The tight housing market, high prices and eroding affordability in recent years is driven by low supply. There are not enough housing units to meet demand. Why has there not been a stronger supply response to chase those profits? We look into the 5 most commonly cited reasons behind the housing shortage.

1. Causes of the Great
Housing Shortage
April 2017
Oregon Office of Economic Analysis

2. Oregon Office of
Economic Analysis
2
There is No Supply…
Oregon is currently
building as many
new housing units
as we did in the
1980s, following the
timber industry’s
restructuring.
Oregon has more
than 1 million more
residents today.

3. Oregon Office of
Economic Analysis
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…Anywhere in Oregon…
Permits for new
construction are
considerably
lower today
than pre-
housing bubble
levels of activity
across Oregon.

4. Oregon Office of
Economic Analysis
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…Even PDX Lagging
Even as Portland’s
overall level of new
construction is
back, it has failed to
keep pace with
demand. Household
formation is rising
and population
growth is as strong
as ever.

5. Oregon Office of
Economic Analysis
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Affordability Challenge
Strong demand
and low supply
is a recipe for
rising prices and
eroding
affordability.

6. Oregon Office of
Economic Analysis
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•Confidence
•Labor
•Land Use
•Lots
•Finance
Supply Constraints

7. Oregon Office of
Economic Analysis
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Optimism Abounds
“Successful
developer by
their nature is
optimistic”

8. Oregon Office of
Economic Analysis
8
Industry Adding Jobs…

9. Oregon Office of
Economic Analysis
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… But Wages Not Crazy…
Construction
wages relative
to the statewide
average are well
within historical
range.
Wages are rising
across the
board, and in all
industries.

10. Oregon Office of
Economic Analysis
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… and Labor is Scarce
Everywhere
The labor
market is
getting tight for
all industries,
construction
included.

11. Oregon Office of
Economic Analysis
11
Idaho’s Land Use Laws?
Policy does matter.
Oregon’s land use
laws do have long-
run effects.
However they are
not the driver of
short-term building
issues in recent
years.
Localized
explanations for
national or regional
patterns do not
explain much.

12. Oregon Office of
Economic Analysis
12
Lot Supply Issues
Everywhere
Source: National Association of Home Builders
http://eyeonhousing.org/2016/05/shortage-of-lots-now-worse-than-ever/
Lot supply is low
and a growing
concern.
Issue more severe
in the West, and in
prime locations –
so-called A lots.

13. Oregon Office of
Economic Analysis
13
•Dave Crowe, NAHB’s former Chief Economist
•2014: “The land shortage is the result of tight
credit for developers who have been unable to
buy raw land and develop sites for builders.”
http://eyeonhousing.org/2014/08/builders-confidence-continues-to-build-2/
•2015: “… lot supply continues to be the biggest
concern among builders … very limited access to
capital from regional and community banks …”
http://eyeonhousing.org/2015/07/builder-sentiment-reaches-new-high/
Lots and Credit

14. Oregon Office of
Economic Analysis
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•Builder Confidence
•Labor Costs
•Finding Enough Workers
•Lot Supply
•Credit Availability
Supply Constraints

15. Oregon Office of
Economic Analysis
15
Maybe Not Quite As Bad
For More: http://eyeonhousing.org/2016/11/nahb-survey-adc-financing-standards-continue-to-ease/
The Fed Senior Loan
Officer Survey
shows banks are
tightening
construction and
land development
loans. This is a big
concern.
However, NAHB
survey of members
show loosening
standards for
builders. This is
good news.

16. Oregon Office of
Economic Analysis
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Loan Volume Low,
But Growing Kinda Briskly
Replication of NAHB chart. http://eyeonhousing.org/2017/02/adc-lending-expansion-slows/
Flow of credit has
returned, however
considerably
smaller today than
a decade ago.

17. Oregon Office of
Economic Analysis
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•Financing and credit availability following the bust
likely the primary cause of the housing shortage.
•Increased lending for multifamily has resulted in
apartment surge, which is beginning to impact rents.
•Good news is the flow of credit has returned for
builders, even if overall loan volumes low.
•Additional issues do impact the industry, prices, and
affordability.
•Reasonable to expect some sort of single family
cycle; it has just been delayed a long time.
• Except in geographically constrained regions (e.g. SF)
Summary

18. Oregon Office of
Economic Analysis
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joshua.lehner@oregon.gov
(503) 378-4052
www.OregonEconomicAnalysis.com
@OR_EconAnalysis
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