Wednesday, June 20, 2018

Harvard JCHS Releases State of Housing Report for 2018

Harvard University's Joint Center for Housing Studies released its State of the Nation's Housing report for 2018. The report digs into a number of trends impacting the housing industry. Among the important takeaways:

  • Home-ownership rates for young adults and black households are near 30 year lows
  • Vacancy rates are lowest for Class C apartments, and highest for Class A apartments
  • Nearly 50% of renters nationwide are cost burdened
  • Multifamily starts were down 9.7% in 2016-17, while completions were up 11.3%
  • Median home prices in Seattle, Portland metro areas are approximately 5-7.9 times greater than incomes
  • Oregon and Washington are experiencing high levels of domestic in-migration of Millennials
  • The national rental housing stock is shifting to higher-cost units
  • Apartment properties are appreciating faster than single family homes

Portland City Council Approves New Short-Term Rental Fees

The Portland City Council voted unanimously today in favor of a 2% fee on total revenues for short-term rentals in the city. The 2% fee not only includes AirBnB and HomeAway vacation rentals, but also hotels with fewer than 50 rooms. In addition, a majority of the City Council approved a $4 per night charge for short term rentals. Although Commissioners Eudaly and Fritz argued that the flat fee was too regressive, Mayor Wheeler believes the fee is more legally defensible than an alternative based on a percentage of revenue. Funds raised by the 2% fee will be directed to Travel Portland, while those generated by the $4 nightly fee will go Portland's Housing Investment Fund. Read more.

Monday, June 18, 2018

Multifamily Marketwatch Podcast - June 18, 2018

This week: The Portland City Council puts off for another year a vote on seismic retrofit requirements; The National Multifamily Housing Council reports that over 30 percent of the cost of multifamily development is due to governmental regulation; and the Oregonian editorial board questions whether Metro's plan to place a $652 million affordable housing bond on the November ballot is enough to make a difference in the housing crisis.

Check out this episode!

Thursday, June 14, 2018

Study: More than 30 Percent of Multifamily Development Cost Attributable to Regulation

WASHINGTON, D.C.—Regulation imposed by all levels of government accounts for an average of 32.1 percent of multifamily development costs, according to new research released today by the National Association of Home Builders (NAHB) and the National Multifamily Housing Council (NMHC). In fact, in a quarter of cases, that number can reach as high as 42.6 percent.

Apartment and condo development can be subject to a significant array of regulatory costs, including a broad range of fees, standards and other requirements imposed at different stages of the development and construction process. However, until now there had been no previous research done to analyze the extent of this regulation. This joint research effort surveyed NAHB and NMHC members to quantify how much regulation exists and how much it is adding to the cost of developing new multifamily properties.

Breaking down the government regulation costs showed that an average of 7 percent of regulatory costs come from building code changes over the past 10 years, 5.9 percent is attributable to development requirements (such as streets, sidewalks, parking, landscaping, and architectural design) that go beyond what the developer would ordinarily provide, and 4.2 percent of the costs come from non-refundable fees charged when site work begins.

“The home building industry is one of the most highly regulated industries, and the multifamily sector is particularly subject to these obligations,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Housing affordability is a huge issue throughout the county, and this new research only further illustrates how the layers of excessive regulation translate into higher rents and reduced affordability for consumers.”

“The current regulatory framework has limited the amount of housing that can be built and increased the cost of what is produced,” said NMHC President Doug Bibby. “At a time when states and localities are struggling to address housing affordability challenges, public and private stakeholders should work together to streamline regulations and take the steps necessary to expand housing in communities across the country.”

Although local governments generally have authority for approving the development and adopting building codes, state and federal governments are increasingly becoming involved in the process and layering on additional levels of fees and regulations.

Developers can almost certainly expect average costs to be higher now or in the near future due to the effect of recent regulations that went in place at the end of 2017, such as the new Silica Rule. Further, the survey does not account for other price-influencing factors such as the effects of recent tariffs on building materials, or the extent to which local jurisdictions empower citizens to oppose multifamily development in their communities.

Read the full document.

Portland City Council Punts Mandate for Seismic Retrofits -- Another Year of Study

The Portland City Council voted yesterday to advance the retrofit requirement with the condition of a more inclusive workgroup to conduct further study. It means that the mandate may take effect depending on the vote a year from now.

In the meantime, city staff were directed to study and return in September with a recommendation on adopting an ordinance requiring URM buildings to post placards that they may be unsafe during a seismic event. The council discussed the following language:  "This is an unreinforced masonry building. Unreinforced masonry buildings may be unsafe in the event of an earthquake." If that language is adopted in September the signs would be required to be posted by March, 2019.

The city voted to separate churches from other buildings and to set up a separate committee to study church and other nonprofit needs.

The requirement of securing walls to floors was tabled pending further study by the committee, which will be required to report back to the City Council in six months, and the ordinance will be voted on again in one year. The committee was also directed to work to find ways to finance any required retrofits.

Public buildings and schools remained a top priority on the council's agenda for retrofit requirements.

