Portland’s New Homes Are Too Expensive. Here Are Five Ways to Make Them Cheaper.

The main factor driving the rising cost of all housing in Portland is the cost of building new housing.

After 15 years studying housing policy—10 years as a journalist, the last few for a sustainability think tank—I’ve come to what might seem like an obvious conclusion:

The main factor driving the rising cost of all housing in Portland is the cost of building new housing.

If we want Portland homes to cost less, either to buy or rent, we need it to be less expensive to create a new home or apartment.

Right now, you can’t find a new, three-bedroom house in Portland for much less than $600,000, because that’s how much it costs to finance, build and sell a three-bedroom house. As long as that’s true, the price of a quaint, drafty midcentury bungalow won’t be much lower.

But many of those costs are mandatory—because public policy requires everyone buying a home to purchase nice but unnecessary things that add to the price.

For example, yards are nice. Many places require everyone who wants a home to also purchase a yard. (This was called “single-family zoning,” and fortunately Oregon was the first state to end it.) Windows are also very nice; in most of the U.S. they’re effectively mandatory, too. (Including labor, each window adds maybe $1,000 to the cost of a wall.)

If the costs weren’t mandatory, nonprofit builders wouldn’t need $200,000 or more in public subsidies to build a “regulated affordable” home.

With that in mind, I’ll suggest five ways to meaningfully cut our housing costs, none of which require living without windows.

Four floors and corner stores.

Right now, Portland limits the new construction of apartment buildings to the lots immediately adjacent to a few big streets, plus the areas (like downtown and the neighborhoods right across the river from it) that were developed before apartments were illegal.

That ban is a bad idea.

The policy reduces the number of what Seattle housing activist Laura Loe Bernstein calls “four floors and corner stores.” The phrase captures one of the least expensive housing types in human history: the walk-up wood-framed apartment building, often with a little shop underneath.

Such buildings are far less expensive per unit than steel towers or single detached homes. They’re a perfect way to share walls and utilities and divvy up the land costs (the single biggest factor behind Portland’s rising rents) among more households. That’s why Portland and other cities built so many of them until the 1920s, when we started to restrict them to smaller and smaller areas.

In 1926′s Euclid v. Ambler, the U.S. Supreme Court summed up the argument for apartment bans: Multistory housing is a “mere parasite” mooching off the yards of the more expensive homes nearby. Takes one to know one, dudes: The reason detached homes in Portland are expensive is that they’re close to the urban offices, shops and amenities that apartment buildings make possible. We should re-legalize these, especially near parks, jobs and transit.

Better transit and biking.

In 2020, Portland effectively removed residential parking mandates. This helps lower new construction costs, because every parking space requires land and/or a garage, adding approximately $330 a month to the break-even rent of a new apartment.

The only answer is making it easier to get around town without a car. Two years ago, the Portland City Council unanimously backed a grand plan for dedicated bus lanes and signal jumps all over town. The city is plodding away, but finishing that “Rose Lane Project” fast is a housing issue.

Single stairwells.

If a new apartment or condo building in Oregon has more than three floors or more than four separate units per floor, current building code requires a second staircase and, effectively, a central hallway—hundreds of square feet per floor that everyone in the building pays to construct. This rule ripples through the cost of everything else, from land (it makes small-lot infill difficult) to air conditioning (central hallway means no cross breeze on our cool summer nights).

The rationale is to have an extra exit in case of fire, but we have cheaper ways to save the same lives. Seattle sets this rule at six stories for buildings that take a few extra fire precautions. (So do Japan, Germany and other rich countries with cheaper housing and many fewer fire deaths per capita.) Oregon should follow suit.

Tax land more than buildings.

Tax efficiency rule No. 1 is to tax things that don’t vanish when you try to tax them. Here’s one: planet Earth.

Lots of tenants don’t realize how much of their rent goes to pay the landlord’s property taxes, which the government calculates as a percentage of the combined taxable value of (a) each piece of land and (b) the buildings on top of it.

If competition puts a ceiling on rents, property taxes on buildings put a floor on rents. Taxing the existence of a building gives people a reason not to make new buildings. It’s a classic case of tax inefficiency.

But if we wanted, we could tax the value of land at a higher percentage rate than we do the buildings on it.

The Oregon Historical Society says land tax was “arguably the most contentious issue in Oregon politics” 100 years ago; last year, the Legislature brushed aside a bill to reopen the debate. A 2019 Portland State University study found that land tax would also soak the people whose property value comes mostly from location rather than structure—the owners of Irvington homes and downtown parking lots. The study found it’d help just about everyone else.

Inflation is about to torpedo Oregon’s terrible property tax system; a shift toward land taxes could help build it back better.

Normalize rolling homes.

Last year, Portland legalized living in a small home on wheels (including RVs) in someone’s backyard.

There are no required structural standards. In other words: Hook up the utilities, put a wheel on it, and you’re living legally in a structure with no building code.

Not many people have noticed this yet and nobody knows how it’ll play out. But it opens the door to newly manufactured homes that could break even at about $400 to $500 a month. I wouldn’t want to live in one myself. But these days, it wouldn’t take long for me to find a few people who’d love to, and I don’t think I could explain to them why they shouldn’t be allowed to. Could you?

Michael Andersen is a senior researcher for Sightline Institute, a regional sustainability think tank.

See more about lowering the cost of Portland housing here!