Rep. Mike Nearman's Newsletter 4-3-17

Affordable Housing in Oregon

Oregon has a housing affordability crisis and there are several proposals on the legislative table to alleviate the crisis. As a member of the House Committee on Human Services and Housing, I’ll get a front row seat for this debate. Before we look at solutions, I think we need to consider some of the causes, which can, in turn, guide the quest for solutions.

Since 1974, Oregon has had some of the most restrictive land use laws. Because of this policy, the supply of land that could be developed into housing is restricted by government, which drives up the price of land that can be used for development. We can have a discussion about whether or not we want to change the land use laws, but there is no doubt that these policies restrict the supply of buildable land and therefore are a price driver. Most notably — on this issue — state and local government has control of this restriction on resources and if this issue is to be taken seriously as a concern, government needs to lead the way by relaxing restrictions.

Another factor driving the lack of supply of affordable housing is the fact that very little housing was constructed for about five years during the Great Recession beginning in 2008. Since housing is such a big ticket item, when builders build, they tend to build the highest end housing that they can afford. They need to get the most out of the land, especially when the price of land is so high. This is not so much the case for small ticket items, like, say toothpaste, where there is a market for a low cost alternative.

The way that we get affordable housing is not so much through private developers creating budget homes and apartments, but more through what was once higher-end housing getting run down over time and becoming more and more affordable. The same effect can be seen in the automobile market. No automaker makes any vehicle that you can buy for even $10,000, but you can certainly find a used affordable vehicle for even a $1,000 or less. Time creates affordable big-ticket items, not the market.

With that in mind, when the government sector endeavors to spend public money on housing to cover a need caused by the likes of the Great Recession, they need to take care that they are supporting very low cost units that the market will not supply. Sadly, this has not been the priority. While public money could multiply the number of units by creating simple housing – even dormitory style housing which might be ideal for low-income persons — the trend has been to build few, expensive units.

Another driver of the lack of affordable housing, is one that perhaps cannot and perhaps should not be solved – the Oregon Coolness Factor. In short, Oregon is a cool state, and attracts a large net in migration. Short of making the feral skunk the state animal, there is probably not a way to deter people from moving to Oregon. And while growth has some negatives, I’m not sure I want to stop or slow it.

A further possible driver is that financial regulations (Dodd-Frank) which arose out of the housing collapse of 2008 have restricted access to capital. Providentially, interest rates have been low since then, but any rise in rates will surely cause a new problem. Resolving this will be the job of the federal government.

As we look for solutions, we need to keep the sources of the problem in mind. 

Next: Affordable Housing in Oregon, Part Two: Where Do We Go From Here

Representative Mike Nearman

House District 23