“Growing Tualatin” housing presentation for Tualatin BAC

Tualatin’s housing shortage is only one piece of a broader regional problem. Like many complex social challenges, there aren’t any “silver bullets” — answers that will fix everything at once. Fortunately, there are many policy makers, researchers, and community members working together to identify strategies that can begin to provide more housing options.

This past Monday, Tualatin’s Business Advocacy Council invited Michael Andersen (@andersem), Senior Fellow at the Sightline Institute, to present on the topic of housing in Tualatin. Although Michael isn’t an expert on Tualatin specifically, he contextualized our local housing shortages with the economic trends of Washington County, and then identified the solutions other cities are already applying.

Watch Michael’s presentation embedded above or on Vimeo. There was a good Q&A session too but the video for that was incomplete. You can also read the (machine-generated) full transcript below. Thanks to Joseph Konty for video recording and Tim Garrett at Matchlight Video for post-production work.

If you’d like to learn more about missing-middle housing / residential infill, including its associated practical and social challenges, listen to this Think Out Loud interview with Michael Andersen and Portland city planner Joe Zehnder.

Thanks for inviting me here everybody. Thanks Daniel. That was wonderful. So, like they said, Daniel and Linda invited me here to talk a little bit about my favorite subject, housing; how we can pay less for it, how your employees, colleagues, co-workers, neighbors can pay less for it and hopefully having more of it the right places can lead to a stronger economy and better quality of life here in Tualatin.

Like Daniel made clear, I think, I’m not an expert on Tualatin. I’ve been here but I don’t know the community nearly as well as any of you do. I know about the region and the regional situation; I’ll be trying to bring some wisdom from around the region that you can figure out how it fits into your community, obviously. And I’ll talk just briefly about where I’m coming from in this: I’m a policy writer and researcher, and I focus mostly on housing affordability.

The Sightline Institute is a regional sustainability think tank is notable for understanding that economics are a thing. We are focused on this area of the Pacific Northwest as our bio-region is the, arguably, most physically abundant part of the richest society in the history of the world.  If we can’t figure out a way to make our current prosperity sustainable, indefinitely, in this area, then we can’t figure out anywhere. So we think about what is in the way of that happening.

We have as a three part way of thinking about that all. Going through the first, our economy depends on working ecosystem here in Oregon, as everywhere, and our ecosystem depends on efficient cities and towns.

That’s: space-efficient, energy-efficient, economically efficient. On that last note, our economically-efficient cities are depending on a fair and productive economy. We need to be able to do as much as we can in these cities to help everybody’s lives improve.

This is a three part stool. We need every part of that circle to work and they all feed into one another. So I’ll be trying to talk about ways that they can all mutually reinforce.

On that note, I want to talk about a problem that Tualatin has. This is not going be news to any of you but I’m going to run through a few of the statistics that hopefully capture where things are at. The median monthly rent is up $76 in the most recent year data. That was 2016, a little bit ago, but that’s the equivalent of a $912/year tax hike, if you’re a homeowner for example. It looks like a property tax hike that you never get any additional services for. We were talking about one every dollar you pay you want to get out of; from a tenant’s perspective, they got nothing out of that. And, if the tenants and renters in your life have been pissed off, that’s why.

Meanwhile home seekers, as we heard from Daniel, have also been struggling. Median home prices are up 13% last year to $464,000. That translates to $115,000 up since 2008. 33% percent increase and comes out to, if we some simple math, 10% down payment with much higher interest rate than anyone would want to pay. They need to get $46,000 down which most people aren’t going to have, especially when they’re a first time home buyer.

Meanwhile, this is part of a larger situation in Washington County. I think there are a lot of ways to think about what the cause of this problem is. But the simplest way to think about it, probably, is that in Washington County we’ve added 82,000 new jobs since 2000, which is fantastic, and we’ve added 48,000 new homes since 2000.

Over the course of two business cycles, job growth has been 37 percent faster than housing growth. So that is a problem, in as much as the people who need to work in these jobs, who are creating these jobs, who are making these jobs exist by their presence, are coming in not from homes they’re being in Washington County, but from elsewhere.

And of course this is what that looks like. So people are spending more and more time, as we heard, to get to these jobs.

We can even put numbers on it.

The red lines in this picture are higher income $40,000+ per household. The pink lines are commutes to the census tract we’re standing in right now for people making less than $40,000 per household.

You see people are coming from a long way away, some of them without very much financial reward for doing but they’re making it work because they are a bunch of good jobs here in Tualatin. The cost of those commuting, of course, is borne by everybody who is trying to use the roads including the freight and the rest of the economy in general.

