Housing affrdability

Housing affordability in Portland-metro

Portland-metro has become increasingly unaffordable. For this analysis, the cost of home ownership was defined as not only the mortgage (assuming a 20 percent down payment and a 30-year amortizing loan), but also property taxes, insurance and utilities. Affordability was defined as spending no more than 30 percent of the household income to purchase and live in a single-family house, condominium ortownhouse. Data was collected by home sales reported through the Regional Multiple Listing Service (RMLS) for the calendar year of 2014; values reported are the mean sales price in each area. Home prices in Vancouver, Washington, were not analyzed for this initial affordability study but will be considered in future analysis.

The analysis found that on average, a family of four would need to earn $70,000 per year (a high-income wage in a single-income household) to be able to purchase a home in the region, assuming the regionís median house price of $285,000, as shown in Figure 15.

A more detailed look at housing affordability provides startling results. A neighborhood-byneighborhood analysis of home prices shows that, with a few exceptions, the regionís core Ė essentially most of the city of Portland Ė has no home ownership opportunities for households earning less than $70,000. That lack of housing affordability, essentially driven by the mismatch of rising home prices and stagnant middle incomes, has grown more acute since 2004, and it essentially means middle-income families must leave the city and move increasingly far from the urban core, and from job centers for middle-income jobs, to find a home they can afford to purchase.

Figure 16 shows home affordability based on household income. Areas color-coded shades of green remain affordable for families with incomes of less than $69,400. Areas color-coded yellow to red require incomes greater than $69,400. The map clearly shows that, while a few spots in the city of Portland remain affordable for middle-income families, the lionís share of affordable areas are in the eastern, southern and western suburbs of Portland.

Figure 17 shows how affordability changed over the last decade. Areas color-coded shades of green have become slightly more affordable since 2004, a fact that was driven almost entirely by drops in mortgage interest rates over that 10-year period. Families looking at homes in the areas color-coded with the darkest shade of green, for example, needed $10,000 less in household income to afford a home in 2014 than they would have needed in 2004, again, with a drop driven by record-low interest rates.

Families looking at homes in neighborhoods color-coded yellow to red needed substantially higher incomes in 2014 compared to 2004. Areas shaded the darkest red saw the biggest changes; families looking in those neighborhoods needed $20,000 or more in 2014 than in 2004 to purchase a home. The biggest changes were in close-in neighborhoods on Portlandís eastside, many of which transformed from being traditionally middle class to becoming home to higher-income households.

If purchasing a home in the city of Portland is an opportunity only for families earning $70,000 or more, who are we pricing out?

For more than a decade, policy leaders have been focused on low-income housing, which primarily includes rental housing. That is an important focus that should continue with a greater emphasis on solutions that develop low-income housing more cost-effectively in a broader array of neighborhoods.

But this report shows that housing opportunities for middle-income workers must also be a focus. If purchasing a home in the city of Portland is an opportunity only for families earning $70,000 or more, who are we pricing out? Teachers? Firefighters? Welders? Construction workers? Owning a home has always been a significant American dream milestone; and one that should be available to more than high-income workers to meet the cityís equity goals.

And the problem is likely to get worse. If mortgage interest rates go up, as expected, the cost of owning a home will grow. The remaining affordable homes in Portland-metro, including those in the outer suburbs, will become less so, and the city of Portlandís middle-income affordability challenge will spread further.

Policy makers at the state, regional and local levels must look closely at all laws and regulations that impact home prices, including land availability, zoning, fees and taxes. If the goal is to enable people to live closer to their work, schools and transit, then housing affordability must be a focus.

However, the jobs and output numbers havenít produced the income gains that typically accompany economic expansions. This isnít a Portland problem. Income stagnation is a common theme across the country.

Portlandís answer to slow-growing income lies in how we address two big trends: the technology revolution and a growing global middle class. Technology is eliminating routine, middle-skill work. Simultaneously, technology demands higher-skilled laboróto design, operate, and otherwise harness its potential. Our students, workers and schools must be better informed about the direction of technology and organize their training and studies around it. We must connect education to the economy.

The growing global middle classóon track to more than double in sizeóis a huge opportunity for the Portland-metro region. This reconfirms the need for a coherent, focused export strategy, and increases the urgency to attract and retain diverse students and investors to the region, who understand foreign markets and have deep networks overseas.

There are challenges and opportunities ahead. Working together, we can be ready for them and focus on our common vision of growing jobs that support our regionís families.