"I was on the edge of a cliff, hanging by my fingernails, fearing that my kids and I would have to leave Portland," Roscoe Ryan remembers.
The 41-year-old single mother had been renting a home in Portland's St. Johns neighborhood for three years when the bad news came. "The landlady told me she wanted to sell the house, and I would have to move," she recalls.
Then the owner offered to sell the 800-square-foot house to Ryan for $290,000. Ryan, who earns $30,000 a year working at an organic grocery store, initially was hopeful. But when lenders told her she'd need to make a $35,000 down payment to qualify for a mortgage, she balked. Scraping together a down payment bigger than her annual salary seemed impossible. Ryan began scrambling for alternatives.
In Portland's runaway housing market, residents without the means to own homes face three options: shell out ever-larger portions of their paychecks for rent; move from familiar, amenity-rich neighborhoods to less expensive, less desirable suburbs; or both.
A surge of policy responses — from a locally approved bond measure that will fund development of affordable rental housing units to a proposed bill in Salem that would overturn Oregon's ban on rent control — have focused on subsidizing and regulating the rental housing market.
While these measures have brought some comfort and hope, they've brought little relief to residents wanting a surer defense against the risks of spiraling housing-cost inflation and displacement: homeownership. Fifteen years ago, less-wealthy Portlanders more easily crossed the homeownership threshold. But today's homeownership market is shutting out lower-income residents like Ryan, forcing middle-income residents to make tough compromises, and kicking historically disadvantaged residents of color further to the curb.
This series, part of the Open: Housing journalism project, will look at causes, impacts and solutions to the rising — and unequal — barriers of entry to Portland's increasingly exclusive homeownership class.
High prices, tough competition
Chris Bonner has seen a sea change for middle-income earners since she became a real estate broker in 1991— and before that, when her father, Ernie Bonner, helped shaped Portland's livability reputation as director of the city's Bureau of Planning.
At $290,000, the price tag on Ryan's home is an anomaly in Portland. The city's current median home price is $422,450. A down payment of 10 percent on a house of that value pencils out to $42,000 — more than half the $73,000 annual earnings for a median-income family of four. That's a lot to save when rents are exploding and incomes are stagnating, Bonner says. And depending on how much of a monthly mortgage payment a family can afford, the down payment may need to be higher.
"My clients are well-qualified, have good jobs and can make a 10 percent down payment, but are having a super-hard time," she says. "I just tried to get a $440,000 house for a client, and there were 21 other bidders, including three cash offers." (More than 30 percent of Portland home sales in 2016 were all-cash transactions, which sellers prefer because they are less risky and easier to close than mortgage-financed deals.)
Even when buyers can get their bids accepted, they may have to use more of their earnings to pay off their mortgage loan than their parents did, Bonner adds.
"If you are below 100 percent median family income, you still can find a very small house, which probably has problems with it, on the city's far east side," Bonner says. "But if you want something west of I-205 — forget it."
Those in the business of helping lower-income families close the gap say the once-high obstacles to owning a home have become almost insurmountable. Felicia Tripp, deputy director of the nonprofit Portland Housing Center, says that as recently as the early 1990s, "most renters in Portland were young adults who, within a few years, could assemble enough savings to make a down payment on a modest home somewhere in Portland." Now, she's sending clients to ever more distant suburbs.
"The usual barriers of getting good credit, enough income requirements for loans and a down payment have increased far beyond the financial capabilities of many of our clients," says Erica Calderon, homeownership manager at Hacienda CDC, a nonprofit in Northeast Portland that helps many Latino potential homebuyers.
Data shows massive narrowing of access
A set of maps produced by economic consulting firm ECONorthwest and the Portland Housing Center show the trend with striking clarity.
On 16 maps, one for every year from 2000 to 2015, the city is a dense honeycomb of color-coded cells. Affordable areas, where homeownership costs would consume 30 percent or less of earnings for a median-income family of four, are green. Unaffordable areas are yellow, orange and (least affordable) red.
By 2015, there is only a smattering of green cells west of Interstate 205. By 2020, a projection based on current market trends, the whole metro area, from Hillsboro to Gresham, is mostly red.
