
“For Rent” signs are popping up all over Portland - jseliger
http://cityobservatory.org/signs-of-the-times/
======
evanlivingston
Nono, wait.

The housing being built in Portland over the past handful of years is of a
specific type and a certain price range. I regularly check the rental rates
for units in these new complexes as they come on line and I have yet to find
units that I can afford.

Portland is very lax with it's high density zoning, or strict depending on how
you look at it. They promoted high density housing by disincentivizing
alternative zoning types (making it extremely difficult to find non retail
commercial spaces).

The lack of rent control combined with the proliferation of high-end retail +
housing spaces contributes to housing as an investment opportunity which in
turn makes low end rent unstable and rare. This past year over half of the
renters on my block were kicked out of their homes when owner decided to sell.

Sure, there's a glut of $1,500 studios and one bedroom units available, but
there's a real lack of rooms or units below $1,000.

~~~
noodle
> The housing being built in Portland over the past handful of years is of a
> specific type and a certain price range.

This is true for every city. Developers don't really build low-end units. They
build high-end units and rely on the age/deterioration of other buildings to
eventually turn them into lower-end buildings.

This is sort of working out because people are generally moving back into
cities and are willing to pay a premium for it.

The reason why I think this article about Portland is interesting is either
their influx of people into the city has slowed/stopped, or they've built so
many units that its outpaced the influx. A common narrative in cities is
"we're building so many units yet prices are still high!!!" But clearly the
equation should be rate of new units coming into the market vs rate of change
of city population.

Which also feels like common sense. But maybe its more like, this article is
interesting because it shows there's light at the end of the tunnel.

~~~
derefr
What part of "age/deterioration" makes units lose value, exactly? Is it just
that buildings aren't built to last, or is it that newer buildings have newer
amenities?

If the former, would a trend of "over-engineering" buildings—or more rigorous
building codes—mean that buildings will take longer to lose value, and so
there will be fewer low-value units on the market at a time?

If the latter, would a lack of recent domestic innovations mean that new units
are basically "just like" old units, and thus stall the aging-down process?

~~~
woolvalley
Houses have general wear and tear that need to get fixed.

Housing designs and styles go out of date. Code gets updated to add new
standards such as better insulation, earthquake resistance, plumbing. Roofs
need to be replaced, walls need to be repainted, floors need replacement after
general wear and tear. Electrical standards change since our demands have
changed over generations. And most units don't keep all of this stuff up to
date through renovation other than the bare minimum. Like a used car.

Since buildings last a long time, a 1920s-1970s building is what is considered
an aged building. 1980s is on the edge and 1990s is relatively new. A older
building that was overengineered will retain better value and so on.

------
kavabean
The market can never provide housing as cheaply as a properly functioning
local/state government.

* The state can borrow money far cheaper than private developers.

* The state has far fewer regulatory risks (getting permits, etc).

* The state does not need to make a profit but only needs to pay the bond payments.

* The state profits even when it doesn't make immediate profits on the particular housing development. It does so by increased local spending (by housing tenants who pay affordable rents instead of every penny they earn, etc) and also by higher taxes on increased incomes/output due to higher productivity, the higher productivity due to reduced stress and churn in the community caused by a lack of funds for life expenses due to high rents. (Remember lower income tenants spend _all_ of their money, with a high proportion spent locally. High earning landlords are exactly the opposite. A much larger proportion of their income flows internationally, to wherever capital gets the highest return, or whereever luxury goods are made)

* The state gets an implicit discount on labour costs in development since it gets tax income from the workers.

With all of these incentives in play the state can provide housing for less
than the state borrowing cost of the money for labour/materials to build an
apartment. Since in Portland it costs 175-200/sqft to build multifamily units,
a 1000sqft 1BR should cost the equivalent of state borrowing costs/month for
$175k at 2.2% = $320. Imagine how much better life would be if we had a
government that used all of these incentives to provide well-built housing for
its people.

There is also the cost for land but the state owns a lot of land, and it has
the ability to get land by rezoning, and also by using eminent domain as a
last resort. At any rate for high density buildings, this is not the dominant
cost.

~~~
rlanday
Your argument is clearly flawed because it goes way too far. It applies to
literally any sort of economic activity it's possible to be engaged in. For
example, I could make all your arguments as reasons why the California state
government should take over pornography production from private producers. We
know from experience that private industry is more successful than the
government at many things…including building housing:

[https://en.wikipedia.org/wiki/Public_housing_in_the_United_S...](https://en.wikipedia.org/wiki/Public_housing_in_the_United_States)

~~~
kavabean
Top down state organisation is prone to corruption. It takes effort to keep
that at bay. The public oversight required is an overhead that should only be
used in select tasks.

The state is not suited for all tasks, especially those with rapid iteration,
experimentation, low capital costs, and low cost of failure. Housing
technology moves slower and is dominated by capital and bureaucratic concerns.
It is also one of the dominating costs in modern life. The state is capable of
doing this task and the public oversight burden is warranted.

For products and services that do not absolutely require the state, I believe
worker cooperatives, incentivised by the state are a much better solution

------
top256
Why is that surprising? This is eco 101 no?

