Portland can expect higher rents starting next year

Portland's affordability crisis has the potential to worsen in the coming months, thanks to a combination of record-high interest rates and a decline in new apartment construction.

Why it matters: Despite a swell in out-migration, there isn't enough housing supply to keep up with demand, and state economists predict rents will soar because of it.

What's happening: The city's pipeline of new apartment construction is drying up.

• The number of new apartments under construction in the Portland metro is down 27% compared to the same period one year ago.
• According to a city analysis, Portland will need to add approximately 120,000 housing units at all income levels over the next 20 years if it plans to curb the crisis.

State of play: Portland's limited land, infrastructure requirements, and complex permitting process have all played a role in whether or not developers decide to build here.

• "There is still a shortage due to historical underproduction," Josh Lehner, an economist for the state, recently wrote.
• Rising interest rates have not made it any easier because it makes "project financing difficult," he said.

Context: For now, rents are stable — mostly because people tend not to look for new housing until the spring and summer months, Mike Wilkerson, an economist for ECONorthwest, told The Oregonian.

• Once warmer weather comes along, "more affluent renters" who would've sought out fresh-to-the-market apartments will now be competing with others for older builds, driving up the price of rent.

The intrigue: A few other cultural factors could also contribute to rising rent.

• For example, even though Portland's population has remained stagnant for years, a spike in household formation (spurred on by the pandemic) means more people are interested in living on their own without parents or roommates, fueling demand, according to Lehner.

The bottom line: Oregon is a long way off from meeting Gov. Tina Kotek's goal of building 36,000 homes annually over the next decade — an issue she plans to pressure the Legislature to move on during the short legislative session next year.

• Kotek is urging lawmakers to temporarily dissolve some of the barriers to housing production — like loosening land-use laws, expanding urban growth boundaries, and issuing more revolving loan funds.