Policy Brief: Housing Crisis at a Tipping Point

Increasing the supply of houses is the only way out of the crisis.

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Before the pandemic, Oregon was headed for a major housing crisis — housing costs were climbing further out of reach for many, and half of renters in Oregon’s cities were spending more than a third of their income on housing.

We faced a housing shortage that is the worst in the nation as a percentage of existing stock, and the number of people experiencing homelessness was climbing daily.

On top of that, housing affordability has a disproportionate impact on those with disabilities, those who are 65 and older, those with limited English proficiency, and non-Asian people of color — the same groups who are disproportionately impacted by COVID.

We must take decisive action this legislative session to repair the tears in our housing system — and ensure no one loses their home because we have stayed home for the health and safety of our community through the pandemic.

Oregon REALTORS® support a set of policy recommendations that will help. The unifying foundation is that each of the policy proposals treats housing as a complex ecosystem: Any changes must be taken in full context of the health of the system.

That might sound abstract but let us take a look at a specific proposal the Legislature is considering: removing the mortgage interest deduction. The mortgage interest deduction saves homeowners in our state thousands of dollars on their taxes every year. It is a key provision for helping contain overall housing costs.

And it does not just benefit homeowners: Nearly half of rental-property owners are private individuals. These homeowners factor in the total cost of owning a rental when setting their rent, so it saves renters money, too.

Lawmakers propose removing the mortgage interest deduction and using the savings to fund affordable-housing programs. That might sound like a good policy on its face, but if you consider the impact to the system, you start to see how it could be catastrophic.

Let us take the homeowner who is a full year behind on payments because they have lost employment during the pandemic. When they file their state income taxes, they would be surprised to find they owe thousands more dollars than they expected. For the thousands of homeowners in this position, that could drive them further into debt — and closer to foreclosure.

Now, consider the renter who is also behind on payments. Without the mortgage interest deduction, their landlord’s costs go up, and they will either have to raise rent or sell the property — both of which jeopardize the renter’s basic housing needs.

In a pandemic when more than half of renters have reported cutting back on medication and food to afford rent, we cannot in good conscience increase the cost of housing.

The simple fact is you cannot create more affordable housing by making housing less affordable. Maintaining the mortgage interest deduction is a simple way to help ensure no one loses their home because of the pandemic, and it requires no action by the Legislature whatsoever.

Let us look at a few other proposals and how they impact housing as a system. I mentioned Oregon has the worst housing shortage in the nation as a percentage of existing stock. In total, we need 600,000 more housing units in the next 20 years.

Any economist will tell you without a doubt: Housing shortages drive prices up.

This basic equation taught in every introductory economics course means there is a much simpler way to create affordable housing: Strategically increase supply. Oregon communities of all sizes lack entry-level homeownership opportunities, and there are several bills this session that would equip developers with a simpler and less expensive way to divide lots.

This may not sound particularly exciting, but developers spend months — sometimes years — and tens of thousands of dollars simply dividing property into pieces so they can build homes. We can streamline this and, in the process, jump-start the development of affordable housing in cities across the state.

Rural Oregon also faces a severe housing shortage, and we support another elegant, triple-win solution: allowing accessory dwelling units (ADUs) on land zoned for residential use. This would allow affordable housing in rural areas that meets the needs of the communities and families who live there while reinvesting in those communities.

It is not the only solution we need to alleviate rural housing shortages, but it is a powerful tool with support from rural county commissioners.

For too long, we have treated housing — one of our basic needs — as a set of disparate inputs. We tax one group to try to fund the other, create well-intentioned laws with unintended consequences, and then wonder why housing costs spiral out of control. Yet it does not work — and the 17,000 Oregon REALTORS® who serve every corner of the state see it every day.

The pandemic is a chance to course correct. We all share the goals of ensuring no one loses their home because of the pandemic, and that every Oregonian can have a vibrant and thriving future.

We are committed to evaluating policies with a holistic lens and look forward to partnering with anyone who shares that commitment.

Jenny Pakula is the CEO of Oregon REALTORS®, a real estate sector advocacy group.

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