~~~
twinkletwinkle
Every time you talk about building more housing in a desirable place, there's
always someone who brings up the argument "But if you build more housing then
even MORE people will want to move here". Nothing wrong with some empirical
evidence.

~~~
pishpash
They're not wrong. There will be more people moving there if prices are
lowered, and over the long run unless Portland can absorb the entire movable
population whatever it is, it will be helping to lower rent everywhere in the
country. So thanks!

~~~
AnimalMuppet
What I _think_ you're saying is, prices drop in Portland, so people move there
from city X, which drops demand in X, so prices drop in X.

One problem, though, is "stickiness". I wouldn't move to a different city for
$1/month. I probably wouldn't move even for $100/month. Why not? Well, I'm not
single, and I have kids. It's not just that I'd upset everyone's routine - I'd
also have to move all this stuff. I'd also have to sell my place and buy (or
rent) a new one. Total cost to me: Probably in the $20,000 range. I'm going to
do that for $100/month? No way. Even for $1000/month, it would take 20 months
to pay back, not counting the time and aggravation.

So cities are "sticky". I'm stuck here; it takes a _seriously_ better
situation to break me loose.

Many people have lower thresholds than I do; but for most people, the
threshold is some way above zero. (Exceptions do exist; if the current
situation is socially or emotionally difficult, they may move to something
even if it's economically worse.)

------
philipkglass
This is good news. Is more apartment availability also curbing the recent
price increases for owner-occupied detached home sales? They're rather
different goods, but the effects from lower apartment rents might spill over
to some extent.

~~~
drak0n1c
The article says that the increasing numbers of For Rent signs were all found
on older suburban houses, which includes owner-occupied detached homes. So it
seems they are all feeling pressure to reduce prices.

~~~
evanlivingston
Detatched homes, or HUDS, have a really aggressive tax policy in Portland
making them very expensive to rent out as apartments. The policy promotes
using these units as airBnB rentals in place of longer term housing for
residents.

------
smikhanov
Am I the only one who doesn’t understand what actually was done to stop rents
to grow from reading the article?

Seems like this one sentence may be the key:

    
    
        prompted the City to adopt an ill-advised
        inclusionary zoning ordinance, and
        led the state to flirt with authorizing rent control
    

But it’s unclear whether that was just a flirt or some control was actually
implemented? Did the “prompting” result in “city adopting”? What’s “ill-
advised” in this context?

Lots is unclear

~~~
cullenking
What has happened is all the large multi-apartment buildings under
construction for the last 2 years have come online. There's a lot more that
will be ready to move into starting 2018 and into 2019. These are quick
construction 4 to 6 story 100+ unit buildings that are being built
_everywhere_ in portland. Heck, home owners are event getting into the game,
where they are making ADUs out of existing garages and basements. The city has
waived a bunch of the development fees normally associated with ADUs. Not a
game changing number coming online every year, maybe 100 or so, but the
combined effect is that rental units are popping up everywhere.

Side note: many of these large buildings are built around a model that
includes staggering the release of units over two years, so as to not flood
the market with new units, lowering the price. I wouldn't be surprised if a
few of these projects scheduled for move in late 2018 or early 2019 turned
less of a profit than planned, given the sheer quantity of them being built.

Side note: We've had more than one random person looking into our business our
office from the hall, who upon questioning, turned out to be a random wealthy
dude from CA or NY, who is looking for some real estate in which to park a few
million dollars, lead around by a hawkish businessy looking person, neither of
which even know the term triple net. It's a wild market here right now, it'll
be interesting to see how it all turns out.

~~~
smikhanov
Who finances that construction? If that’s private developers, then what so
suddenly incentivizes them?

------
Strang
A naïve application of supply and demand isn't always right, but it often is.

~~~
mjevans
It tends to work well enough over broad stretches, including the end points.

Since the model for the last couple generations was expanding in to the "green
field" suburbs and that model is now breaking down due to the distances
finally becoming too insane / growth boundaries being enforced, there has now
been a building pressure that is finally being re-directed in to other areas.

Unfortunately civic codes are focused more on preventing the loss of life than
on making life a quality affair. I would really love to have actual peace and
quiet at home; being completely unable to hear those on the other side of the
walls, and requiring that build in appliances be similarly quiet instead of
the cheapest possible and least effective exhaust fans.

------
Animats
I hate those year-over-year charts. Show me the data, not the first derivative
of it.

------
paulcole
I live in Portland and MANY of those signs are left out constantly and have
been out for YEARS.

American Property Management leaves them out front of all units and just
funnels you to wherever they have an opening.

