From the March 2005 issue of New Urban News

Urban growth boundary did not make Portland unaffordable

PHILIP LANGDON

For the past several years, opponents of “smart growth” policies have insisted that Portland, Oregon’s urban growth boundary has made the region a much less affordable place to buy a house. But it now appears that the critics’ arguments relied to a large degree on figures that were wrong.

The critics have cited the National Association of Home Builders’ “Housing Affordability Index,” which is intended to calculate housing affordability based on median house prices, median income, and other factors, such as taxes. In housing affordability, Portland was near the national average in 1992, but in the following six years its ranking plummeted — from 94th to 190th, near the bottom of the list, according to the NAHB survey.

Portland remained near the bottom for five years, but then something curious happened: In 2003 Portland suddenly jumped to 65th. And in the latest survey, covering 165 metro areas, Portland ranked 78th — not as affordable as before but still in the top half of American metro areas.

So what happened? It appears that NAHB’s ranking underestimated the income of Portlanders. Not until 2003 did the ranking incorporate income figures from the 2000 US Census, which indicated a rise in median household income to $65,800 from $57,200 — a spurt of $8,600. Until then, income had been based on 1990 Census figures plus an adjustment that apparently underestimated just how well people in the Portland area were faring financially.

Since the start of the 1990s, the region’s high-tech boom has helped to boost both incomes and housing costs. The problem was that the affordability survey (which, according to NAHB, relied on income figures from the US Department of Housing and Urban Development) achieved greater accuracy on housing than on median income.

The most recent figures obtained by New Urban News show that US metro areas have a median household income of $57,500 and a median house price of $225,000. In Portland the median income is $67,900 and the median house price is $201,000.

The journal Housing Policy Debate had urban analyst Anthony Downs look at Portland’s urban growth boundary (UGB) in 2002 (Vol. 13, Issue 1). Downs examined house price changes in numerous metropolitan areas, including Portland, from 1980 to 2000 and concluded that Portland’s growth boundary had statistically significant effects on home prices only in the first half of the 1990s “and then only small effects.” Downs said “it is erroneous to conclude from Portland’s experience that UGBs inevitably cause home prices to rise faster.”

CASTING FURTHER DOUBT

A new book from Island Press, The Portland Edge, edited by Connie P. Ozawa of Portland State University (321 pages, $35 paperback), casts further doubt on the idea that the urban growth boundary has driven prices to uncomfortable heights. In one of the book’s sharpest essays, Deborah Howe acknowledges that the median price of existing single-family homes in the region has risen substantially — from $104,743 in 1990 (measured in 2000 dollars) to $160,217 in 2000. But Howe, a professor of urban studies and planning at Portland State, notes that “a large part of the housing price increase during the 1990s came from substantial investments in housing rehabilitation and renovation.”

“As home values started to rise in the 1990s, the transformation of whole neighborhoods was dramatic,” Howe writes. “Long-needed repairs and improvements were made.” She cites American Housing Survey data showing that “during the 1990s, the Portland metropolitan region ranked second in the nation in annual remodeling expenditures at $2,080 per homeowner — 45 percent higher than the national average. By investing an average of $16,640 to $24,960 to overcome existing problems and add space and amenities, Portland homeowners made their homes more valuable and enhanced the desirability of their neighborhoods.

Despite price increases, the rate of homeownership grew 1.6 percent among African-Americans in Portland and jumped 6.9 percent among whites. Every age group except the 55-to-64 cohort increased its homeownership rate in metro Portland in the 1990s, according to Howe. The city government helped offset the urban growth limit’s anticipated upward effect on prices by allowing more housing to be built. Municipal policies authorized higher density, accessory dwellings, and more rowhouses. Thus, in June 2000 more than 30 percent of the housing that was constructed within the metropolitan growth boundary arose in the city itself, Howe says.

“Today there are far more housing alternatives in Portland than existed in the 1980s,” Howe declares. The choices include traditional neighborhoods, downtown living, mixed-use developments, and transit-oriented developments, among others.

“Portland used to have ‘affordable housing’ because people did not want to live in the city,” she adds. “Such housing was often of poor quality and degraded. The city, however, has reinvented itself as a vibrant place where people want to live, and they continue to move here even in a depressed economy.” Government did not stand idly by, she says. “Portland has seized numerous opportunities to proactively facilitate the development of affordable housing.”This article is available in the March 2005 issue of New Urban News, along with images and many more articles not available online. Subscribe or order the individual issue.