Last week, I wrote about the stark contrast in the course of housing development and affordability in two neighborhoods in Washington, DC. Capital Waterfront has experienced high levels of development and lower rents, while Capitol Hill has not.
In City Obervatory, Joe Cortright writes about Portland, Oregon’s experience. Supply has grown and rents are down, much like in DC’s Waterfront neighborhood.
Just a couple of years ago, Portland experienced some of the fastest rental increases in the nation, with average rents, according to some indices, rising at double-digit rates. Alarm about the rent crisis prompted the City Council–unwisely, in our view–to adopt one of the nation’s most stringent mandatory inclusionary zoning ordinances.
As we’ve chronicled at City Observatory, that ordinance prompted a land rush of building permit filings in January of 2017, as developers looked to lock in building permission before the new ordinance took effect. That surge of building permits came on top of several strong years of new apartment construction. The result has been a flurry of “For Rent” signs, the like of which Portland hasn’t seen in years.
Landlords are notoriously loathe to cut advertised rents, but in addition to tolerating longer vacancy periods, there’s evidence that there’s considerable discounting going on in the local marketplace, with landlords offering one- or two-months free rent, waiving fees and deposits and even offering pre-loaded debit cards.
Over just the past year, rents for a one-bedroom apartment have declined from $1,155 to $1,120, a 3% decrease.
As with any effort to increase housing supply, there will be a natural lag between liberalizing zoning and land-use policies and declines in rent (much like Rome, new housing can’t be built in a day), but this 3% decline in one year in response to increased supply is welcome news.