Solving the Housing Crisis

February 28, 2023

Shortage of Housing and Rising Rents Create a Problem for Everyone

Rising rents make housing out of reach for low income workers. Rising rents are taking a bigger % of renters’ paychecks.

“Rent Rates to climb up to 14.6% in 2023” – State of Oregon’s Office of Economic Analysis

“The national average rent price increased 36% during this decade, fueled by a cooking job market and an increase in valuable land. Demand skyrocketed, raising prices. During this time, the median household income also grew by 27%. In 2010, the average monthly rent cost was $1,083 compared to $1,473 in 2020.”

Sep 9, 2022 – June Homes: How U.S. Rent Prices Have Changed Over Time

Headlines like the one above from the Washington Post in July 2of 22, highlights a huge impact of rising rents on the most vulnerable among us.

Homeowners are not affected the same way, those with fixed rate mortgages don’t worry much about volatile housing costs. Yet renters in Oregon have been faced with rental increases of close to 10% for the past few years!

How Does this Affect Everyone?

Wages and prices increase to cover higher housing costs.
People often have less to save making buying a home harder.
Young adults have less resources to support or even have kids.
Extended families are living in the same home.
Single adults are often renting bedrooms and sharing a house with other adults.
Businesses have less access to entry level workers – increase costs, shortened hours, limited services and increase prices to consumers.
Some businesses close as they can’t successfully operate with labor shortages and higher wages/operating expenses.
More homeless people are in our communities.

Rental Assistance and Rent Controls

Rental Assistance

Some studies have shown that it cost significantly less to keep someone in a home than it costs to get someone out of chronic homelessness.

Judicious use of rental assistance is necessary. Yet this needs to be balanced with the cost to our cities, states, and federal government. Without addressing housing capacity, our governments will pay a huge price premium for the subsidies it provides and will still face the problem of not enough places to rent to people. Increase subsidies will result in more competition for the limited availability – pushing prices higher.

Rental Control – Renter Protection

Some say price caps and stricter landlord regulations are needed to protect renters. Many cities have passed renter protection rules. The city of Eugene is working on Phase II of its renter protection program right now. It has some good things in it, yet it also includes measures that will make it harder for anyone with less than perfect credit and rental history to get accepted. Due to housing shortages, Landlords will choose tenants that are safer bet for paying rent on time and caring for the home.

Creating rules to ensure all landlords operate in a professional and ethical manner to keep tents from getting taken advantage of, is a good thing.

While happy that people in genuine need are getting help to stay in their home and having extra protections against unethical landlords, many are worried that the focus on subsidies and rent controls are merely “rearranging the deck chairs on the Titanic”.

Making it harder to be a landlord is not a winning long term solution for solving our housing problem.

Making it more complicated and difficult to own, operate and manage a rental, will discourage more people from owning, investing, and building rentals.

They either divest of their rentals or turn their rental into a short-term rental (like AirBnB) so they do not need to deal with excessive regulations and the inevitable nightmare tenant that all Landlords eventually experience.

“While rent control appears to help current tenants in the short run, in the long run it decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood.”

What does economic evidence tell us about the effects of rent control? by Rebecca Diamond – Brookings Institute

(Note: Brookings Institute is considered good middle often road source of information.)

For those who want to dig further into this, here are a couple other thoughts on this:

We need more Housing

Housing is a system, that when at optimal levels, supports healthy communities. Years of well intentioned, yet aging and now ill fitting, Land Use Laws along with other issues have created a huge problem. Costs to build have skyrocketed – material costs have gone up, permits and fees to build have gone up, design and engineering costs have risen, and may builders have left the industry. The process of building has become more complicated. The system has gotten out of balance and as it affects our communities, we are all paying the price.

Without more availability and being able to lower the cost of adding new units, we will not solve the problem.

With a healthy supply of rental units, landlords compete to keep good tenants. They offer move-in incentives. Remember when there where “1st month free” ads everywhere for apartments? Good tenants had lots of option and could shop and even negotiate rents. Tenants with some negative history, with a co-signer or a larger security deposit still had options.

How Do We Solve this Housing Crisis

Making housing more affordable is a complex issue that involves a variety of factors, such as supply and demand, land use regulations, financing, and government policies. Here are some possible solutions:

Increase the supply of housing: A shortage of housing can drive up prices. Encouraging more housing construction, including building affordable housing units, can help alleviate the shortage and make housing more affordable. This can be achieved through measures such as streamlined permitting processes, tax incentives, and relaxed zoning regulations.
Increase density: Increasing the density of housing by allowing more multi-family buildings and mixed-use developments can help reduce the cost of housing by making better use of available land and infrastructure.
Rent control: Rent control is a policy that limits how much landlords can charge for rent. While it can help protect tenants from rent increases, it can also have unintended consequences, such as discouraging landlords from investing in and maintaining their properties. Use rent policies that protect tenants from bad landlords yet still encourages rental housing investment.
Housing subsidies: Housing subsidies such as vouchers or tax credits can help low-income families afford housing by offsetting some of the cost. This can also help stimulate demand for affordable housing, encouraging more construction of such units.
Addressing systemic inequality: Addressing systemic issues such as income inequality, racial discrimination, and inadequate access to education and job opportunities can help reduce the underlying causes of housing unaffordability.
Encouraging home ownership: Home ownership can be an important means of building wealth, but high down payments and mortgage rates can make it difficult for some people to buy a home. Government policies such as down payment assistance programs and low-interest mortgage loans can help more people become homeowners.
Innovations in construction: Innovations in construction methods and materials can help reduce the cost of building new housing, making it more affordable for developers and buyers alike.

Overall, a comprehensive approach that addresses the root causes of housing unaffordability is needed to create more affordable housing. This requires collaboration between government, developers, and other stakeholders to find creative solutions that work for everyone.

by Chris LaVoie

Mr. LaVoie is Executive Director of McKenzie Community Partnership a non-profit community development corporation. He has experience owning, rehabbing, and managing rentals. Quality, affordable housing is important to communities, and we need to find a way to support a healthy mix of housing options to keep our communities healthily and thriving. “We need to provide more create housing and home ownership options so that more working people can participate in home ownership.