Inclusionary Zoning in Oregon

[maccoinnich]

Originally Posted by 2oh1

Anyway... all I'm saying is that rent is getting scary. It's climbing far faster than inflation. It seemed like there was a crazy swing upward in rent between 2005 and 2009, and the recession never brought rent down at all - which — but is understandable. We'd reached a new normal. Now that the recession is over, rent is climbing skyward again. I wish I had solutions to offer up, but I don't.

Why didn't rents fall during the recession? Because demand for apartments was increasing, not decreasing. Even during the boom years of the 2000s, Portland never built as many multifamily units as it did in the mid 1990s. This is taken from a report [PDF] written this Spring:

A Brief History

How did our apartment vacancy rates drop so low in recent years? In the not so distance past, during Fall 2009, Multifamily NW reported a 5.9% vacancy rate for the Portland Metro area. Around this same time, the economy started its nosedive. Unemployment jumped, home foreclosures spiked, and any type of construction financing, commercial or residential, was difficult if not impossible.

However, Portland remained a popular destination and our population grew by around 75,000 from 2009 to 2012. These people needed a place to live, along with the scores of those that lost their homes to foreclosure or unemployment. All of these factors combined would have a positive effect on apartments, and set the stage for our current apartment construction boom.

Supply and Demand: 2009-2012

Given the recent single-family crash, many were not eager to become homeowners and demand for apartments was on the rise. Using conservative estimates, we will assume an average household size of 2.40 persons, and a home ownership rate of around 65 percent. Using these assumptions, growth of 75,000 people translates in to demand for roughly apartment 11,000 units. And this figure does not account for demand from those who left the single-family market and entered the rental market, or demolition.

While there was demand for at least 11,000 new units from 2009 to 2012, permits were issued for 7,400 new units in the Portland Metro area. Thus, the Portland Metro area was short by at least 3,600 new units over this time period. By Fall 2013, vacancy rates had dropped to just over 3.0%.

Inventory and Vacancy

Based on information provided by the 2010 US Census and with ad- justment for apartment permits in more recent years, the Portland Metro area has around 270,000 multi-family units. Using the 3.5% apartment vacancy rate from the Spring 2014 Multifamily NW re- port, we have around 9,500 vacant units. If one assumes that a market in balance will show a 5.0% vacancy rate, then there is a current short- age of 4,000 units.