Pandemic's Effect on Income Migration: Multnomah County's Billion-Dollar Loss

Multnomah County experienced a significant migration of residents during the first year of the pandemic, leading to a net loss of over $1 billion in income, The Oregonian reports. This phenomenon was largely attributed to the rise in remote work, which allowed individuals to retain their urban jobs while relocating elsewhere. IRS data from 2020 and 2021 revealed that 14,257 tax filers and their dependents moved out of the county, marking the first time in a decade that the county's net income loss exceeded $1 billion. Furthermore, the average income of residents who left in 2020 was 14% higher than those who moved out the previous year, reflecting a trend of higher earners relocating. This change was a departure from previous patterns, where typically those who relocated had lower incomes than those who stayed.

While the county lost residents primarily to nearby suburbs such as Clackamas County, some moved to more distant destinations. Economists predict that these trends could result in a significant loss of tax revenue for the county and the state of Oregon, which heavily relies on personal income taxes from high earners. There is concern that if this trend continues, it could lead to budget shortfalls and cuts in local programs and services. The average household income of residents leaving Multnomah County has increased over the past decade, though it's unclear if this is primarily due to the departure of the highest earners. Depending on income levels, migrants from Multnomah County generally moved either to out-of-county areas with more space or to more affordable counties within Oregon. 

Read more at OregonLive.com.

Clearing the Sidewalks: How Disabled Citizens Sued Portland - Insights from Attorney John DiLorenzo

In this informative video, HFO partner Greg Frick sits down with attorney John A. DiLorenzo, Jr. for a detailed discussion about a landmark lawsuit involving disabled citizens who sued the City of Portland for not maintaining clear sidewalks as required by the Americans with Disabilities Act (ADA). DiLorenzo, who represented the plaintiffs, sheds light on the case's proceedings, the specific violations of ADA law, and the resulting outcome of the lawsuit. This dialogue provides valuable insights into the intersection of urban management, ADA law, and citizen rights, particularly in the context of managing encampments in city environments. Watch now for an in-depth look at this pivotal case, its implications, and the resulting policy changes.

Decoding the New Rental Housing Fee Initiatives: Perspectives from the White House and NMHC

Yesterday, The White House unveiled a comprehensive initiative addressing the ongoing concern of "junk fees" in the rental housing market. The announcement emphasized what it described as burdensome and often misleading fees millions of families encounter during rental application processes and lease durations. As part of the initiative, major rental housing platforms such as Zillow, Apartments.com, and AffordableHousing.com have committed to providing renters with transparent and upfront cost information. In addition, several states have taken legislative action to control and regulate these fees:

• Colorado: Implemented two House Bills, one allowing application reuse without additional fees and the other controlling disguised fees.
• Rhode Island: Introduced House Bill 6087 to regulate rental application fees.
• Minnesota: Senate File 2909 mandates a clear display of all fees on lease agreements and advertisements.
• Connecticut: Senate Bill 998 sets fee limits and prohibits specific fees.
• Maine: Legislative Document 691 controls application and screening fees.
• Montana: Senate Bill 320 dictates refund conditions and sets fee caps.
• California: Senate Bill 611 calls for comprehensive monthly rent rate disclosures.

In response, the National Multifamily Housing Council (NMHC) agreed on the importance of cost transparency in rental housing for both renters and housing providers. While the NMHC supports the voluntary measures announced by the White House, they took issue with the notion that rental housing residents are widely exploited by housing providers, emphasizing the absence of concrete evidence to back such claims. The Council suggests that any misconduct by housing providers should be tackled through existing legal channels. Notably, the NMHC highlighted that regulations governing the relationship between housing providers and residents are primarily managed at the state and local levels, tailored to the specific needs of individual communities.

Given the significant housing affordability challenges nationwide, the NMHC has encouraged the White House and lawmakers to prioritize policies that reduce housing expenses. They particularly championed the Biden administration’s Housing Supply Action Plan, which proposes several measures to lower housing costs. The Council's final call to action urged leaders to adopt solutions that expand housing opportunities rather than pushing for further regulations that could potentially deter housing development and inadvertently elevate costs for renters.

