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Like many other states, Oregon is facing a severe housing shortfall, especially for people with low or moderate income. The governor has set an annual housing production target of 36,000 new units over the next 10 years, far more than the numbers produced in recent years. Achievement of this target is challenged by rising interest rates, a phenomenon that has seen the city of Portland lay off 15 percent of its Bureau of Development Services staff over the slowdown in new development.

Good and bad proposals have abounded. Without saying more, we continue to believe that two previous proposals (i.e., to require approval of multiple variances to local residential zoning codes and to allow urban growth boundaries to expand without justification, both on an as-of-right basis), are mistaken. But there are other available alternatives to increase housing, with a higher likelihood to increase the number of affordable housing units. Two of them come to mind.

The first is to avoid unjustified UGB expansions by requiring utilization of existing urban lands before turning to rural lands that require new services and facilities for urban uses, which take time and money to build. For example, during 2009 concept planning for the North Bethany addition to the Metro UGB, Washington County estimated that infrastructure costs were over $100,000 per housing unit. Simple economics dictates that this is the cost to serve recently added urban land. It doesn’t make sense to add more land that will carry the same, if not higher, urban service costs. Simple economics also reveals that filling in housing on existing urban lands will likely have a greater chance of meeting the needs of low- and moderate-income families. Around the state, there are other examples of vacant, buildable urban lands that reinforce compact, efficient, and economically prudent urban development, compared with one-time UGB expansions that will take more time and money to come online. High infrastructure costs will likely prohibit affordable housing without a taxpayer subsidy. Existing law would require existing urban lands to be used before a UGB may be expanded. The system has worked for 50 years and there is no reason to set it aside.

The second alternative involves a much greater public investment in infrastructure development. Since the passage of property tax limitations through Measures 5, 49, and 50, local governments have no excess general funds to build infrastructure, such as water and sewer lines, storm drainage works, parks and open spaces, and transportation facilities, to serve existing or new housing. If infrastructure funding is lacking because of voter objections, inapplicability of urban renewal, or simple lack of resources, the infrastructure (and thus the housing) will not be built. When that infrastructure is constructed, high infrastructure costs will make the housing expensive and available only to the most affluent. And because land added to a UGB is at the edge of that boundary, it may be very distant from existing infrastructure connections. Plus, the capacity of existing facilities (such as sewage treatment plants and water filtration plants) and roads would need to increase to serve new development. These factors will only increase the cost to future residents.

Land economics may be a boring subject to many people, but it is useful in considering the viability of affordable housing (or any housing, for that matter) in Oregon. Land proposed to be added to UGBs, or land already close to the UGB, is less likely to have the necessary infrastructure, so the capital costs of constructing or extending infrastructure are likely to be high and, without public intervention, will militate against affordable housing being constructed. What can be done to make such financing more likely?

One possible means is for the state to provide for a revolving infrastructure fund from which local government-approved projects that provide housing or perhaps only low- or moderate-income housing, may be granted directly or loaned the funds to complete infrastructure. State constitutional limitations effectively prohibit local governments from undertaking direct loans and it may require a constitutional amendment to allow the state to make those loans, but these types of loans have been relatively successful for small-scale energy projects and projects serving veterans. There may be other financing means to get infrastructure constructed, such as authorization for direct state grants, but this is a far more useful alternative to reach the 36,000-unit objective at some level of affordability than a few variances or less-dense additions to UGBs.

So long as there is a housing crisis, there is a market for housing. Planners and economists can forecast where the housing is needed and the price points at which sales and rents will make that housing viable. They may also forecast the point at which infrastructure grants or loans may be viable. There may also be cases in which public agencies may be required to provide a subsidy for low-income housing that may never get built otherwise.

More low- and moderate-income housing is what the state needs. Oregon will not get there through insufficient one-off or one-size-fits-all housing measures, nor through UGB expansions that cannot meet both infrastructure needs and construction of housing at prices or rents affordable for ordinary Oregonians. What is necessary is finding the means by which land available for urban use (likely to have urban services available) or necessary infrastructure is financed and becomes available without breaking the state’s bank or pricing housing beyond the means of those hoping to benefit by the state’s efforts.

Edward Sullivan is a retired practitioner of land use and municipal law with more than 50 years of experience. Contact him at [email protected].

Carrie Richter is an attorney specializing in land use and municipal law at Bateman Seidel. Contact her at 503-972-9903 or [email protected].

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither author nor the 91ÊÓƵ guarantees the accuracy or completeness of any information published herein.