San Francisco, you can have all the Manhattan greed-is-good economy moments you like. Freed, Teller and Freed, the oldest coffee and tea seller in the city (established 1899, its handcrank cash register in use until the end) survived all earthquakes, the Depression, Starbucks but it couldn’t survive the tech bubble, It closed by 2000 to become condos. You can stand on Sixth Street and the flow of traffic now evokes Sixth Avenue in Manhattan. Parking is bad all over the city, the gratuitous kindness from strangers and service personnel so pleasantly contrasted with New York is gone. And I’m gonna laugh when the LGBT community is priced out of it’s famous neighborhoods.

    I’ve only went to SF once and had to play the cities most popular game “Human or Dog”. That’s where you have to guess whether the feces on the sidewalk is from a human….or a dog, no one actually wins the game, you just do a little better each time.

  2. ahwr

    Say a developer in Portland sees an available lot and figures they can sell a new house there for 400k. They look into how much it will cost to construct, labor, materials, permits, interest on debt etc…and all that comes to 200k. Then they’d be willing to pay 200k-their profit for the lot. The 1% construction tax increases their cost to 202k. Now they’re willing to pay 198k-profit for the lot. If they could sell the house for 402k, their costs wouldn’t have to increase for them to do so. The cost of land in Portland is substantial, taxes and fees eat into it. Get rid of this tax and the tens of thousands of dollars in existing development fees and the price of land would increase substantially. The price of land doesn’t get hit by this new tax, only construction. The tax might increase home prices a bit, but well under 1%.

  3. Tombdragon

    ahwr – What? Adding $4,405 to the cost of a home is no big deal? That is the direct result of your suggesting with your example. There is a cost associated with money, and small minds like yours fail to take that into account. What is the true cost to the community associated with those “affordable” housing installed by the community? The fact remains that the purpose of the land us laws in Portland and Oregon is to exponentially drive up prices, driving people – and business – away, resulting in increases in property value and tax collection, as assessments get reset when housing changes hands. Those in government talk a big game, but there is no reason for them to be successful in “providing” an avenue for affordable housing. There is every reason to believe they would come up with schemes and obstacles to actually get it done. This is a big deal, because our government has a horrible record of success in ventures such as this.

  4. ahwr

    > What? Adding $4,405 to the cost of a home is no big deal?

    That would be a big deal. I have no idea where you got that number from.

    >assessments get reset when housing changes hands

    Not in Portland.

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