~~~
gt_
Yep. Long-time residents know these signs all too well. The best way to find a
rental in this particular neighborhood is by calling these numbers.

------
gt_
This does not make me feel any better about losing the best home I ever had
when it got sold in the 2015 buyout race, with “plans to remodel” which were
later rescinded just before being put back on the market at 180% the rent I
paid.

2014 and 2015 was hell for many of the city’s residents and put family’s
literally sleeping on the streets. If this is “how markets work” then we need
to stop wondering why socialism is becoming such a popular notion.

~~~
lovich
I think if you're wondering why it's becoming popular you've got wool over
your eyes. Events that hurt people due to how the market works like you've
described, are not rare

~~~
gt_
I am wondering that, or suggesting it is rare.

------
tthayer
All these rent signs point to is people being pushed out by rent increases due
to a perceived demand provided by people with higher incomes. It doesn't point
to a change in the housing crisis at all. I lived in this area about 6 years
ago and prices were already becoming highly unaffordable for the
'unprofessional' set back then.

------
projectramo
IF you want to measure affordability, why not actually measure rent, or
rent/sf or something directly?

Why would you measure the number of pictures of rent signs and then assume
this means that prices will fall or not?

I would understand if counting pictures of signs were harder than collecting
rent data, but it seems to be the opposite.

~~~
vertex-four
It's potentially useful for forecasting rent drops - if there were no "for
rent" signs last year and there are this year, but rent hasn't dropped in the
meantime, it may signal a market correction.

------
ppeetteerr
There are two counter arguments to this:

1) Some areas have geographic or legal limits to constructions (maximum
building hight, water, etc). There is simply no way to build more building
without first demolishing existing buildings, which is costly.

2) Most people want to live close to work, and work tends to be close to the
centre. A house that is an hour commute away will not influence the price in
the immediate vicinity.

If space was infinite, it would be Econ 101, but given that space is not,
elected officials need to protect the voting population from inflation,
through whatever means possible.

~~~
alexanderstears
_Some areas have geographic or legal limits to constructions (maximum building
hight, water, etc). There is simply no way to build more building without
first demolishing existing buildings, which is costly._

But not as costly as sticking to the status quo - if you account for
opportunity costs.

 _Most people want to live close to work, and work tends to be close to the
centre. A house that is an hour commute away will not influence the price in
the immediate vicinity._

that's not true at all. Look at commuter suburbs and exurbs that get
developed.

 _If space was infinite, it would be Econ 101, but given that space is not,
elected officials need to protect the voting population from inflation,
through whatever means possible._

Space is not the issue - space utilization absolutely is and zoning laws
produce suboptimal space utilization. There should be a lot more residental
sky scrapers in the bay area than there currently are. If San Fran adopted the
zoning of say Dallas, things would be different and probably more affordable.

~~~
ppeetteerr
> that's not true at all. Look at commuter suburbs and exurbs that get
> developed

It's only through the construction of highways that suburbs can be accessible.
There was a great study done to show that the cost of highways is mostly
subsidized by the inner city, not the suburbs themselves.

This is what I mean about keeping inflation low through use of the government:
only the resources of a centralized government can undertake the construction
of highways that keep the cost of downtown areas "low". In effect, this is one
of the strategies to reduce inflation: infrastructure.

For the space issue, see my answer below to bmcusick

~~~
alexanderstears
_It 's only through the construction of highways that suburbs can be
accessible. There was a great study done to show that the cost of highways is
mostly subsidized by the inner city, not the suburbs themselves._

Are you intentionally confusing separate issues? An hour away from the city is
an hour away from a city, infrastructure can change the distance you can
travel in an hour (e.g in countries with high speed rail, it's not uncommon
for people to commute over 100 miles, that'd be a very long commute anywhere
in America).

The highways extend the amount of land that's available for commuters, maybe
cities should pay for them as the highways make it possible for cities to get
away with inefficient zoning.

------
santaclaus
Good to hear! A couple years ago, it wasn't unusual to see friends getting 25
or 30% increases in their rent in Portland.

------
rch
Am I missing the part where they show how increasing supply lowered rent?

Note: the previous title was worded to imply that rents were falling.

------
rabboRubble
I guarantee those apartments are nearly all without parking.

------
shmerl
Wish same could be said about NYC.

------
pishpash
Why should we have density? The US is a huge country with vast empty lands.
The new economy with air travel and internet means jobs require no specific
geography like easy access to ports, waterways, or railroads. Why should
people be packed into a few places living like rats? Keep the rent high and
let economics take care of jobs going elsewhere to new, livable settlements
and perhaps cities. Whatever happened to the pioneering spirit?

~~~
nikanj
How do I telecommute to a dinner date with friends? There's many, many
benefits to living close to other people, most of them not work related.

~~~
pishpash
By your logic people should never move and there should never be new cities.