So what that translates into is that in addition to its specific housing problem, it is becoming a larger economic problem in Tualatin. That manifests in the form of a 2.7% unemployment rate and a series of job recruits that, as we heard from Linda, are hesitant to commute for more the 45 minutes in one direction. And the result of that is that good jobs are going unfilled.

You could solve the problem as employers have tried do by paying more money than ever. And then you’d, of course, have to charge more for whatever you’re selling. But everybody would be happier if you could pay people the same money you want to pay them right now and they would be happy to accept that wage because they wouldn’t have to drive 90 minutes in a car every day.

How do you get to that situation? Well, I’ll be talking about this for the rest of the presentation.

I also want to keep in mind, as one of the folks mentioned, that we have 400 local high schoolers graduating every year from the high school here. Some of them are going out to get great skills and great schools. Some of them want to stay in the community and work here. Whatever the case, if any of them ever want to live in Tualatin and be a home buyer in the area, they’re not going to have $46,000 to do it in the beginning of their career. Unless they have some financial connection or whatever, in which case there’s a whole other problem to work out.

The solution to all this trouble we’ve thought about a lot at the Sightline Institute, and our basic conclusion is that there are a lot of things you can do but the single most important thing you need to do is you need to have more homes. It is ultimately about having enough homes to go around. That is was going to prevent the number of people chasing homes from driving the price way way up. Especially in job-rich areas like Tualatin is lucky to be.

So how do we get more housing? We thought about that too. We have done some math about what that looks like. It’s a complicated process of course, but the calculation is ultimately not that difficult to wrap your head around.

If this is the number of homes that can make money, you can make money by building this many homes. And if you can reduce the cost of building that many homes, then you will be able to more homes for the same amount of money. So ultimately it comes down to cost control. You can get more homes for the same amount of private investment being available if you can reduce the cost of developing homes.

 

So then the question becomes: how do we get more homes and make them less expensive to build? How do we get them less expensive to build? There are a few ways to do that.

We can have lower fees and faster regulatory review. Some of you may be familiar with this website launched recently, Affordable Oregon. It’s a fellow in Washington County who has tried to compile some new and useful information comparing all jurisdictions in the area to one another, and how much they’re putting these in regulatory review together. His belief is that drives up the price of housing. He is completely right. Fees and regulatory review definitely drive up the price of housing and, without wanting to endorse his specific conclusions, that is a place you can go for information about what’s going here.

There are also a couple other factors we can talk about given the price of housing. Lowering the construction cost per home, and lowering the land cost per home. There are various ways to do this but I’m going to focus on these last two, for the simple reason that other people are talking a lot about this, I think, and also there is a very clear political and social tradeoff involved in these fee and regulatory review.

Absolutely, we should be minimizing fees but that revenue is basically being used to replace tax revenue that is not collected from the property tax cap which was passed in the 1990s and ultimately a $1 less is public revenue is going to result in less services at some point. So despite the need for efficiency, there’s a pretty powerful trade-off.

Similarly, with regulations, every regulation that exists is there somebody asked for it to be there. So that’s a difficult needle to thread.

Meanwhile, if we can come up with ways that are politically acceptable and safe to reduce these things, that’s sort of a pure win. We can get more economic activity, more prosperity, more housing for every dollar, if we can reduce those things.

Let’s look at the cost of those things. This is the rent for a recently built home in the Portland metro area in various housing types. Here’s a freestanding suburban house, two store garden apartments, five story urban apartment building, and a high rise apartment building like what you might see in downtown Portland. This is per three bedroom home for recently built rentals.

As you can see, there is sort of a U shape in these costs. What’s contributing to the cost here are these two types have lower construction costs per square foot mostly because they’re built with wood (the freestanding suburban homes and the two story apartment buildings).

The next three types have lower land costs per home because more households are sharing the same amount of land in higher buildings. High rise apartments are built with steel so they’re much more expensive per square foot to build.

None of this is to say that we should only be building like the cheapest kind. There’s a completely legitimate reason for someone to prefer each of these different items. Different people will want to live in each of these different settings.

The problem is not that we are telling people they have to live… We don’t want to tell people they have to live in cheap housing, we want to give them the option to live in that cheap housing if they want to. If somebody wants to live in a two story garden apartment, and they’re not able to because we aren’t building or offering enough of those options, then we are leaving housing on the table. That is housing that could exist but is not. Something that someone would be willing to pay less money to live in if they had the option to.

So this two-story garden apartment scenario I’m going to talk about for a few minutes… it’s part of an idea from the last few years called “missing middle”. If we think of housing on a spectrum, from detached single family housing you see in cities everywhere to mid-rise housing, like four to six stories you might see in the central area. You’ve also got duplexes triplexes, fourplexes, courtyard apartments, townhomes, a whole array of things that have been common historically in cities everywhere, but aren’t really provided for in very many locations in modern zoning.