In summary, while both the White House and NMHC concur on the importance of transparency in rental housing costs, their perspectives diverge on the extent of the problem and the best strategies to ensure fair pricing and practices in the rental housing market.

Portland’s Inclusionary Housing Policy: Truth or Exaggeration? Watch Council Workshop Live: Tuesday 7/25 9:30-11:30 am

The public is invited to watch a crucial work session on housing production to shed light on the city's current housing predicament. The session is scheduled for Tuesday, July 25, from 9:30 to 11:30 a.m., with doors to the city council chambers opening to the public 15 minutes beforehand. If you cannot attend in person, you can tune in live on YouTube or Cable TV (Xfinity Channels 30 and 330 and CenturyLink Channels 8005 and 8505). You can also watch live online.

The primary focus of this meeting lies in the presentation of the Inclusionary Housing (IH) Working Group Recommendations, a cost comparison analysis, a local policy impact analysis, and a discussion on recommendations to address housing feasibility issues.

In the spotlight is the city's IH policy, which has faced scrutiny since its initiation in 2017. A specialized work group, convened last fall, was charged with examining the efficacy of this policy. Members of this group, who hail from a variety of backgrounds, have voiced concerns about the city's alleged overestimation of the number of housing units created through the policy.

As the Portland Business Journal uncovered in December 2022:

...the Portland Housing Bureau's (PHB) claim of having assisted an estimated 891 people living in IH units and having another 1,250 people on the waiting list for IH units under construction was significantly inflated.

The reality, as the work group discovered, was that the actual number of people in private developments was significantly lower, at 587. An additional 576 were headed for units still under construction. These revised figures were obtained via a copy of corrected PHB data, suggesting that the city combined private and affordable projects to inflate the total number of people being helped by the IH.

With a need for at least 23,000 additional housing units to cater to low and moderate-income households, Portland's housing challenge is daunting. The PHB's Inclusionary Housing Program is aimed at fulfilling this need by promoting economically diverse neighborhoods and housing affordability.

Nonetheless, the city’s budget office estimates the cost of constructing 20,000 affordable housing units to be a whopping $9.8 billion. The City of Portland's contribution would be $3 billion, based on the current rate of $150,000 per unit. This fiscal challenge, coupled with the perceived inefficiency of the IH, indicates that the upcoming work session will be a pivotal event in shaping Portland’s future housing landscape.

Whether you're a concerned citizen, a housing developer, or simply interested in the future of Portland, this work session is an important opportunity to understand and engage in the city's housing strategy. Be sure to mark your calendars for this critical discussion on Portland's housing crisis.

Additional Reading:

Affordable Housing Mandate Remains Expensive for Developers, Study Finds

A recent study funded by the City of Portland and conducted by BAE Urban Economics found that Portland's "inclusionary housing" policy requiring some units in new apartments be affordable for low-income tenants is not as costly for developers as initially feared. Instead, the study indicated that other construction factors had a more significant impact on development costs. 

The policy, introduced in 2017, mandates that all new apartment complexes with 20 or more units should keep 20% of rents affordable for people earning 80% or less of the median income, or alternatively, 10% of units for people making 60% of the median income. In return, developers receive certain development fee waivers and 10 years of property tax exemptions for the affordable units.

While the policy seems to work well in the central city due to heightened incentives, it is less lucrative in areas outside the central city's boundaries. The policy has resulted in 1,000 new affordable rental units in Portland since its inception more than six years ago (Feb. 2017). 

In addition to the inclusionary housing policy, the study found that the biggest cost to apartment developers is system development costs (SDCs) which can account for over 6% of total development costs. The study also suggested ways the city could reduce building costs, including:

• An increase in city incentives to offset worsened market factors
• Reducing risk and uncertainty to developers by streamlining permit approvals
• Considering policy adjustments to decrease costs such as reducing required bike parking spaces, system development charges, etc.

Overall the feasibility analysis indicated that at the current time cost increases outweigh revenue increases and that:

• Rents must increase between 15-35 percent, or
• Hard costs must decrease between 15-40 percent; or
• Investor return requirements decrease to pre-pandemic levels (this exact amount was unspecified in the report)

The study revealed that building an apartment in Portland costs 10% more than in Seattle or Sacramento and is 4% cheaper than Denver. Despite these insights, some developers argue that the inclusionary housing policy may have hindered the construction of additional overall units. 

