Market trend sees wealthy choosing apartment living over buying homes
By: Jim Redden, Portland Tribune
Posted: Apr 25, 2019 08:11 AM PDT
Updated: Apr 25, 2019 08:31 AM PDT
PORTLAND, Ore. (PORTLAND TRIBUNE) -- "They're building apartments no one can afford" is a frequently heard complaint about the affordable housing crisis.
Those making the complaint — including affordable housing advocates and some local elected officials — mean that most of the new apartments being built in the greater Portland region are too expensive for even median-income renters. They are priced far higher than the relatively few publicly subsidized ones that help prevent homelessness.
That is true — but it is not the fault of those behind the new upscale apartments. Their developers are responding to well-understood market trends. A recent study says an increasing percentage of renters want and can afford such apartments, both here and nationwide.
According to an Apartment List study released in February, households earning more than $100,000 per year are the fastest growing segment of the U.S. housing market. They grew 48 percent nationally between 2008 and 2017. The increase was almost twice as much in the region — 93 percent during the same nine years.
"Households that can afford to buy houses are choosing to rent instead," says Igor Popov, chief economist for Apartment List, an online rental and research platform.
According to Apartment List, high-income households in the region increased 29% — from 253,006 to 325,571 — between 2008 and 2017. High-income renters increased from 12% to 17% of the market in those years, with the total jumping from 29,352 to 56,771 — more than enough to support the new luxury apartments that were built.
This shift should not be surprising. Most of the newest apartments in the region have a lot to offer. Many are located in walkable neighborhoods with nearby jobs, shopping, dining and entertainment. And they include such features as secure electric vehicle chargers and bike storage. Given the shortage of available single-family homes in such locations, it's obvious why an increasing number of high-income households are choosing such rentals.
And, despite the complaints, many of the most expensive new apartments in the region are heavily supported by public funds. In Portland, examples range from those in the Pearl District, which was redeveloped with urban renewal funds, to the new high-rise apartments in the Lloyd District, where the eastside Portland Streetcar extension was deliberately routed to serve them.
Even in Beaverton, the new upscale 230-unit Rise Central apartment complex is the result of deliberate city policies that recognize the market for higher-income urban residents. The city solicited proposals for the project, which was built on city-owned land adjacent to The Round, which includes Beaverton City Hall and federal offices. That was an earlier redevelopment project; both of which are supported by TriMet's multimillion-dollar westside MAX line.
And those projects won't be the last. Prosper Portland, formerly known as the Portland Development Commission, currently is designing a master plan for the former U.S. Post Office distribution center at the southern end of the Broadway Bridge. The Broadway Corridor is expected eventually to include 2,000 market-rate apartments, with rent restrictions on only 10% of them. Another 500 publicly subsidized apartments also are foreseen.
Beaverton goes upscale
Many residents in the region might be surprised by the concept of luxury apartments in Beaverton, which has long been stereotyped as a suburb of Portland. But that is not how Rembold Properties manager Kira Cador sees it. Her family-owned company jumped at the opportunity to build the Rise Central in the fast-growing part of the city known as Central Beaverton.
"There are more jobs than housing in Washington County, and that's creating a demand for Class A apartments with amenities," Cador told the Westside Economic Alliance during a March 7 breakfast forum on commercial property development in the county.
According to company research, the county has a disproportionate percentage of well-paying jobs in the region, thanks in large part to such major employers as Nike in Beaverton and the tech companies in Hillsboro, anchored by Intel.
But, until now, apartments in Beaverton were mostly low- and medium-priced. Many well-paid workers who wanted more were living in Portland and "reverse commuting" into Washington County.
In fact, Rembold Properties is so enthusiastic about the development opportunities in Washington County, it moved out of downtown Portland to the Cedar Mill area to be closer to its projects.
Although it has only been open a few weeks, the Rise Center shows every sign of being a success. There was a waiting list when it opened April 1. Even though construction is still being finished, the first residents already have moved in and Greystar, the property manager, is busy processing more applications.
"There's been a steady stream of them," said Greystar Regional Property Manager Trisha Lobdell.
During a recent tour of the project, the appeal for high-income renters was obvious. The two nearby buildings offer studios, one- and two-bedroom floor plans, and two-story townhomes. Apartment interiors include air conditioning, keyless entry, stainless appliances, quartz countertops, hard surface plank flooring, subway tile backsplashes and open kitchens with the option of an island, oversize closets and triple-paned windows. Community amenities include outdoor entertainment areas with firepits and barbecues, a fully equipped fitness center, bike storage on every floor, parcel lockers and more. The lobbies feature video screens displaying the arrival times of MAX trains and the proximity of ride-sharing company vehicles.
The Rise Central also is located within easy walking distance of the Beaverton Transit Center, the Cedar Hills Crossing shopping center and theaters, the Beaverton Town Square, and the BG Food Cartel, which offers an urban vibe with food carts and an indoor beer hall.
"The neighborhood offers great walkability for our residents close to transit and everything they need," Lobdell said.
Construction also is scheduled to start soon on a new hotel and the Patricia Reser Center for the Arts in the immediate area.
Apartments range in size from 493 to 1,648 square feet of living space. Prices vary from $1,275 per month for a studio to $3,294 for the largest units. But, in response to the regional affordability housing crisis, Rembold Properties also voluntarily included 15 units affordable to households earning 80% of the area median family income, even though that wasn't a requirement.
Many renters struggling
Another recent Apartment List study shows the highest priced new apartments are far outside the reach of most regional residents, however. Its April study found that households earning the area median family income can afford to rent a median-priced two bedroom apartment. But those earning less than $25 per hour would have to pay more than 30% of their income for it, making them cost-burdened.
In fact, according to the study, the greater Portland region has the 33rd highest cost-burden rate of the country's 100 largest metropolitan areas. Around 50% of renters in the region are either moderately or severely cost burdened, meaning they are paying more than half their income for rent.
The regional cost burdened rental rate increased from 49.7% in 2016 to 50.8% in 2017, the April study said. But the percentage of high-income renters is increasing much faster, which helps explain the growing spread of upscale apartments.