By Mick Harris
In June 2022, according to a Redfin report, Portland home prices were up 7.6% compared to last year, selling for a median price of $570,000. On average, homes in Portland sell after six days on the market. One would expect such a brisk market to lead to a building boom. Unfortunately, despite demand in the popular Portland metropolitan area, both homebuyers and builders are stymied by an artificial shortage. One troubling reason for this shortage? An unnecessarily complex bureaucracy.
According to a recent Willamette Week article, “New data from Redfin shows that despite the city having some of the highest housing prices in the nation, Portland’s builders aren’t pulling permits fast enough to meet demand. For single-family houses, builders here pulled just 7.6 permits per 10,000 residents in the first quarter of 2022. By contrast, builders in Austin, Texas, took out 31.1 permits per 10,000 residents, leading the nation, according to Redfin.”
Multifamily builders also find the Portland market difficult. Willamette Week reported that Portland issued just 4.9 permits per 10,000 residents for multifamily buildings, despite Portland’s median asking rent increasing 33% in April compared with a year earlier – the fifth highest rate of rent increase for large metro areas.
Developer Noel Johnson spent nearly four years waiting for permitting to build the Wilson Forest Park Townhomes. In conversation with Tonkon Torp, Johnson described the Kafkaesque process of building the 14-home subdivision in NW Portland. According to Johnson, building the subdivision involved a seven-month land use review and a 22-month public works review before Turner Construction could build the streets and sidewalks. This was followed by a four-month plat review and an 11-month building permit review before I&E Construction could build the actual homes.
An extensive audit by Portland City Auditor Mary Hull Caballero—first published on March 23, 2021 and updated on January 14, 2022—supports these anecdotal examples of bureaucratic entanglement. The audit found that Portland:
- Does not meet its timeliness goals—The city assesses its performance for reviewing building permit applications, across the seven bureaus, with a single benchmark: time to finish the initial plan review. This measure is required by Portland’s permitting standards and bureau agreements, as well as by state law and industry standards. Unfortunately, the city has not met the timely plan review standard in the last five years for either commercial or residential building permits.
- Doesn’t measure or report on activities as required—City policy requires quarterly and annual reports on complaint resolution decisions, but the department does not produce these mandated reports. As a result, the downstream accountability process is circumvented.
- Does not follow policy for customer complaints—City policy establishes clear timeframes for resolving delays, identifies who handles complaints, and defines different escalation pathways for those complaints. However, the City ignores these requirements in favor of informal practices…. This tends to leave the inexperienced and less well connected at a significant disadvantage, and it appears to favor, at least in some instances, those with resources and connections, including political connections.
According to the audit, “Portland’s fragmented form of government exacerbates the situation. Seven bureaus and City Council are responsible for plan reviews, but no one entity manages system-wide performance…. Solving these problems requires sustained, focused City Council leadership.”
It’s past time to act
Portland’s housing situation has become increasingly more critical in recent years, as real estate prices across the nation have soared. The issue of affordable housing is a complicated one, and it cannot be resolved simply. However, the role of bureaucracy in compounding the issue is a problem that Portland must tackle immediately. The recent audit recognized the vital importance of fixing this broken system, stating, “an effective permitting system would help restore Portland’s standing as a desirable place to make investments for much-needed housing and make living in Portland more attractive to job seekers.”
If you have questions about residential or commercial real estate in Portland, please reach out to Tonkon Torp. We are dedicated to working with the community to find creative solutions to these challenges.