Oregon’s Limits on Growth Reduce Impact of Housing Price Decline


Even as other states struggle with housing price declines that have cut homeowner borrowing and spending power, Oregon’s land use controls are being credited with bolstering its housing market and economy.

Housing sales in the state have slowed and home prices in several Oregon cities have been described as “overvalued.” But compared to Midwest and Sun Belt states, where home prices have typically declined 20 percent, Oregon’s housing market remains strong.

For example, a recent Chicago Tribune article cited the 4.5 percent rise in 2007 housing prices in North Plains, a small town near Portland located in Oregon’s thriving high-tech “Silicon Forest.”

Unlike Phoenix and the San Francisco Bay Area, where similar high tech booms have sparked speculative housing construction and sprawl, North Plains and other Oregon communities have higher-density housing, the result of urban growth boundaries that protect farm, forest and coastal areas and that keep housing supply better aligned with actual demand. As a result, according to the Tribune, Portland area housing prices so far have only fallen slightly.

In the 1970s, growth management policies were adopted to protect Oregon from what then Governor Tom McCall, a Republican, called the “grasping wastrels of the land.” McCall noted that “unlimited and unregulated growth leads inexorably to a lowered quality of life.”

While free market proponents continue to decry Oregon’s growth management policies as a potential drag on the state’s economy, current evidence strongly suggests that (in addition to other benefits) such “sensible growth” policies are instead stabilizing the state’s economy in a period of economic turbulence.

One Response to “Oregon’s Limits on Growth Reduce Impact of Housing Price Decline”

  1. Antiplanner Says:

    There is no Midwest or Sunbelt housing market where prices have declined by 20 percent. According to the Office of Federal Housing Enterprise Oversight, the only markets that have seen such large declines are in California. Claims of larger declines are often based on realtor reports of median sale prices, which are not trustworthy as indicators of individual home values.

    In general, as shown by Harvard economist Edward Glaeser, the largest bubbles and the largest declines are in states with Oregon-like land-use rules. States without such rules did not see bubbles or declines. Oregon’s bubble hasn’t deflated much yet, but that does not mean its housing market is healthy.

    Several Oregon housing markets, including Bend and Medford, have seen drops in housing values of 5 percent or more. But Oregon benefits from being next to California, where strict land-use regulation has made housing even more expensive (and more prone to collapse), so Oregon’s market is partly supported by people fleeing California’s regulation.

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