Dave Hunnicutt, President
Oregon Property Owners Association
In 2016, Habitat For Humanity published a research summary entitled “Beneficial Impacts of Homeownership”. The summary should be a must read for every Oregon legislator and government official involved with our land use system.
For those of you unfamiliar with the organization, Habitat For Humanity is a non-profit corporation founded in the early 1970’s that works both nationally and internationally to build affordable homes in underserved communities. Founded in Georgia, Habitat found its success early, based in large part on the support of Jimmy and Rosalynn Carter. Habitat works to better the lives of people around the world, and has built (and rebuilt) homes in many countries. For decades, Habitat has been a voice for the socially disadvantaged community.
Habitat’s 2016 study shouldn’t be surprising to anyone. According to the report:
“Homeownership is a crucial foundation for helping low-income families find a path out of poverty. When they move out of substandard housing and into simple, decent, affordable homes, homeowners and their families frequently improve their health, educational attainment, safety and personal wealth.”
The study goes on to demonstrate that homeownership leads to increases in children’s good health, graduation rates and net family wealth, and lowers rates of children’s behavioral problems, reliance on government assistance and asthma.
Not surprisingly, the U.S. Department of Housing and Urban Development agrees. Its studies have shown that “homeowners accumulate wealth as the investment in their homes grows, enjoy better living conditions, are often more involved in their communities, and have children who tend on average to do better in school and are less likely to become involved with crime.”
All this makes me wonder why Oregon state and local leaders haven’t figured out that Oregon’s current land use laws inhibit home ownership, making it more difficult for lower income households to break the cycle of poverty and perpetuating the problems that HUD and Habitat so clearly point out can be remedied by increasing homeownership rates.
Earlier this year, we worked closely with Oregon legislators to introduce House Bill 3072, a bill designed to create a quick supply of “workforce housing” in parts of the state (i.e. nearly everywhere) where housing prices are unaffordable to working class families. Our targeted group were families with median family incomes that were right in the middle for their community. Younger couples starting their careers. Blue-collar workers who don’t want to rent but can’t afford a $500,000 mortgage on an entry level home in town. A single parent with a good job but no other financial support.
These families used to represent entry-level homebuyers, but they can no longer afford homes in today’s housing market. That means they remain in the rental pool, which puts significant pressure on the rental market, where more families need to occupy the same units.
The bill applied to property owners in areas designated as “urban reserve” areas by the nearest city or Metro, the Portland area regional government responsible for managing the Portland-area urban growth boundary. Urban reserve areas are blocks of land that have been identified and selected as the next place for the urban growth boundary to expand, when growth makes that necessary. These areas have been analyzed and approved by both the local government and LCDC as the most logical places where a city should grow.
Property owners in urban reserve areas are in an interesting position. They know that their land will eventually be inside the urban growth boundary, making it valuable. But the decision to bring the land inside the boundary is up to Metro or their city, and is completely out of the property owner’s control. It may happen in 10 years, it may be 20 years, or it may be 30 years before the land is brought into the boundary.
Once the land is brought inside the boundary, the property owner will reap a reward akin to winning the lottery. For example, land zoned for exclusive farm use lying just outside the Metro urban growth boundary in Washington County sells for approximately $20,000/acre. If Metro brings that land inside the boundary, it sells for $700,000/acre. Obviously, that’s quite a difference for the exact same land, and it’s all based on the invisible urban growth boundary line drawn by Metro.
Why is land inside the urban growth boundary so expensive? Because Metro and our land use system intentionally create artificial shortages, making any available land extremely valuable. Supply and demand isn’t all that complicated. Reduce the supply during a steady demand and the price goes up. As long as we continue to have an influx of people moving to Oregon (which we do), and Oregonians keep having children (which they are), we’ll have a need for more housing and more land.
Metro and the most strident advocates of the land use system will tell you that shorting the supply is needed to “save farmland” and encourage the maximum use of land already inside the boundary. But you don’t have to advocate for unbridled sprawl to recognize that there’s a middle ground that allows enough land inside the boundary to lower land prices to the point where less expensive housing can be built while at the same time not jamming more apartments and multi-family housing into every backyard of established single family neighborhoods.
It’s called finding a balance, something that Metro and our land use agencies really don’t show much interest in exploring, and likely wouldn’t be good at if they were.
If you own land in the urban reserve, you probably know that your property is going to skyrocket in value when it’s brought inside the boundary, but you have no idea how long that will take. You also know that if you sell your property now, the price will be low, because anyone who buys your property will be in the same situation you are.
At the same time, the cities on the edge of the boundary are facing tremendous growth pressure, and the resulting demands for more (and cheaper) housing. They also know that expanding the boundary is either entirely out of city control (for cities within Metro), or an endless slog through the state land use goals and a decade of lawsuits from every NIMBY group who believes that now that they live in town, nobody else should be allowed the same privilege, or that it’s a bad tradeoff to lose an acre of cannabis, fallow acreage or wine grapes in order to give some young family a reasonable chance at getting out of the rental rat race. Just ask Bend, McMinnville, Newberg, Woodburn, Scappoose, or any of the small Willamette Valley cities about trying to expand the boundary under current Oregon land use law.
