I started in lending in 1998 making affordable housing loans in El Paso, Texas, at a time when our housing was truly affordable. I did a lot of FHA fall out loans for a new home builder on the east side of El Paso, so several times a week I drove about 26 miles to take loan applications for first time homebuyers. The inventory for the subdivision ranged from $45,000 to about $90,000. but most homes were priced at about $65,000 to $75,000 for a two or three bedroom, two bath home with a tiny yard. This was no-frills housing, but it was brand new, painted and carpeted to the homeowners' tastes. Some of the homes featured amenities such as bay windows, and all had central heat and air conditioning. A colleague at the time used to smirk that I was financing "tomorrow's slums today," but I did not see it that way. The housing was affordable enough that any working family could afford to purchase a home.
Fast forward 13 years, and housing prices have increased (of course) but El Paso is still a very affordable place to find a great home. In October of 2011 I financed a 1368 square foot home on the westside of El Paso with 3 bedrooms, and 2 baths which sold for $113,500.00. Just this month, I financed the purchase of a 1714 square foot newly remodeled townhome with 2 bedrooms and 2 and a half baths which sold for $130,000.
Because our housing prices have remained affordable, even though El Paso has low incomes compared to the national average, El Pasoans can afford to purchase a home. For that reason, we have never had a strong rental market here as compared to other cities. It just did not make sense for people to pay rents when they could purchase a home for basically the same payment. In fact, the Monday, January 24, 2011, issue of Inman News listed El Paso as number 10 of the top ten cities where buying is more affordable than renting.
Unfortunately, all of that is about to change for us. Our city fathers (and mothers) hired the consulting firm of Dover-Kohl to help them understand how they can help our city embrace Smart Growth and Smart Code. Two weeks ago, in my opening post on this subject I talked about how the Dover-Kohl representative made his hometown of Portland, Oregon sound like the "Happiest Place on Earth" full of walkable communities, green spaces and quaint little local coffee shops. Now, the new city plan, Love El Paso, Plan El Paso, which is about to be adopted by city council, aspires to bring the Portland lifestyle to the Southwest.
Portland is a model of Smart Code, Smart Growth and UN Agenda 21 nationwide. In 2010, Portland won the EPA's Smart Growth award for Programs, Policies and Regulations for "Making the Greatest Place: Metro's Strategic Implementation of the 2040 Growth Concept."
In 2009, however, Portland was awarded a less distinguished honor by Business Week--Number One on the list of America's Unhappiest Cities. Businessweek.com ranked Portland number 1 for depression, number 12 for suicide, number 24 for crime (both property and violent) and number 4 for divorce rate. (The editor of Businessweek.com explains in a note that Businessweek.com ranked 50 of the largest metros based on depression rates (as based on drug company data for anti-depressant sales) suicide rate, (from the 2007 Big Cities Health Inventory) crime risk (based on FBI crime reporting for the seven most recent available years) and divorce rates (using info from the U.S. census). The editors also looked at additional factors such as unemployment, population loss, job loss, weather and green space, with the heaviest weight being given to depression, suicide, job loss and unemployment and crime rates. Apparently the editors of Businessweek.com did not perceive that the abundance of green space was enough to compensate for the other problems in Portland.
Maybe one reason the population of Portland is so unhappy is that the excessive planning of their city has made housing unaffordable. Rent.com states that Portland, Oregon has an overall cost of living 20% higher than the national average. In the same study cited above by Inman Group on January 24, 2011, Portland ranked number 9 out of 10 on the list of cities where renting is cheaper than buying. According to City-data.com, the (mean) average price of a detached single family home in Portland in 2009 was $336,885.00. The (mean) average price of a condo or town home was $299,518.00. The same website states that the (median) average household income in Portland in 2009 was $50,203. Put simply, it is impossible for the average family to afford the average priced home. And because the emphasis is on density, and preserving green spaces rather than building homes that families can actually afford, no builder can come in to build a cheaper home to meet the needs of families. According to the city data site, in 2010 435 building permits were issued for homes with an average cost of $220,300 each.