Lorelei Juntunen, the study's primary author, boils down the many layers of hidden data to a grim statistic: from 2001 to 2016 the portion of Portland homes sold at prices affordable to median-income families fell from 57 percent to just 36 percent.
That's a drop of more than 20 percentage points, a massive narrowing of homeownership access for Portland families. If housing and incomes follow a straight-line trend, the portion of homes affordable to middle-income families will fall to just 12 percent in 2020, Juntunen says.
The maps are confirmation of what affordable housing advocates such as Emily Reiman, executive director of the statewide Neighborhood Economic Development Corp., already know. "For lower-income households, income has been flat for decades, and housing costs are out of control," Reiman says.
But the income/housing-cost ratio doesn't tell the whole story; wealth is a factor, too, Reiman explains, and it's eroding. College debt has begun financially hobbling many people well into their 30s, preventing them from qualifying for mortgages.
As families reset their strategies and expectations, shifting their home-search parameters to cheaper communities or resigning themselves to renting (often at prices comparable to a mortgage payment), what are they losing? And what is the city losing, as a wealthier class of owners takes their place?
Homeownership brings economic, social advantages
Homeownership isn't without its own risks, particularly for low-income buyers with budget-straining mortgage payments. Ryan eventually purchased her home with the help of a modest inheritance, plus a coveted, publicly funded $15,000 down-payment-assistance grant and counseling from Portland Housing Center. She is near her financial limit, with housing costs that consume well over half her earnings and exceed what she was paying for rent.
But Ryan believes the benefits are worth the costs. "I'm happy," she says. "My kids, who are 8 and 11, can stay at James Johns Elementary School, and I can walk three blocks to work. I love our whole St. Johns neighborhood."
While lower-income homeowners benefit little from special perks such as the mortgage interest tax deduction, the 54 percent of Portland households, 61.1 percent of metro-area households, and 63.6 percent of American households who own their homes all lay claim to substantial economic and social advantages.
Owning a home enables families otherwise at risk of eviction or displacement from rising rents to put down lasting roots in their communities. That stability ties to improved academic performance for kids, says Portland school board member Steve Buel, a retired career teacher.
"Bright kids are much less likely to succeed if their families are getting bounced from apartment to apartment," Buel says. "A teacher can't develop trust if a kid is moving to a new school every few months."
Seventy percent of partner families who responded to a survey by Habitat for Humanity Portland/Metro East say that their kids' grades improved after moving into their Habitat home, according to Habitat spokesperson Melinda Musser. "We found that affordable homeownership is directly connected to improvements in education, health, financial stability and other benefits," she says.
Having a fixed mortgage payment also enables families to accumulate wealth, as housing costs stabilize and wages grow, explains Caitlin Baggott Davis, who addresses issues of wealth inequality as executive director of North Star Civic Foundation.
"Homeownership is how most Americans have historically built up savings — for retirement, yes, but also to absorb the shock of a medical emergency or temporary unemployment," Baggott Davis says.
Furthermore, American families use equity from appreciating homes to finance investments that lift their economic opportunities — to start a business, say, or send their kids to college. But as growth pressures push home prices higher in Portland, access to those opportunities is dwindling, experts say.
"It's getting hard to buy a home, build equity, start a business, or plan for retirement, all things that help people break out of poverty," Reiman says.
Community at large faces worrisome consequences
Shrinking homeownership access in inner Portland could bring dire consequences not only for families shut out of the market, but also for the community at large. The inability to buy a home exposes families to increased financial insecurity, as rent hikes devour paychecks, and force often emotionally disruptive moves and costlier job commutes that leave parents less time to spend with their children.
If Portlanders don't find a way to increase opportunities for homeownership in the urban center for the next generation of middle-income families, the alternative is "a long slide toward increasing wealth segregation, in which only the top 20 percent (of income earners) can live close-in, walking distance to parks, transit and urban amenities that all residents pay for with their tax dollars," Baggott Davis predicts.
Alarmed environmentalist groups, including 1000 Friends of Oregon, point out that when Portland residents flee to the suburbs to get cheaper housing, it results in the kind of increased freeway traffic, consumption and auto emissions that plague other urban areas.
