A couple of decades ago, the planning mantra in Oregon was “don’t turn Portland into Los Angeles,” meaning don’t make it more congested. So planners were a bit chagrinned to discover that their plans actually aimed to turn Portland into Los Angeles (see p. 7), meaning a dense urban area (L.A. is the densest in the nation) with a low number of freeway miles per capita (L.A. has the lowest of the nation’s fifty largest urban areas). Since then, Portland-area congestion (measured in hours of delay per commuter) has reached the Los Angeles’ 1985 level.
Today, the mantra is “don’t turn Portland into San Francisco,” meaning an extremely unaffordable housing market. So it should be no surprise that Portland planners are following exactly the policies that will turn Portland into San Francisco.
“We have a crisis of housing affordability in this city,” says Portland Mayor Hales. But expanding the urban-growth boundary is not the answer, he claims. “It’s not true that new housing at the edge is affordable,” he argues. “Maybe it once was when there was cheap land, cheap money and cheap transportation. That’s not true anymore.” Yes, but the reason it isn’t true is the urban-growth boundary. Get rid of the boundary and associated planning restrictions, and vacant land becomes cheap, and new homes built on the urban fringe will cost a lot less. In turn, that will force prices down throughout the city and region.
Hales believes instead that “Affordability comes by innovation: small houses, infill, different forms and structures than the 3-bedroom home on a cul-de-sac.” That’s exactly the prescription used in San Francisco. That region has had urban-growth boundaries for longer than Portland and it hasn’t expanded them, ever, as far as I can tell: expansions require spending $15 million or more on an environmental impact report, and no local government is willing to spend that.
Instead, Bay Area governments are focused on densification: Despite accusations of NIMBY zoning, the region’s density has increased by 65 percent since 1980. But that increase hasn’t made the region more affordable. In 1980, median home values were 4 times median family incomes; today they are nearly 8 times, and at the peak of the recent housing bubble they were more than 11 times family incomes.
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For comparison, value-to-income ratios in regions that don’t have urban-growth boundaries tend to hover around 2 to 3. In 1969, before it had urban-growth boundaries, San Francisco’s value-to-income ratio was 2.3.
(For those not familiar with value-to-income ratios, someone getting a loan on a house that costs two times their income can pay it off in under 10 years; three times, 20 years; 4 times, 30 years; 5 times, more than 30 years; 6 times, about 60 years; 7 or more times can never be paid off. These numbers presume 4 percent interest rates, a modest down payment, and that the buyer devotes 25 percent of their income to the mortgage.)
As the Antiplanner has previously noted, San Francisco’s Plan Bay Area calls for even more densification, with something like 80 percent of all new housing being located in high-density developments along transit corridors. Yet the planners themselves predict that this will only make housing less affordable.
Merely making token expansions to the urban-growth boundary, as Portland has done in the past, will do little to relieve affordability problems. For one thing, the region so heavily regulated the added land that developers weren’t interested in building on it anyway. Even without the regulation, a small addition wouldn’t do much to reduce overall prices. What Portland needs is to eliminate the boundary so developers can build where it is most suitable, which may be miles away from where planners want them to build.
That’s not going to happen under Portland’s current regime. Instead, politicians will continue to pay lip service to affordability even as they jack up the rents on supposedly affordable, government-owned housing. What a farce.
For the purpose of reducing the cost of housing, I agree with Randal O’Toole that removing Portland’s growth boundary would hold more value then increasing density. Mr. O’Toole has claimed that building costs are higher per square foot of floor space in higher density areas, and that makes enough sense to me. But I don’t understand his implication that increasing density holds no value.
He writes, “Despite accusations of NIMBY zoning, the region’s density has increased by 65 percent since 1980. But that increase hasn’t made the region more affordable.” But how much does this really tell us about changes in San Francisco’s housing market? Wouldn’t more meaningful figures be to talk about the changes in vacancy rates since 1980? If the vacancy rate has remained constant over that period, but household costs have still risen faster than incomes, then that does more to backup his point. I’d post these figures myself, but I don’t honestly know where to get them.
To suggest that increasing density can have positive effects, I’d like people to imagine three different metro areas. In one, developers are allowed to build whatever there is a market for, and the market only demands low-rise housing. In another, developers are also allowed to build to meet market needs, and there is market demand for some high-rise housing in addition to low-rise housing. In the third metro area, there is demand for more high-rise housing and physical barriers prevent them from building more low-rise housing, but regulations prevent building more high-rise or mid-rise housing. I’m guessing that I’ve listed those three areas from least-expensive to most-expensive, but wouldn’t the gap in prices be much larger between the third and second than between the second and first.
Portland is renowned as a great place to live. I know people all over who have expressed a desire to move to Portland. Is it possible that places where lots of people want to live might be more expensive, irrespective of urban containment policies?
No, it is not possible. Increased demand will only cause prices to skyrocket if the supply is limited. You can ignore supply and demand, but supply and demand will not ignore you.
Sooo, you’re saying Portland’s housing prices have nothing to do with its desirability as a place to live? By that logic all Detroit needs to do to prop up its blighted neighborhoods is draw an urban growth boundary around them and voila, it will have San Francisco’s housing market. Brilliant!
Ohai,
No, I didn’t say that. Detroit’s existing housing stock satisfies it’s demand so limiting new construction would have a very small effect. However, Atlanta, Houston or any growing area could easily cause housing prices to skyrocket by limiting new construction.
Portland’s housing prices are up due to speculation and foreign investment. A place can be cool and affordable at the same time. As a Portlander, I can tell you that Mayor Hales and his spec-home building pals have screwed up the housing market and it is at bubble levels. that would explain the “No California” stickers on real estate signs.
Higher prices are pushing interesting people out, and Portland grows less cool and livable by the day.
Crime is up, congestion is up, and there are terrible bike vs cars conflicts.
BTW, people with jobs in the Portland area are moving to ‘burbs like Wilsonville and commuting in by car- so the anti-sprawl policies aren’t working.
Y’all are just all wrong. Look at any house valuation for taxation purposes on the GIS site. All fluctuations in prices coincide perfectly with Federal Reserve interest rates and federal monetary policy. Low rates = high level of speculation and increased land/housing “values.”
Also, go Royals!
Is it possible that places where lots of people want to live might be more expensive, irrespective of urban containment policies?
No. Why would the attractiveness of a location have an effect on house prices/rents but not incomes?
Y’all are just all wrong. Look at any house valuation for taxation purposes on the GIS site. All fluctuations in prices coincide perfectly with Federal Reserve interest rates and federal monetary policy. Low rates = high level of speculation and increased land/housing “values.”
You think that house price variation within a single urban area, at a single point in time can be explained by Federal Reserve monetary policy? How?