Rent: The Rise

[April 2nd, 2008]

There are seemingly three kinds of Portland renters: those who’ve had a recent rent increase, those who soon will, and those competing for the dwindling supply of decent rentals at a decent price.

Annie Seroyer, a 25-year-old nanny, counts herself among the masses looking for a decent place at a decent price so she can move. She feels lucky she’s not in a hurry, because she’s content to live rent-free in her parents’ home.

“You have to be very proactive,” says Seroyer, who expects to pay about $750 a month for a one-bedroom apartment in close-in Northeast or Southeast that would be closer to her work. “It’s almost like looking for a job, which is very frustrating because you are giving them money.”

According to Norris & Stevens—one of Oregon’s largest locally owned real estate and property management companies—newer two-bedroom, two-bath apartments in the metro area rented for an average of $865 at the end of 2007, while older (pre-1995) apartments of the same size rented for $715. That’s up 5.7 percent from the previous year, well above the area’s overall inflation rate of 3.7 percent.

And industry insiders are predicting even larger rent increases ahead. Our averages remain well below the most expensive West Coast cities, like San Francisco at $1,900 per month, and Los Angeles at $1,450 per month, though of course average pay is much higher in those cities. Still, Portland’s relatively lower prices don’t offer much solace for local seekers who must fork out the cash.

It’s also a more competitive market. Apartment vacancy rates in Portland are at 3 percent, lower than at any time in the past 10 years, and down from 4.7 percent a year ago.

So why these big changes? The mortgage crisis has made it harder to qualify for a loan. That means those who may have become owners a year ago are now forced to rent. And demand keeps increasing as more people move in. The U.S. Census Bureau estimates that Multnomah County had 701,500 residents in 2006, up 6.2 percent from 2000.

Add in a slowdown in multi-housing construction—about 770 units planned for this year in Portland, compared with 1,000 in an average year—as well as the effects of an urban growth boundary that limits development. The result: swelling rents.

Norris & Stevens managing director Brian Bjornson says rents were kept “artificially” low for the last few years because it was easy to buy and many renters opted to own instead of rent.

“Now, many of those same buyers would like to rent out their condos,” Bjornson says. “These condos in the Pearl and the South Waterfront aren’t selling, and the owners have $2,000 mortgages. They want to get as much of that mortgage covered as possible, so they try to keep rents high.”

He adds that some residents who’ve lived in apartments long-term have seen recent rent increases, but their rents still aren’t as high as they could be, compared with what newer renters are experiencing.

With all the rental pain, you’d think City Hall candidates in the May 20 primary would be eager to jump in and provide some relief. Council candidate Edward Garren is making the most noise about the rent issue. He’s proposing rent stabilization for Portland, capped at 3 percent a year or linked to the cost-of-living index.

“We regulate the sale of automobiles more than rental properties,” Garren says. “I’ve talked to a lot of young people who think this is a big issue. If you’re working a nominally skilled job, you’ll really feel the pinch as the housing market tightens.”

Garren concedes that rent stabilization is currently illegal under state code. But he says if he’s elected to the council, he’ll take on the Herculean task of lobbying the Legislature to change that law.

So what’s a renter to do in the meantime with higher rents predicted for the next few years? If you plan to stay in your place, get your landlord to sign a lease for as long as you can. Or, think about getting a roommate. And hey, rents are still relatively cheap in Scappoose.