By Jennifer Shuch and Greg Frick
HFO Investment Real Estate
This is the full text of an article by Jennifer Shuch, HFO Research Analyst, and Greg Frick, Partner. A shortened version of the article appeared in the Oregonian February 2, 2017. You can read the Oregonian article here.
The City of Portland and the State of Oregon have a lot to be proud of. Once again, Oregon is at the top of the list of places people are moving to. A recent Fast Company report ranked Portland a top city for job seekers. Innovative environmental policies have garnered Portland international attention. On the flip side, many Oregonians are still being left behind. A 2016 article in The Atlantic brought national attention to Oregon’s history of racial segregation, an issue that continues to be ignored by state and local politicians. Housing prices in cities across the state are rising at unprecedented rates, far outpacing wage gains, particularly for minorities and single-parent households. Rates of child hunger are incredibly high, while high school graduation rates continue to be low. On the city level, Portland is at a crossroads: if thoughtful solutions are found for these problems, it will continue its road to prominence on the national and international stage. If not, Portland will be a study in municipal failure.
It is crucial that local and state politicians hoping to make change do the due diligence required to ensure we are not setting ourselves up for failure. Without thorough risk analysis, policies that sound like a panacea may end up doing more harm than good. In November, ballot measures from the state and local governments had lofty goals, but were lacking in practical details. For example, Measure 97 sought to provide much needed funding for schools by raising Oregon’s comparatively low corporate tax rate. Ultimately, it failed because it relied on an untried, untested measure of collecting corporate taxes that raised many questions about how it would impact voters and businesses. There was no reason for this – Oregon schools were failed by politicians who wanted to try something new, rather than perform a formal analysis of successful measures from other states.
If Oregon is 50th in the nation for corporate tax rates, we have 49 case studies in front of us to learn from. Leaders have an obligation to dig into the available data and do a detailed cost-benefit analysis. In performing due diligence, lawmakers should be asking which states continue to attract businesses, despite higher tax rates for corporations. What is the system in Texas? Massachusetts? Washington? California? North Carolina? Instead, Oregon lawmakers came up with a new, untried solution that few advocates could competently explain. Meanwhile, businesses of all sizes feared the uncertainty, especially when at the 11th hour lawmakers began to suggest they would fix the measure’s problems after it passed.
The State of Oregon is now considering overturning the ban on rent control, while Tenants United and other groups in Portland are lobbying the city council to enact a rent freeze prior to the ban being lifted. There is no denying that the concept of rent control sounds great. No more rent increases! How could that possibly be a bad thing? But the fact of the matter is, it has been tried in a number of cities all over the world, and it has never proven to be successful policy. Rent control was attempted in Boston, only to be repealed in the late 1990s. More recently an extremely nuanced version was attempted in Berlin, and studies have found it benefited the upper middle-class renters more than any other group. In San Francisco and New York, rent control has contributed to skyrocketing rents. London is currently blaming austerity and demand-side market manipulation for its own affordability crisis.
Rent control is frequently described as the only topic on which all economists can agree. Renters in Oregon are struggling – there is no denying it. But it is the responsibility of lawmakers to find the best solutions to this problem, not just the solution that plays the best with a progressive audience. We need a solution that will be most beneficial not only for renters today, but renters in the future. Enacting bad policies now because they sound good to frustrated voters is not an option. Voters depend on lawmakers to do thorough cost-benefit analyses, to research the best possible policies, not to put forth a band aid solution.
It is also concerning that members of the Portland City Council do not always seem to be aware of the full extent of what they are voting to approve. In the 2035 comprehensive plan, a stated goal was to increase housing density in transit corridors. Meanwhile, part of Northwest Portland, arguably one of the most walkable and transit-oriented parts of the city, was downzoned on the recommendation of neighborhood groups. Is Portland demonstrating that it is truly committed to increasing the supply of housing and advocating a multi-modal transportation system if it so easily overlooks an issue like this? Should neighborhood groups’ concerns about potential new neighbors outweigh the recommendations of urban planners and housing advocates?
Many Oregon voters do not have a great deal of confidence in state or local politicians. The turnover rate for mayors and city council members in Portland is a good indicator of this. Arguably, this stems from decades of questionable policies enacted without thorough cost-benefit analysis performed at the outset. Politicians have a responsibility to voters to be able to explain how data-based analyses, recommendations from experts, and specific case studies convinced them that the policy before them is the best possible one for the voters they serve. While there is a lot of disagreement among urban planners on issues like inclusionary zoning, housing vouchers, and transportation systems, it is the job of elected officials to make every effort to find the best solutions for the problems faced by constituents. They do not need to get it right every time, but they do need to demonstrate to voters that they are not simply enacting the easiest, fastest, or most progressive-sounding policies. The future of the state depends on it.