The study also failed to take into account the number of apartment buildings not constructed or built with reduced density to avoid the city's requirements. 

How Oregon's Rent Control Will Reduce Housing Supply

 

In this HFO-TV Episode with John A. DiLorenzo, Jr., host Greg Frick discusses recent developments in Oregon housing legislation, specifically the SB 611 rent cap and its implications for landlords and tenants. Learn about the modifications made to the bill and the potential effects on the housing supply. Discover why many in the industry believe the tenant advocates' agenda works against their own interests.

HFO Op-Ed: Is Portland's Affordable Housing Spending a Failure?

In this thought-provoking video, HFO Client Services Director Aaron Kirk Douglas share's HFO leadership's opinion on Portland's affordable housing spending and raises essential questions about its effectiveness. 

This critical viewpoint argues that the current approach has resulted in wasteful expenditure without achieving the desired outcomes. Several specific examples are discussed, shedding light on projects that received significant funding but failed to adequately address the city's affordable housing crisis. The video proposes alternative strategies, such as increased private sector involvement and market-based solutions, to optimize the impact of housing spending. By encouraging a reassessment of Portland's affordable housing approach, this video aims to spark a constructive dialogue on achieving more efficient and impactful results. Join the conversation and share your thoughts on this complex issue in the comments below.

Rent Control vs. Rent Stabilization: A New Name for a Failed Concept

(NMHC Research Notes - Summary)

There are widespread consensus among economists that rent control is a failed policy, as it reduces the quantity and quality of available housing. There are also documented negative consequences to rent control, including poor targeting of benefits, decreased property maintenance, and a decline in rental housing supply.

Despite this consensus among economists, many states have introduced rent regulations that limit rent growth under different names, such as "rent stabilization" or "anti-gouging" laws. Proponents argue that these new regulations are less restrictive compared to traditional rent control policies because they allow for increases tied to inflation, aiming to promote renter stability and affordability without the adverse effects of absolute rent ceilings. However, opponents contend that these terms are often used interchangeably, and the underlying concept remains the same: government intervention in setting rental prices.

Here are some specific examples of "rent control" and "rent stabilization" laws in different states. See if you can guess the difference!

1. New York City:
New York City has one of the most well-known and restrictive rent control programs in the country. The program, which dates back to the 1940s, applies to apartment units built before 1947 and continuously occupied since 1971. Rents are limited to a "Maximum Base Rent" adjusted every two years to reflect changes in operating costs. The Housing Stability & Tenant Protection Act of 2019 further tightened allowable rent increases in controlled units. In 2017, the median rent for a one-bedroom apartment under rent control was just $840, significantly lower than the median market-rate rent of $2,555.

2. Washington, DC:
Washington, DC has its own rent stabilization laws. The current iteration, effective since 2006, caps rent increases by the lesser of inflation (Consumer Price Index) plus 2 percent or 10 percent. However, the law is not universal, exempting units in buildings with fewer than five units and those built after 1975. The original rent regulation in DC also allows for vacancy decontrol, enabling owners to raise rents by a maximum of 10 percent in between tenants or up to 30 percent if an identical unit in the building rents for that amount.

Recently, the DC Council passed legislation that further limits annual rent increases in stabilized units to 6 percent for the next two years. This change was made in response to a spike in rents in mid-2022 after the COVID pandemic. However, the legislation does not consider the rising costs of property insurance and other non-controllable expenses faced by housing providers.

3. California:
In 2019, California implemented the Tenant Protection Act, which is framed as a rent stabilization law. The act caps rent growth at the lesser of 5 percent plus inflation or 10 percent. However, similar to other jurisdictions, if inflation exceeds the cap, housing providers cannot raise rents accordingly. The law exempts rental units built within the last 15 years, as well as certain condos, single-family homes, and two-unit properties. Efforts have already been made to make the law more restrictive, with proposals to reduce the limit on rent increases to the lesser of inflation or 5 percent.

