Home builder says he's had enough of Portland
Prominent area residential developer Jeff Smith says he has stopped trying to build new homes in Portland.
Smith, founder of J.T. Smith Companies, says the city's construction permitting process takes too long and is too uncertain to guarantee when his projects can even start — and at what cost.
"Portland's process is slower and more complicated than any other city we work in. It's a magnitude of difference," says Smith, whose company does everything from single-family home construction to subdivision development.
"We cannot work in Portland. We cannot predict our costs," Smith says.
Ironically, Smith is the incoming president of the Home Builders Association of Metropolitan Portland. Smith says his decision is strictly a business decision for his company and not connected to his new position with the builders trade group.
Smith says the permit delays are especially frustrating because the Portland City Council has repeatedly declared a housing emergency. The need for more housing was a major topic of discussion when Smith appeared with Oregon House Speaker Tina Kotek at the trade association's annual Housing Forecast on Nov. 3. During the standing-room-only event at the Oregon Convention Center, Kotek and other speakers lamented the shortage of new homes for sale that is driving up all housing costs, including rents for low-income households.
David Austin, public information manager for the Bureau of Development Services, says reforms are underway to speed up the permitting process. Austin says that Commissioner Chloe Eudaly, who is in charge of BDS, has appointed a new director who is committed to improving customer service. Eudaly appointed longtime BDS manager Rebecca Esau to replace former director Paul Scarlett in late October.
"Commissioner Eudaly came in and saw that changes needed to be made. Director Esau is committed to eliminating inefficiencies in the system. We want people to have successful projects," Austin says.
Bureau system blamed
Smith's company has been developing construction sites and building new homes in the region since 1991. He says that doing business in Portland has always been more difficult than in other jurisdictions, especially for land divisions and other projects that require the construction of new streets and the installation of new water and sewer lines. He blames much of that on Portland's fractured permitting process, which requires developers to submit a series of incremental plans to the Bureau of Development Services that must be reviewed separately by other bureaus, including the Bureau of Environmental Services, the Portland Bureau of Transportation, and Portland Fire & Rescue.
"We have to prepare a separate plan for each bureau because they only look at the portion that relates to them, and they all must be approved before we can submit the next set of plans," says Jesse Nemec, a senior development manager at Smith's company. "Everywhere else, we just have to submit one complete plan that is reviewed. If any changes need to be made, they're made to that plan."
Hassles in eastside project
Smith says the development that finally pushed him over the edge is Hawthorne Meadow, a 71-lot subdivision he has been planning in East Portland. It is planned on 20.8 acres of mostly vacant land bordered by Southeast 152nd and 157th avenues, and between Henderson Way and Barbara Welch Road. Properties west and north of it are already completed subdivisions.
Originally, Smith purchased just 4.4 acres at 152nd and Henderson for a 16-lot subdivision. The company received its land use approval on Jan. 15, 2016, and submitted its 60 percent plan a little more than three months later. It still has not received the last permit needed to begin construction.
During the land use process, Smith learned that another developer had given up trying to subdivide an adjacent 16.4 acres into 55 lots. Smith entered into a contact to purchase that property in January 2016, re-engineered the previous project to current city standards, and submitted a revised 30 percent plan on May 12, 2016. His company has still not received approval to prepare its 60 percent plan.
Nine months ago, Smith expressed his frustrations with the slow process in a Feb. 7, 2017, letter to Mayor Ted Wheeler.
"Developing residential real estate in the city of Portland versus the remainder of the metropolitan cities and counties has proven to be a model of inefficiency as a result of excessive bureaucracy, unrealistic expectations and lack of understanding of how development actually works," Smith wrote before relating experiences up until then with the Hawthorne Meadows projects.
He never received a reply.
Austin at BDS says the permitting process needs to be speeded up, but the Hawthorne Meadows project is moving slowly because it is complicated, requiring multiple easements, a right-of-way extension, and the need to guarantee emergency vehicle access from Southeast 152nd Avenue.
Nemec counters that the project is no more complicated that many of those Smith's company has done in other jurisdictions that haven't taken nearly as long.
"The fact they think it's a complicated project is the problem," Nemec says.
Lost construction window
Smith and Nemec say that even if the city approved all its permits tomorrow, it is now too late for work to begin on the Hawthorne Meadows project this year. The wet weather we are now experiencing usually increases construction costs 10 to 15 percent, all but wiping out the company's profit margin.
"We can't begin work now until next spring," Nemec says.
In Kotek's address to the home builders association, she stressed the need to build housing affordable to households earning 60 percent or less of the area median income. But two other major speakers said that building all kinds of new housing is needed to accommodate the many different people moving to the region, including newcomers with higher incomes who are driving up the cost of the existing supply.
Robert Dietz, chief economist for the National Association of Home Builders, said the shortage of new homes is a national problem. He blamed it on several factors, including a shortage of the kind of buildable lots that Smith has not yet been able to create at Hawthorne Meadows.
Tim Duy, senior director of the Oregon Economic Forum, agreed, noting that construction of new single-family homes in the Portland area is still well below pre-Great Recession levels. According to figures presented by Duy, multifamily housing development has exceeded single-family construction in the region since at least 2000. Single-family home construction is still around half its 2005 peak, while multi-family construction is higher than any time since 2002.
"We need more ownership opportunities," Duy said.