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Director of Harvard center tells City Club forum that Portland shares U.S. trends, but city is 'ground zero' for gentrification and area prices far exceed national median.

A national expert says Portland faces many of the same problems as other cities with availability and affordability of housing.

But Christopher Herbert said a couple of factors — rising prices and rents, and gentrification of neighborhoods — put Portland's problems "a bit on steroids" and make it "ground zero" for a rapidly changing urban area.

Herbert said it's difficult to turn around a market with increasing costs and limited supply in an era when growth of household incomes has failed to keep pace.

"In order to solve it, we need to work on both," Herbert said at the Friday Forum (Oct. 27) of the City Club of Portland.

"We need to work on how to get incomes up — and for those who can't get their incomes up, we need to work on subsidies — and on the price side, we need to get the cost of housing down.

"It means a whole host of strategies to try to build in more long-run affordability while you can."

Herbert is managing director of the Joint Center for Housing Studies at Harvard University, which since 1988 has issued an annual report on the state of the nation's housing.

Its latest report, released in June, said housing prices and construction are up — a decade after the economy went into a deep downturn — but high demand and tight supply are pushing prices up.

Herbert was questioned by Elisa Harrigan, program officer for the affordable housing initiative of the Meyer Memorial Trust, and a former executive director of the Community Alliance of Tenants.

In Portland, Herbert said, the median home price is now five times the median household income — the point at which half are above and half below — compared with a national average of three times. That ratio is equal to Boston's.

During the housing bubble before the 2008 recession, Herbert said, Portland's ratio was 4.5 to 1.

According to the center's 2017 report, home prices in Portland and other major West Coast cities rose 40 percent or more in inflation-adjusted dollars between 2000 and 2016 — increases comparable to parts of the Northeast — but in parts of the South and a ring of states around the Great Lakes, they actually fell.

As for gentrification, Herbert said it can be measured in many ways, including displacement of lower-income families in older neighborhoods by higher-income households with college graduates.

The Portland region has seen a growth in high-poverty neighborhoods, defined as those where 20 percent or more of households have incomes below the federal poverty line. In 2000, Portland accounted for 31 such areas; in 2015, 89. The national increase was from 14,000 to 21,000.

"By those measures, Portland has been ground zero for gentrification for the past decade or so," he said.

National trends

On the national level, Herbert said, renters are surging onto the housing market at a rate of 1 million annually, double the rate in the 1970s, when the first of the post-World War II generation known as baby boomers sought housing.

But supply has not kept pace with demand — and Herbert said about 11 million people say they pay 50 percent or more of their incomes for housing, well above the 30-percent mark defined by federal guidelines as "affordable."

"It does not leave much left over to pay for food, health care, transportation and other necessities of life," he said.

There is construction, he added, "but only at the high end" for 1.6 million renters with household incomes topping $100,000.

"We are building for them. That market is getting saturated," Herbert said. "We haven't been building for the rest."

Meanwhile, during the past decade, homeownership rates have declined sharply, much of it because of an estimated 10 million foreclosures during the downturn — 6 million by owner-occupants.

Herbert said the overall rate is stabilizing at 63.5 percent, but it's less than it was back in 1990.

There are wide differences based on race. Between 2004 and 2016, it was 72 percent for whites, but 42.2 percent for blacks, 46 percent for Hispanics and 55.5 percent for Asians.

"For minorities looking to get into home ownership, which is an incredibly important source of financial stability for today's older generation, it's getting harder to do," Herbert said.

Still, he added, "Homeownership is the principal means of wealth accumulation for low-income and minority households."

No easy solutions

Harrigan asked Herbert several times about solutions to the nation's housing problems.

"The sad answer is that there isn't any simple solution," he said.

"What we have is a situation that has been developing over a long period. It's complex with many causes. The solution is one that has to take time and has many different approaches to it."

The report said state and local governments have important roles.

"But only the federal government can provide funding at the scale necessary to make meaningful progress toward the nation's stated goal of a decent home in a suitable living environment for all," it concludes.

President Donald Trump's 2018 budget calls for a $6 billion cut in federal housing assistance. But Congress faces a deadline in early December of renewing spending authority for most federal programs.

"We're already in a situation where we're not doing enough," Herbert said. "I think the best we can hope for from the federal government is to do nothing."

One exception is the current congressional debate about an overhaul of the federal tax code. Herbert said there is bipartisan support for renewal and expansion of the current 9-percent credit for developers of low-income housing.

"There is a recognition we need to do something," he said.

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For a link to the 2017 report by the Joint Center for Housing Studies at Harvard University:

Oregon issues

Christopher Herbert was asked about whether Oregon's urban growth boundaries, which largely confine development to cities, drive up the cost of land potentially available for housing.

"It does have the downside of raising land prices," said Herbert, managing director of the Center for Housing Studies at Harvard University.

"It is an issue around the world — a tendency to push housing way out, to where land is cheap to get affordability — but at the expense of being connected to jobs and other things."

He also was asked about rent control. A bill that would have lifted a 32-year-old ban on local governments doing so passed the Oregon House but died in the Senate earlier this year.

As an economist, Herbert said, most of his colleagues believe rent control is not a good idea for various reasons.

He said some regulation may be appropriate, but it is likely to result in more complexity for state and local governments than its advocates envision.

He mentioned New Jersey, where local governments can set their own ordinances although there is no state law. Studies have shown, he said, they have resulted in few differences in rents.

"It does suggest it's a special good that may deserve different treatment," he said. "I think at times of extreme rent increases, some moderation of those increases — given housing special role in people's lives — might be warranted."

— Peter Wong

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