4. Oregon:
Oregon also passed a rent stabilization law in 2019. The law currently limits rent growth for multi-unit properties to 7 percent plus inflation. This means the maximum allowable rent increase under the law would be 14.6 percent. Similar to California, the law exempts multi-unit properties older than 15 years. Recently, Senate Bill 611 was passed in Oregon, further lowering the limit on rent increases to the lesser of inflation plus 7 percent or 10 percent.

These examples highlight the limitations and exemptions within rent stabilization laws in different states. Despite the variations in terminology and some adjustments to the regulations, the fundamental issues and criticisms associated with rent control persist. Rent stabilization laws:

1. Impose rent ceilings without considering the actual costs of maintaining rental housing
2. Fail to address the needs of vulnerable populations
3. Do not create new housing supply to reduce market rents
4. These laws are often not universally applied, exempting certain types of rental units from the regulations.

In conclusion, rent control and rent stabilization policies, whether under different names or with minor adjustments, are failed concepts that do not effectively address housing supply issues.

Unhoused Portlanders Challenge Camping Ban

Portland's recently implemented daytime camping ban faces its first legal challenge, from the Oregon Law Center, which represents 24 individuals experiencing homelessness. The new ordinance, approved by the city council, prohibits camping on public property from 8 a.m. to 8 p.m., enforcing limitations on where individuals can camp during remaining hours. Penalties increase for multiple violations and include a written warning, a $100 fine, and up to 30 days in jail. 

The plaintiffs allege this legislation violates both state and federal law, with critics arguing that it amplifies criminalization rather than addressing the core issue of homelessness. Mayor Ted Wheeler, who introduced the ban, will not immediately enforce it, aiming instead to educate the homeless population about the policy throughout the summer.

The policy update was purportedly necessary to align Portland with Oregon's House Bill 3115, which requires cities to make “objectively reasonable” rules for public property usage. The Oregon Law Center, however, disputes the “reasonable” nature of Portland's rule, suggesting that it unreasonably forces individuals to disperse during the day without offering viable alternatives for legal camping. 

The firm's arguments draw on the 2018 federal ruling in Martin v. Boise, which bars cities from arresting people for sleeping on public property unless sufficient shelter is available. This legal challenge, set to proceed in the coming months, could test the application of House Bill 3115 and its implications on ordinances aiming to regulate public camping. 

For property owners and investors in the Pacific Northwest, this case continues to influence investment, migration, and real estate markets in the region. 

Read more at OPB.org

Apartment Owners Call for Insurance Reform

A recent series of articles in Multifamily Dive covered increasing insurance rates in extensive detail. Below is a summary of those articles, which you can read in their entirety here. 

As the summer approaches, multifamily owners and landlords are facing a daunting reality: skyrocketing insurance premiums. Insurance renewals are resulting in significant cost increases for property owners across the country, causing concerns and uncertainties. This blog post dives into the reasons behind the surge in insurance costs and explores potential solutions for mitigating these expenses.

Key Points:

• Multifamily investors are experiencing a surge in insurance premiums, with rates increasing from 20% to as high as 500%.
• Weather disasters and climate-related risks are contributing factors, with areas prone to hurricanes, windstorms, and wildfires facing the highest premium increases.
• Replacement costs, driven by inflation, labor issues, and property value growth, are adding to the insurance burden.
• Multifamily leaders are exploring new ways to manage insurance costs, including shopping around for better deals, working with specialized brokers, managing risk, and self-insuring.
• Lender insurance requirements often pose a challenge, preventing owners from exploring alternative risk management strategies.
• Windstorm coverage, mandated by lenders in flood-prone areas, is a major pain point, with owners and insurance advisors advocating for a more data-driven approach to reduce costs.
• The National Multifamily Housing Council (NMHC) urges owners to negotiate flexibility in loan agreements to account for insurance market volatility.
• Government intervention and policy reform, such as tort reform and incentives for private insurers, may be necessary to address rising costs and reduce litigation.

Conclusion:

The surge in insurance costs is posing significant challenges for multifamily owners and landlords, with premium increases ranging from moderate to exorbitant. Understanding the factors behind these rising costs and exploring strategies to mitigate them is crucial for owners seeking financial stability. By shopping around, managing risk, and advocating for policy reform, multifamily leaders can navigate the complex landscape of insurance expenses and work towards sustainable solutions for their properties.