Housing USA: Portland

5 min read

Jeff Merkley’s Dilemma

Portland, OR—If U.S. Senators weigh in on America’s housing crisis, they need to understand the complexity of the issues. Of course we need more affordable housing almost everywhere, but the problems go beyond that. There is rampant academic literature showing how high housing costs in key metro areas are discouraging business formation, suppressing GDP, perpetuating class divisions and forcing environmentally-harmful sprawl. It’s essential that some of our most influential political leaders take notice.

Jeff Merkley, an Oregon Democrat, is one of those Senators, and he embodies both the upsides of having a Senator engage in pro-housing advocacy; along with the ongoing failure of Washington’s political class to truly understand this issue.

Merkley was born and raised in the small timber town of Myrtle Creek, OR. After detours through the Ivy Leagues and the Pentagon, he returned in 1991 to lead the Portland branch of Habitat for Humanity, a nonprofit dedicated to building affordable housing. He continued his housing advocacy after getting elected to the Oregon House of Representatives in 1998 and later the U.S. Senate in 2008.

His time in the Senate, ironically, has dovetailed with a rising affordable housing crisis in the state he represents. Since January of 2009, when Merkley took office, Oregon’s median home prices rose by $65,000 to $303,000, or 54 percent above the national median. In the Portland metro area, where Merkley is popular, there is a flat-out housing crisis, something that became evident during my recent month spent here. Thanks to state policies against cracking down on homelessness, people here have formed visible tent cities beneath bridges, underpasses and even on crowded public sidewalks. I saw many others sleeping inside motorized campers or cars. And many of those who have housing nonetheless settle for trailer parks and crowded apartments on the rough east side of town. Portland’s rental housing vacancy rate is 3.4 percent, and its median home price is $414,000.

Because Merkley sees these dilemmas faced by his constituents, and others throughout urban America, he favors broad public subsidization of housing. In 2012, following the aftermath of America’s mortgage meltdown, Merkley proposed a four percent refinancing option that would help maintain homeownership levels. In 2016, he added provisions to a bill that ensured better housing access for Native American fishermen along the Pacific Northwest’s famed Columbia River. He has advocated for the continued support of Homeless Assistance Grants. And this past March, he co-sponsored, along with Oregon’s other Democratic Senator, Ron Wyden, the Affordable Housing Credit Improvement Act. This bill, according to Merkley’s website, “would strengthen and expand the Low Income Housing Tax Credit by 50 percent. The legislation would help create or preserve about 1.3 million affordable homes over a ten-year period – an increase of about 400,000 units than is possible under the existing program.”

The problem is that Merkley’s pro-housing agenda has been decisively one-sided; he favors expanding government programs, like LIHTC, that add to the affordable housing stock. But he has remained mostly mum about the regulations that reduce these programs’ cost-effectiveness, and drive up prices across the board.

In Oregon, this would include certain regulations that raise housing prices statewide, especially in the fast-urbanizing Willamette Valley. For example, Oregon mandates that every urban area draw an Urban Growth Boundary to stop sprawl. While these have preserved farmland, multiple analyses have found that, in the case of Portland, it has either slightly or significantly increased housing prices. Yet Merkley celebrates the boundaries on his website.

Other regulations keep housing out of even hotter, more in-demand parts of Portland. In the popular downtown area, zoning suppresses many new buildings to stay below 200 feet, and preserves a single-family residential character in surrounding neighborhoods. Between this infill zoning and the boundary around the city, Portland is enshrouded in a regulatory bubble, unable to grow either up or out. To that point, the metro had about 70,000 new housing permits between 2010 and 2016—miniscule compared to other prominent metros—even though its population grew by over 200,000. As economists, such as Ed Glaeser have shown, a similar mix of high population growth, tight zoning and minimal housing starts has been found to increase prices in metros, like New York City and San Francisco—regardless of whether they receive government subsidies.

Merkley has not vocally attacked these regulations even though they likely make LIHTC-backed projects harder to build in places like Portland. Instead, his comments show a lack of understanding about the housing situation.

“[Housing isn’t] an area to say simply the market will take care of this,” Merkley told NPR last year. “If the market would take care of it, we wouldn’t have this problem of people being forced to live in tents on cloverleafs.”

Of course, because Portland—with all its regulations —is not remotely an open market for housing, Merkley’s point is moot, and misses the potential for the market to solve some of these problems. (The Senator was overseas during the writing of this piece, and his office did not respond to multiple requests for a Skype interview).

In fairness, Merkley is not alone. While federal-level Republicans theoretically want looser regulations, that isn’t always the case for land-use. Several different Republicans in the House and Senate have tried for years to advance the Local Zoning Decisions Protection Act, a bill that would preserve local control (read: NIMBYism), while protecting against HUD’s attack on restrictive zoning via Affirmatively Furthering Fair Housing.

If Senators, such as Jeff Merkley, wish to improve the government programs that create affordable housing, and—more importantly—deregulate the market for more overall supply, then they’re using their bully pulpits well. But if, at the same time, they ignore the fundamental reason why housing is expensive in select markets, like Portland, they’re not really solving current problems.