County faces tight housing market and it could be getting worse

Population forecasts drive the amount of land that cities and counties must provide for growth under Washington’s Growth Management Act (GMA). At a time when housing inventory is at 1.5 months, population estimates provided by the U.S. Census Department are higher than projections made by Washington’s Office of Financial Management (OFM). The disconnect between the OFM’s projected data and the U.S. Census Department could impact the buildable housing inventory and home prices for years to come.

At the same time, the Office of Policy Development and Research of the U.S. Department of Housing and Urban Development (HUD) prepared a housing needs analysis that found that current housing units under construction were dramatically lower than the number of units needed to be built over the next three years. The two trends of large population growth and lack of housing units under construction likely will continue to put substantial pressure on the existing housing supply and drive prices up.

While the OFM projected Clark County’s population to hit 461,010 in 2016, the latest U.S. Census estimated the 2016 population at 467,018. With an average of 2.71 persons per household, this equates to approximately 2,217 additional housing units needed to serve the increased population. Because the OFM looks at five years of historical data in making its projections, and because it can take years for cities and the county to identify and bring in property, the system is not set up to respond to dramatic population increases. The lingering effects of the great recession will continue to skew the numbers downward as the OFM looks at a five-year average. As the year-over-year population increases exceed estimates, the buildable land inventory for future housing needs will continue to be insufficient.

Given the time and staff resources associated with the GMA process, cities and the county cannot quickly respond, even though they recognize that there is a housing crisis. Cities and counties must consider many factors as they look at the GMA housing needs analysis and OFM population projections. Higher populations and the need for Urban Growth Area (UGA) expansions on the outer edges of population centers come with requirements for transportation infrastructure, which need to be planned. At the same time, funds to pay for that infrastructure need to be identified.

As the OFM projections and GMA inventory slips further behind the actual data, the lack of preliminary planning can act as a barrier to bringing in and serving property. Even in areas where planning has occurred, such as 179th Street, the lack of state funds for freeway access are blocking the development of land that could be developed to meet regional needs.

In May of 2016, HUD performed an analysis of the Vancouver submarket, which consists of Clark and Skamania counties. They projected a need of 6,800 sales units and 2,950 rental units for the period beginning May 1, 2016, and ending May 1, 2019. At the time of the estimates, 940 sales units and 1,125 rental units were under construction, which is significantly less than what is needed to keep up with market demand.

Oregon cities and counties face a similar situation. Neither the Portland submarket nor the Hillsboro submarket are meeting HUD’s need projections. Total regional demand for sales units is 27,225 and HUD has estimated units under construction at 2,810. Total demand for rental units in the region is 18,925 and HUD estimates that 6,995 are under construction.

Clark County and our region have important choices to make and hopefully they will err on the side of supply.

Peter Watts focuses his law practice on municipal, land use and elections law for Oregon government bodies. He has received numerous accolades for his skill and abilities, including being named the 2012 Up & Coming Lawyer of the Year by the Daily Journal of Commerce.

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