Not that Portland has not made some effort to bridge the affordability gap for families. An October 22, 2011, story in the Oregonian told the tale of Portland's newest affordable housing project, Killingsworth Station, which opened October 17, 2011. When the Killingsworth Station Project was initially approved, 34 of the 57 condominiums were supposed to be affordable for households earning about $46,100 for a family of four. (Since these are 1 bedroom condos, I wonder how a family of four is expected to squeeze in.)
Still, the condo project would have died if the city of Portland had not stepped up to provide Down Payment Assistance loans averaging about $25,000 to effectively reduce the $168,829.00 price tag of the condos to one that buyers might actually be able to afford. And the Down Payment Assistance loans can be forgiven completely depending on the length of homeownership. Brad Schmidt, writing for the Oregonian, explains "It is not unusual for Portland to subsidize projects--typically rentals--to help make the units affordable. With regard to Killingsworth Station, a portion of the PDC real estate loan was expected to 'buy down' the cost of the units to make them affordable."
So let's review. In its attempt to have "Smart Growth" Portland's Metro has limited new housing and development until homeownership is virtually unattainable, so the city (meaning the taxpayers) has to subsidize rental housing (and apparently 1 bedroom condos built in a less than desirable part of town) so that the residents will have a place to live. Why would we want to imitate this system? Why would anyone?
I was curious about how people live who cannot afford to buy anything. Rents in Portland appear to start at about $635.00 for a one bedroom apartment and range upward to $954.00 for a one bedroom. I could not find very many houses for rent in my on-line search, but there appeared to be plenty of apartments. The starting price for a two bedroom appears to be $750.00-800.00.
I was also curious as to how the truly underprivileged fair in a city where housing is so expensive. Oregon City News featured a story last June about Poppy Michell, of Gladstone, Oregon (about 14 miles from Portland) in Clackamas County, who spent 10 years on a waiting list to get a Section 8 federal housing voucher from HUD. (Ten years appears to be the average wait time for a non-disabled, non-homeless person. People in high risk groups such as disabled persons or homeless people only have to wait 4 to 5 years to get a voucher.) For those unfamiliar with the program, Section 8 Housing vouchers subsidize rents for qualified Americans living in poverty. As an unemployed single mother of three boys, Poppy qualified and received a voucher for $1226.00 a month to pay for her rent and utilities if she could find a place to live in 120 days. Poppy was hoping to rent a house, but she could not find a landlord of a single family residence that accepts Section 8 housing vouchers, so when nearly at the end of her 120 day deadline, she was looking at renting a two or three bedroom apartment or else losing the voucher. The turn back rate (the percentage of vouchers returned unused to the Housing Authority after the 120 day period because the recipient cannot find a place to rent) is about 10% in Clackamas County. Trell Anderson, executive director of the Clackamas Housing Authority, explained to Oregon Live, "What we hear a lot is that people spend much of their time looking for that single family home and run out of time."
According to the same article, Portland had a turnback rate of 28% turnback rate for Section 8 Housing Vouchers in 2007, but they have reduced the turn back rate to about 7% in 2011, by speeding up payments to landlords and creating a $400,000 mitigation fund for landlords to repair damaged property.
Oregon's solution to this problem should not surprise anyone given the statist nature of their laws--the state representative wants to introduce a bill into the legislature forcing all landlords to accept Section 8 vouchers.
The moral of this story is simply this--the micro management of Smart Code and Smart Growth increases prices, which then requires that the government step in to provide subsidies and assistance to people on the lower end of the economic scale. But the middle class worker who goes to work every day, does not lose his job, and pays his taxes diligently is on the losing end because he can never afford more than a small rental, while his tax dollars help to subsidize the rents of others. Maybe the residents of Portland would be less depressed if they fired all of the politicians responsible for this ridiculousness and started implementing some strategies to reduce their costs.
I mentioned earlier in this post that the 2010 winner of the EPA's Smart Growth Awards for Programs, Policies, and Regulations was Portland, Oregon. The 2011 winner of the same award was El Paso, Texas. When our city council is finished ramming through the new city plan, we too will be on our way to unaffordable housing. Maybe next year we, too, can make Business Week's Unhappiest City list.
Alexandra Swann's new novel, The Planner, about an out of control, environmentally-driven government is available on Kindle and in paperback. She is also the author of No Regrets: How Homeschooling Earned me a Master's Degree at Age Sixteen. For more information, visit her website at Frontier 2000
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