Watch the council meeting:
June 13 - AM Session - Timestamp 3:03

Compelling testimony from local Pastors. 

While not entirely satisfied with the outcome, the group Save Portland Buildings was pleased owners were able to "impact and shine a light on the issues by exposing conflicts of interest and lack of representation."

Read the Oregonian story.

Wednesday, June 13, 2018

The Potential For Earthquake Damage in Portland: Another Opinion

We often hear from one expert (Chris Goldfinger) when it comes to how likely it is Portland will experience damage from an earthquake.

Let's take a step back for a moment to hear from Professional Engineer Andrew J McCann, who had this to say on the matter recently:

Education is the key to enlightenment.

Earthquakes occur on a daily basis - most very small, some very large.

Will a quake occur beneath Portland - only minor ones if any at all. Which means we will not bare the full force of a quake in our area of the world. When the news writes a quake of 9.5 will hit Portland - that gets everyone's attention, even in New York City! However, that is the maximum anticipated quack at the epicenter - that point over the quake it's self! Not what we will feel in Portland.

Will Major quakes occur around Portland - that's a broad question - the closest possible quake would come from the Cascadia Subduction zone 350 miles away - and/or Mount Hood located approximately 78 miles from the center of Portland - estimated maximum at a 9.5 at the Epicenter at the Casdadia seduction line. So we would probably see much less damage than occured in Santiago Chile; and nothing like the damage seen in the coastal towns of Chille located just 30 miles from the quakes epicenter.

Straight of Juan de Fuca Tectonic Plates - AKA Juan De Fuca Plate is approximately 1000 miles from the center of down town Portland. and extends from entry to the straight of Juan de Fuca, out into the pacific about 1000 miles, then back towards Eureka, California.

While the massive quakes off the coast of Japan and Chille damaged local towns and cities, the real damage came from the Tidal Waves/Tsunami's that occurred as a result of the quake. Note: Japanese quake was approximately 60 miles offshore while the Chilaen quake was only 20 miles off shore - and we are 78 miles from Mount Hood and 800 miles from the Straight of Juan De Fuca fault!

Tsunami's are deadly for those living on the coast. However, studies by Oregon State University have noted that the tide would rise to a point 6 feet above flood stage in Astoria and by Longview - no change would be noted. Besides, I don't think a 100 foot high wave would make it over the coast range! Even the Tsunami free zones are marked in blue located on the west side of highway 101 thru Newport, Oregon. So lets not think/worry any more about a tidal wave taking out the bridges and washing away downtown Portland.

Most quake's intensity is strongest within the first 20 to 40 miles of the epicenter - where most of the cities have major damage. So being 78 miles from mount hood 300 miles from the Cascadia Subduction zone gives us a lot of breathing room. Also, death tolls and injuries are minimal due to the rocking and rolling of the quake; while most people and homes are damaged/lost from the following tidal wave.

While I concur with our leaders that we must do something, the probability of a quake from the Mount Hood area is fairly minimal; and the Cascadia Zone - 10% probability of occurring in the next 50 years. We should not make a Knee Jerk reaction to something that requires thought and planning.

We should think about what we can do over the next 50 years to limit impact of falling structures, saving lives and take into account the cost to the general public.

My family and I own 5 of these URMB structures. However, as a Professional Engineer I must position myself to perform the duties I'm charged with: To Safe Guard the Public followed by Property and well being of all that there is.

We must prioritize what is most important, allocating resources in a logical manor and using methodical methods to prepare for what ever may come - whether it be an eruption, tidal wave, plane wreck or earthquake.

Last but not least - listen and watch the animals, as for centuries, people have noted wild life moving in droves to safety, hours before a major earthquake/tsunami occurs - would it not be more prudent/cost effective to place locators on all animals around Mount Hood and along the Pacific Coast; then notify people in those danger zones of an impending Quake or Tsunami???

Federal Reserve Raises Benchmark Interest Rate for Second Time This Year

The Federal Reserve raised its short-term interest rate a quarter point to 2% today. This is the second time it has raised the rate this year, after raising it three times in 2017. The Fed expects that it will increase rates a total of four times this year. Read more.

Tuesday, June 12, 2018

Wheeler Defends High Price of New Affordable Housing Bond Purchase

Portland Mayor Ted Wheeler announced last week that the city intends to purchase a nearly completed development at E 105th & Burnside using money from the affordable housing bond passed in 2016. The $14.3 million price tag works out to approximately $280,000 per door for the 51 unit building. Mayor Wheeler argues that the city is willing to pay more to purchase and develop affordable housing built with high-quality materials, but developers including Rob Justus of Home First Development are pushing back on that claim. According to Justus, the city assumes that their buildings will never require work, but all buildings require maintenance every 20 years or so. Since 2017, only three multifamily properties in the eastern portion of Multnomah County sold for over $200,000 per door. Two of those properties were originally built as condos, and all three included larger townhome units. The highest price per door was just under $236,000 for a converted condo building completed in 2000 and sold in 2018. Read more.