Thursday, September 5, 2019

Trends in Portland's multi-family housing market

CoStar, a real estate analytics and etc company recently released an article showing a pretty significant drop in out of state investment in our mutli-family housing market.  This decrease is attributed to Oregon's recent rules restricting rent increases, the City of Portland's tenant protection laws and the City of Portland's inclusionary zoning (requiring a percent of larger projects to have affordable units etc).

Given that much of the increase in our rents was driven by out of state investment here, I'm not so sure this is a bad thing.  I'd wager that rental housing owned and managed by folks in our community may better serve our community.

We do though, need investment in rental housing; especially affordable rental housing.  The City of Portland, and Metro both have passed housing bonds in recent years, and we are starting to see housing projects planned and built using those funds.  Some funding requires matching funds from private resources. This can include charitable foundations and trusts, along with money raised from donors.  And, like it or not, actual investors look for a return (profit) on their investment.

Though housing is a human right, it does cost money.  Money, which needs to come from somewhere.  Our current, capitalist system, doesn't provide, in a big way, for housing resources.  Instead, in addition to public/government resources, real estate investors play a role in building and developing housing.

I'm hoping, if its true our various housing regulations and restrictions have discourage out of state investing, that we can foster local investment in rental housing.  How do we do that?  I don't know.  I do know the tenant relocation rules, upcoming restrictions on tenant screening and state restrictions on rent increase and tenant relocation have pushed some small time housing providers to get out of the business.  The rules are complicated enough that most housing providers I know will choose to hire an attorney whenever they need to move a tenant out.   This adds cost  through legal fees and delays, to already thin margins.

Is the future of rental housing completely corporate?  Are there enough local corporate investors to make up the loss of out of state investors? How small of a return is an investor in housing willing to make?

Portland's housing non-profits have been doing a good job of getting new projects approved and built.  The funding provided by the housing bonds bring more projects in the coming years.