Good times are upon us with regard to the Portland metro area’s rental market. If you are a landlord, you can achieve much higher rent than you could have ever dreamed of achieving. If you are a reluctant landlord, now may be the time to sell your investment property. Inventories are way down and prices are way up.
From the aspect of the tenant, things are not so rosy. Affordable rent is nearly impossible to find. Your housing budget is now a moving target, since you may get an increase several times per year. You expect value for your hard-earned dollar and it will be nearly impossible for your landlord to meet your expectations. What would make you happy is to have your rent reduced to the amount charged in the “good old days” (2 or 3 years ago).
Supply and demand is a cruel master. The rental demand in the Pacific Northwest is huge. The supply in the Portland/Vancouver area is very limited. Developers have been very cautious about building since the real estate crash of 2008. Building permits have been down for years. Recent recessions have not helped spur on new construction. We have very restrictive rules for development within the Urban Growth Boundary, which theoretically keeps our development in the urban setting without the undesirable sprawl. Logically, within a large metropolitan area new roads should be built, but are nowhere to be found. The least expensive in-fill would be to build vertically and build up a few stories. However, tear downs cost a fortune here, review processes are numerous, expensive and slow-tracked and, of course, “we can’t change the character of our neighborhoods by going vertical”.
It would appear that our local government has developed the “no-win scenario” on the supply-side economics of our housing. We don’t have enough supply to meet the demand. If it is profitable and a relatively pain-free and set in stone process; all developers would continue to build until they could not sell their products. Profit is a great motive, while government can jam the gears to create a work stoppage.
We have a supply problem. We do have landlords seizing the opportunity to make more profit if they can. However, many of our clients have saved historic buildings and struggled to keep rents down to retain good tenants and provide housing while eking out a living, Remember, however, that their costs have increased exponentially with regard to everything government touches, such as taxes, utilities, licenses, permits and more permits. Landlords and property management companies are not the enemies of the tenants, but that is now the chant of the day. The most ironic part of this is that now tenant advocates and groups of tenants are protesting and demanding that government agencies take action in our housing crises. Rent control does not work and it never will. Control the revenue and anything involving expense (maintenance) will be cut to the bone. No value for your money there. Inclusionary zoning might work if there were logical tax incentives (there’s that profit motive thing again) guaranteed and logically put in place.
We have allowed the regulatory agencies to become the mediators between landlords and tenants, when they created the majority of the problems (here’s the irony I mentioned). They get off without a scratch. They are Teflon. They have turned the battle to the victimized tenants vs the greedy landlords and they are the wise wizards that will magically fix everything. Perhaps the real answer is very simple. Why can’t we fast-track development processes knowing that neighborhoods must get more vertical and denser? Why can’t agencies make their fees a small percentage of the projected costs, rather than big windfalls (basically a fine for the privilege of doing business in our fair city)? How about we build some new roads to move all these new people? Supply and demand is certainly a cruel master. But having our agencies crater our supply side and then ride to the rescue is a cruel joke.