If we take nearly every local politician at their word, finding a solution that 1) enables the property owner to receive value for their property, 2) allows the city to avoid the boundary expansion quagmire that we’ve managed to create in this state, and 3) provides residents in the community with a supply of housing that is affordable to people in the middle is a win-win-win.
That’s exactly what HB 3072 would have done. The bill allowed a property owner with land in the urban reserve and the adjacent city, working together in a partnership, to bypass the normal boundary expansion morass and bring land inside the boundary. In exchange, the property owner had to agree to limit development of the property to workforce housing, and the city had to agree to provide services to the property to enable the development to occur within two years.
How would the project pencil so that affordable homes could be built by the private sector? Easy – the property owner would have to agree to sell their property at a lower price than they would receive if they waited until the property was brought into the boundary under existing law. It doesn’t take a genius to understand that if a homebuilder is required to pay $700,000/acre for bare land, and then pay another astronomical fee (somewhere between $10,000 and $50,000 per house) to the local government for the pleasure of building a home, it will be impossible to build a low cost home. But if the homebuilder could buy the land for $250,000/acre, then the housing could be built.
The bill required an agreement from both parties. If the property owner wanted to continue to wait until the land was brought into the boundary in the normal process, they could do so. If the city did not (or could not) provide services to the property, or did not want to bring that land within the boundary, it could refuse to do so. In other words, the bill created a partnership, not a mandate.
If the owner used HB 3072 to bypass the normal boundary process, the purchase price for their property would be significantly higher than it would be currently, but also likely much lower than it would be if the land was brought into the boundary without any restrictions on the type of housing that could be built. For the property owner, HB 3072 gave the property owner a choice – take less money now, but bypass an uncertain and potentially timely process that would likely result in more money at some point in the future.
The city could also choose to use HB 3072 to bypass the normal boundary process, saving years of headache and taxpayer dollars spent on trying to jump through every hoop and fight every NIMBY lawsuit thrown up as a roadblock to their need to build more housing, building a stronger and more diverse community, furthering the goals outlined in the HUD and Habitat studies, and keeping their promise to their constituents.
And best of all, the housing that would be built would be affordable without the need for any taxpayer subsidy. No funding schemes, no taxpayer grants, no urban renewal plans. Nothing but an agreement between a willing property owner and a willing local government.
The testimony in support of HB 3072 was fantastic. A local homebuilder with decades of experience testified that if HB 3072 were adopted and a Metro area city were to partner with a property owner in an urban reserve area, brand new homes could be built and sold for $250,000 per unit. These are brand new, single-family detached homes with yards and off-street parking. Not condos. Not duplexes. Not apartments. A house with a yard and parking for $250,000, a price that is less than half the current price of a single family home in the Metro area. In many instances, the monthly payment on a mortgage for a house at that price is significantly lower than the rent that is being charged for single family homes in the Metro area.
So why did HB 3072 fail? Look to your “friends” at Metro and the environmental community. The Metro Council sent a strongly worded letter to the legislature telling them that HB 3072 bypassed Oregon land use law and threatened Metro’s careful control of land use planning in the Portland Metropolitan area. Really?
How can Metro support the existing process? Metro has expanded the boundary or adopted urban reserves 10 times since they received authority from the legislature and voters to do so. They’ve been sued every time, and have lost 7 times (and maybe 8, depending on how their most recent boundary expansion turns out).
Worse yet, even when Metro goes back to the drawing board and eventually gets it right, the time it takes is years, not months. In their “shortest” decision, after the lawsuits were finished, it took three years from the date of Metro’s final ruling until the lawsuits were completed. In the case of the designation of urban and rural reserves in Multnomah and Clackamas Counties, it took Metro and the courts almost a decade to reach a final decision. Metro’s most recent boundary expansion was approved by the Metro Council in 2018 – it’s still being litigated today.
Given their record of failure and delay, and the need for immediate solutions for Oregon families, how can Metro justify keeping things the same? More importantly, why does anyone listen to their concerns?
The environmental lobby was equally disingenuous in their opposition to HB 3072. According to the Oregon League of Conservation Voters, the umbrella organization representing a host of small environmental organizations, HB 3072 was a “major threat” to the environment. Say what?
Looking at their website, OLCV advocates for issues involving climate change, oil spills, pesticides and other typical environmental causes. What does providing lower cost homes by eliminating red-tape and a broken land use process have to do with any of that? And more importantly, why does OLCV believe that the local governments who make the decisions under HB 3072 would support proposals that had negative impacts to the environment?
But in a legislative session where every hearing was conducted “virtually” and where the public was excluded from the Capitol, a few comments are enough to convince legislators that a bill is dangerous, especially legislators who don’t understand our land use laws. And that’s exactly what happened to HB 3072.
So I guess Habitat For Humanity and the Oregon residents they’re trying to help will have to wait another two years before we can try again. Protecting Metro’s role in the land use system is obviously way more important.