Preserving Affordable Houses Like This

Not Replacement Like This

Portland Together
Growing and Conserving Great Portland Places
Affordable House, Demolished, 2014
Mega-sized Replacement House, 2015
Managing Growth Q & A

Frequently Asked Questions About Affordability and Managing Planned Growth

Question: How does limiting the size of new single family houses promote affordability?

Answer: When a moderately affordable house is demolished to be replaced with one or two larger, more expensive homes there are two market effects.  First, developers will bid up the prices of single family houses to reflect the potential profits that can be made and second, the new houses are invariably more expensive (up to 2 to 3 times more) than the house they replace.  Limiting the size of new construction will reduce the impacts of this vicious circle of ever rising prices and more expensive houses by reducing the potential profit to be made by developers from demolishing existing reasonably priced homes.

Question: Why not just zone every part of the City for multi-family housing.  That will certainly drive down housing prices, won't it?

Answer: In a word "no".  We have lots of evidence of this already, and have no need for the proposed RIP's planned reckless experiment in allowing duplexes and triplexes throughout our single family zones.

Question: OK, what is that "evidence"?

Answer: Quite simply that we already have thousands of single family houses sitting on land zoned for higher density under today's zoning policies.  Every house in a single family zone sitting on a corner is eligible to be replaced by a duplex already and have been for 10 years or more.  That means roughly 25,000 housing sites, most of which are NOT currently duplexes.  (Assuming 18% corners, although in many neighborhoods it is actually closer to 25%!)  The conversion rate on these houses is extremely slow... only a few smaller delapidated houses typically are being converted, or those on oversize lots.

And that's just the start of what we know.  Altogether there are over 13,000 single family houses sitting on land zoned R1, RH, RX, and R2 lots where multi-family housing is permitted.  These too are being converted to multi-family buildings or replaced by new apartment construction very slowly.

Question: Why aren't these thousands of houses already being converted to multi-family construction?

Answer: The simple answer is "cost".  With existing single family houses -- even simple bungalows -- selling for $500,000 and up, only the smallest and least desireable houses will "pencil" for replacement by multi-family housing.  Basically when the cost of the existing house to be demolished is added to the new construction cost, the result is anything but "affordable", and the profits to be made are not enticing to developers.

Question: Yes, but there are thousands of existing duplexes and multi-family structures that are converted single family houses.  Why can't we do that again?

Answer: We could if the demand for single family houses in the inner city were like it was in the 1930s through the 1960s.  During those years, the middle class and upper classes moved out of central Portland to the suburbs, spurred by automobile transporation and, after World War II by low-cost home loans for Veterans.  By the 1960s, large inner city houses were selling for as little as $15,000, in many areas banks were refusing to lend money for purchase and rehabilitation, and only a few hardy "urban pioneers" were buying these homes.  Often the only way they could make the big old houses work was to split them up into duplexes or even boarding houses.

The situation is vastly different today.  The would-be renter or developer of a duplex or tri-plex is competing with well-heeled single family home buyers (many from out of state) who want those larger inner city homes, many of which have in the intervening years been "de-converted" back to single family use.

Unfortunately, it is only the larger single family homes that make practical candidates for straight-across conversion to a duplex or triplex.  The smaller houses don't have sufficient floor area for conversion in most cases, and provide more profit opportunity to a developer to simply demolish them and replace them with a cheaper-to-build large single family house.

Question: A senior planner from BPS told us in the public meetings that when a larger lot is split into two smaller lots to build two houses the new houses will be affordable because that original land price is now spread over two new houses.  What do you have to say to that?

Answer: With all due respect, that planner is mistaken.  The problem is that as more housing is allowed to be built on a given lot, the value of that lot is bid up by the developers until it is at the point where it will just marginally "pencil" to make profit for them.  With the prices of even modest sized single family homes being bid up by new residents moving to Portland, there is no incentive for the marketplace to hold land prices down when substantial profits can be made from new, higher-priced houses.  To make matters worse, new house construction, even at "basic standard" levels of quality, costs between $200 and $300 per square foot.  Historically, existing single family homes have sold for somewhat less than those levels in Portland, so between the higher construction costs and the cost for land acquisition (including a house) and demolition, the resulting new houses are invariably more expensive that what they replace -- even when built on half of the original lot.

Question: OK, so maybe you're right that these lot splitting and new duplex/triplex rules won't help much, but what can we do to accommodate a growing population given Portland's income levels?

Answer: The City is pursuing several well-intentioned strategies including "inclusionary zoning" and the longer-range possibility (if the State of Oregon allows it) of rent control.  Inclusionary zoning certainly can provide more affordable housing for individuals and families at or below 80% of the median family income, but its benefits will fall to a relatively lucky few out of the thousands who might qualify.  Rent control is more controversial, in that some of the most expensive cities in the country have imposed it (like San Francisco and New York) with mixed results.

A more practical approach is to encourage ADU construction and provide incentives for adding units to existing buildings (both single family houses and existing multi-family buildings) where the zoning currently allows it.  If the incentives and zoning rules that encourage the use and expansion of existing homes and buildings are concentrated within 500 feet of real high-frequency (minimum of 10 minute intervals at peak times) bus lines and MAX stations, the result will be less costly increases in density in areas that potentially can support it, compared to approaches that would mow down thousands of existing single family houses.

Question: Do you support zoning changes or other incentives as you describe?

Answer: Yes, to the extent that the concepts can be tested in a variety of areas around the city to see what works best and what kinds of unintended consequences have emerged and to the extent that sound economic analysis can be done to find out what levels of incentives will actually change property owner behavior.  The biggest argument against the current RIP proposals is that they purport to be a wide-ranging solution to the affordability problem without the slightest shred of evidence for that claim -- and (as we pointed out above) plenty to suggest that they offer false promises to people who are really hurting with the rising cost of housing.