This is my friend Max’s place. His place demonstrates that this is not a new idea, this is a forgotten idea.

The reason he can live in this nice neighborhood in central Portland on a corner lot like this is that he shares a lot that could house one household with three households. This is a four-plex. He works at a retail store and that’s what makes it possible for him to be my neighbor.

Looking specifically at Tualatin, if we see the yellow areas, here are housing, the blue is manufacturing, the pink is commercial city center.

Think about how much of the land a place like Max’s would be able to be built on or would be illegal to build a place like that today. It’s just the red areas here, the sort of medium density housing areas. It’s not a lot of land as a share of everything that we’ve put together in a city where you’re allowed to build those.

If we assume we want to build more of these things, or at least we want to allow them to be built if people want to live in them in more areas, we have a few options. We could expand the amount of city that has this middle size housing; we could ensure that new areas that are brought inside the Urban Growth Boundary have a higher-ratio of that middle-sized, middle-density housing. We want to consider whether it is possible to get these missing-middle housing into the lower density zones in a way that doesn’t fundamentally change those zones, and people won’t object to the transformation of the neighborhood in a way that is moving too fast.

Is there a way to find missing-middle housing options for these lower-density zones? I think this is one of the important ways to think about this thing.

There are a lot of cities around the region considering new ways to do that. For the last part presentation I’m going to share a few ways that they’re accomplishing that goal.

We’ve got the accessory dwelling unit; the backyard cottage, the mother-in-law unit you might call it. It’s a great place for your mom-in-law to live or your father-in-law or your cousins or a young couple that you know or just somebody who is gonna help you pay the rent and a mortgage on your larger building.

These are usually no more than 800 square feet and they were recently legalised in Tualatin. We’ll talk more about reasons why more action might be needed in a few minutes

This is another example of ADU. This is from Kol Peterson is a sort of expert on ADUs as they’ve been taking off in popularity the last few years. He’s based in Portland and has a book about it. He has an example of a two-car garage he worked a few months ago and converted it to a 815 square foot home for about $100,000 including $25,000 of his own labor and time. It is possible to get pretty extraordinary things done for not very much money when you can reuse existing spaces for housing units.

This is more for the context of new areas that are brought into an urban area: cottage clusters.

For example, you would say that, instead of only allowing a house to be 3,600 square foot house on a lot, you could also say you get the option of building three 1,200 square foot houses, or three 1,000 square foot houses with a shared rec room for the kids to play in. It’s not going to be for everybody, but making that an option is a way to get more use out of less land for a lower cost. And also creating the type of housing a lot of people were looking for and unable to find because of the economics of development land use in the area.

This is a modern duplex. A familiar idea, I just took picture of one I like.

This is a four-plex. This is an old Victorian home built in 1949, I think, in Portland. This is Garland and his wife. He’s the developer of this new place; this is their first project. They took one home, sliced it into four floors so the first floor is fully disability-accessible, of course. The top floor has a terrific view

They can get a lot of use out of a single structure because they’re allowed to put more than one home in it.

The last thing I want to say, the last point I want to make and leave you with here, is that, in addition to legalizing any of these options, if we want them to happen, we need them to be economically viable. The useful thing about Bellingham, they legalize ADUs in 1995 and since 1995 they’ve only built, on average, four per year in the whole city for these backyard cottages. Why is that?

It’s because they put a bunch of rules on their use and construction. I’m going to focus on one of these (these are a few of them): the last one, off-street parking requirement. This is probably the biggest reason why they haven’t had any more of them constructed in the last few years.

This is a quote from the regulatory document recommending how cities in Oregon should legalise ADUs if they want them to be built. As they say accurately, it’s one of the biggest obstacles to having anybody actually construct these homes.

That’s just one example, here’s some other specific things we can do. We could up-zone to three-story areas to four-story areas if people are not building new apartments on a given lot. The reason is that they cannot make money by doing so and the simplest thing to do is just let them build more homes, if that’s politically viable.

We could reclassify homes like Max’s from a commercial lot. Right now, if someone wants to build a new four unit building, that is subject to the same regulatory standards and processes and building requirements as a two hundred apartment building in downtown Portland. We could decide we want to regulate them more like a duplex and hold that same building standards. Or we could create a new intermediate standard of building and bring down the cost of developing those three or four-plex homes.

We can legalize internal divisions of homes over 10 years or 50 years, whatever we want. Just to say that this house has served its purpose, it has some architectural value, maybe, and we want to keep it viable by letting it do new things as it gets older.

These are just a few examples of possible actions and I’m hoping that we can spend what would ordinarily be a Q&A session to talk about your perspectives on what actions we can take and what is needed. That’s all I’ve got to say