"Avoiding pushing housing further and further into the countryside was one of the reasons why Gov. Tom McCall created statewide land-use laws," says 1000 Friends spokesperson Alyson Marchi-Young.
Major employers complain it's harder to recruit employees for some positions because many workers can no longer afford to live within the city, says Valerie Cunningham, Portland Business Alliance Communications Director.
And other social costs loom, Baggott Davis warns. "What happens if the largest generation in state history never gets to a place to invest in a home? Who will cover the cost of retirement and health emergencies for a generation of renters without savings? We all will," she says.
Most observers think it will get worse. Regional planning agency Metro predicts 300,000 more people will come to the Portland-metro area between 2015 and 2025. With population growth outpacing new housing production, buyer competition is likely to increase, further escalating home prices.
ECONorthwest's Juntunen says that if interest rates go up and development trends continue to favor multifamily rentals over homeownership, home-buying prospects for Portlanders of lesser means could end up even worse than her study projected.
"The impending increases in interest rates will ultimately crowd out more lower-income families out of Portland," Calderon echoes.
Tripp, from her vantage at the Portland Housing Center, is concerned. Some of the people who'd want to buy a home will find it further out of reach. "Many are just one job loss away from having to move in with relatives, or live in their car," she says.
Opening doors to home ownership
To borrow a quip from Portland tenant organizer Margot Black, "people think that to rent is to have failed at 'adulting.'" For reasons both practical and symbolic, many Portland renters aspire to eventually join the homeowner class.
Various policies and programs exist to help them. They fall into roughly four categories.
Down-payment assistance, typically in the form of grants and loans funded with public subsidies, helps low-income and moderate-income buyers close the down-payment gap. Several Portland-area nonprofits, including Portland Housing Center and culturally specific groups such as Hacienda and NAYA Family Center, which targets services to Native Americans, offer down-payment assistance and homeownership coaching.
The global nonprofit Habitat for Humanity offers a unique "sweat equity" model for making homeownership affordable. A homebuyer works alongside volunteers to build or renovate a house that Habitat finances, then buys it from Habitat at low cost. Several Habitat affiliates are at work in the Portland area.
Community land trusts buy or build homes that they sell to moderate-income homebuyers at below-market rates. In exchange for the price discount, the nonprofit land trust retains a share of the homes' equity upon resale, so that the homes remain affordable to the next round of moderate-income buyers. Portland has one land trust, Proud Ground.
Tax incentives encourage private developers to build affordable for-sale homes. The City of Portland's HOLTE program provides a 10-year partial property tax exemption to moderate-income homebuyers if they purchase an eligible home. The current home-price cap is $350,000.
These programs help hundreds of families buy homes each year, but meet only a fraction of demand. And as property values continue to rise, available funding for these programs stretches a shorter distance.
The Portland Housing Center helped 75 families purchase homes in 2016, Tripp says. "We have three times as many clients who are ready to buy homes," she adds, "but we can't find enough homes under $300,000."
— Camela Raymond
Measuring the rising cost of home ownership
Portland's homeownership costs have outpaced the national average for more than 20 years, forcing many buyers to shell out for fatter mortgage payments or settle for less desirable homes or neighborhoods.
Now homes prices have shot so far through the affordability roof that the cumulative impact may permanently alter the character of Portland. There are many ways to measure this trend. Here are a few:
32 percent Rise in the Portland area Consumer Price Index since 2000
80 percent Rise in the Portland area median home price since 2000
$198,600 Median home price in Portland area in 2000
$353,400 Median home price today
14th Portland's rank in the 100 least affordable major U.S. metro areas
10 percent Rise in Portland home prices in February 2017 over previous year
2nd Portland's rank nationally in February price increase (Seattle was first at 12.2 percent.)
Sources: Portland State University's Center for Real Estate. 2016 study by the Oregon Office of Economic Analysis, Case-Shiller home price index.
Camela Raymond contributed to this story.
Next in the series: The effect of housing costs on Portland's minority residents. A longer version of this story and other parts in the series can be found at www.OpenHousing.net