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In classical economics, the law of supply says that higher prices will lead to greater supply as profit-seeking firms try to cash in on the demand that’s driving prices upward.
Not so in the Portland housing market. New data from Redfin shows that despite the city having some of the highest housing prices in the nation, Portland’s builders aren’t pulling permits fast enough to meet demand.
For single-family houses, builders here pulled just 7.6 permits per 10,000 residents in the first quarter of 2022. By contrast, builders in Austin, Texas, took out 31.1 permits per 10,000 residents, leading the nation, according to Redfin. Construction firms in Raleigh, N.C., came in second at 30.7.
Scarce housing threatens Portland’s economic growth, says Oregon state economist Josh Lehner. “Our office’s long-standing concern is our lack of housing production,” he said in a June 21 blog post.
Part of the problem in Portland is that building permits are bogged down in bureaucracy, according to a March 2021 report by City Auditor Mary Hull Caballero.
“An essential function of Portland’s building permits system does not work as it should,” the auditor’s office said. “City plan reviews of permit applications are too slow, and the city does not follow its own customer complaint policy to resolve these delays.”
Part of the problem, the auditor said, is Portland’s “fragmented” form of government. “Seven bureaus and City Council are responsible for plan reviews, but no one entity manages systemwide performance.”
City Commissioner Dan Ryan is trying to eliminate some of that overlap. In a one-year update released June 30, the auditor said Portland had made progress on building permits, though “the city still does not follow its own customer complaint policy to resolve delays.”
Portland lags not only on single-family houses, Redfin said. It’s also behind on apartment buildings. Portland issued just 4.9 permits per 10,000 residents for multifamily buildings, compared with 26.1 for Austin.
That’s despite the fact that Portland’s median asking rent rose 33% in April compared with a year earlier, making it fifth among large metro areas. Rents in Austin rose 46%, topping that list, too.
Unexpectedly, rents in Oklahoma City rose 43% year over year, placing it second. Builders there pulled 15.6 permits per 10,000 residents for single-family houses in the first quarter, Redfin said.
In the Redfin report, single-family homes are defined as having one to four housing units. Multifamily buildings are defined as having five or more.
Tired of waiting around for Portland contractors to put up more houses? Consider a move to Milwaukee, Wis. Rents there fell 8% in April compared with a year earlier. And the Milwaukee Bucks won the NBA championship in 2021. And they have beer there, just like in Portland.