Portland's Painful Rental Market Keeps Softening as New Apartments Arrive

Your wallet may not be feeling the impact yet, but Portland economist Joe Cortright says there are significant signs of relief emerging for local renters.

"In the past year, there are growing signs that the surge in rental inflation has peaked," Cortright writes at City Observatory's blog. "According to Zillow's estimates, the average price of a two-bedroom apartment in the Portland area ($1,495) is almost exactly the same as it was a year ago.  Rental price inflation has dropped from nearly 20 percent a year ago to effectively zero in the first few months of 2017."

As the chart below shows, Portland's rental inflation spiked after the end of the Great Recession. That spike stemmed from the fact that very little got built during the economic downturn but people continued to move to Portland.

Now, nearly four years into a red-hot market, the pace of construction is outstripping demand. Cortright cites a real estate industry report that there are 25,000 apartment units in the pipeline in Portland.

Related: 5 myths about Portland apartments.

Even that tsunami of supply, however, is not enough to put a smile on the economist's face.

"The big uncertainty in the years ahead will be whether the policies the city has enacted (inclusionary zoning) and others that it is considering (rent control) will choke off future investment in local housing supply," Cortright concludes. "Once the current inventory of permitted housing is built (and much of it was permitted just prior to the new inclusionary requirements taking effect), its far from clear that developers will find Portland as attractive a marketplace for new apartments as it has been in the past few years."