Will Portland Be the Next San Francisco?
Monday, May 18, 2015
In the 1990’s San Francisco was cool, hip and so “not Los Angeles.” Today, it is big and expensive.
The impact of the growth and increase cost of living has been profound, In the past three years, the median house price in San Francisco has increased from $665,000 to over $1.1 million, according to Paragon Real Estate Group. Could this be the fate of Portland?
The impact of skyrocketing housing prices has has a big impact on San Francisco as the city is becoming only affordable to the wealthiest. “While high prices for real estate are bad news for most San Franciscans — only 14 percent of whom can afford the median price of for-sale homes in the city — the boom in local wealth is a boon for the city budget,” according to non-profit, SPUR.
Portland is seeing the signs of explosive growth. While Portland has grown from 529,121 in 2000 to to over 610,000 today, an increase of over 15 percent. In comparison, peer cities like Seattle and San Diego grew at 8% and 10% over the same time period. As GoLocalPDX reported in April, In five years the population of the city could reach 650,000 — a 23% in 30 years
The cost of housing for the average Portland resident is beginning to climb again. In 2007 just before the great recession, Portland’s housing affordability became a significant issue. Housing expense to income ratio hit an all-time high. At that time
“The question is one of timing, and right now we expect it to happen soon, but the strong price gains are likely to continue until supply increases or demand falls,” report the Oregon office of Economic Analysis.
Today, housing prices have rebounded from the great recession, but incomes have not. Thus, more many home buyers housing is taking 30% to 35% of their income.
San Francisco in 2014 reported population of 852,469 up from 776,733 in 2000 -- an increase of 11%. But the growth in San Francisco's population was just two-thirds of the growth rate of Portland during the same period. Even the City of Portland recognize that there is not the infrastructure to meet the demand, "None of the growth scenarios provide enough affordable housing, especially for the lowest income households. Public investments to increase services can create gentrification pressure. Portland will need to better align growth management, public investment and affordable housing develop."
Big Difference Between Portland and San Francisco
While Portland is growing its tech economy it is a tiny fraction of the size of San Francisco’s tech sector. In 2014, Portland generated $168 million in 2014 across 27 deals. In contrast, San Francisco had 876 deals and 15.7 billion or 93 times more in venture funding that Portland realized.
“There are also risks inherent to having a tech economy — namely market saturation and the formation of speculative bubbles. But neither appears to be an issue yet for the Bay Area economy. Nationally, equipment and software spending is expected to grow at an 8.8 percent rate this year and 6.6 percent in 2016,” writes SPURS.
All indications are that Portland’s economy will continue to rebound, emigration from around the country will continue, and housing demand will continue to grow. The implications are profound, as the affordability of housing will continue to grow. Oregon Economic Analysis identifies that between 2006 and 2014, Portland was under-built by 20,000 housing units. This failure to develop housing stock in the city during the great recession and post period will continue to put strain on housing prices.
“We need to ensure that we have enough homes, townhomes, apartments and the like to meet the demands and needs of our growing population. And we need these housing units to be relatively affordable, so that households do not have to squeeze their budgets to such a degree that it impacts their ability to meet their non-housing needs,” writes John Lehner.
Three X factors could push the transformation of the City of Portland even faster are: Portland could see even greater population growth fueled by a ever improving economy and employment opportunities in the City and pulling in more people from around the country. Second, Portland could be a focal point of destination for an even greater number of California residents if the drought turns even more serious. Lastly, Portland could see wage growth that would allow for greater demand on housing. Realization of any of these three factors could put even ore demand on the limited housing stock and potentially making Portland ever more like San Francisco.
PHOTO: Flikr - Don McCullough
Related Slideshow: Oregon Business Rankings in US
See how Oregon stacked up against the other states in the U.S.
Oregon gets a C+ for small business friendliness from Thumbtack, in conjunction with the Kauffman Foundation.
According to the ranking:
Overall friendliness C+
Ease of starting a business B
Ease of hiring D+
Health & safety D
Employment, labor & hiring D
Tax code D+
Training & networking programs B+
Oregon has been ranked as the 2nd most eco-friendly state in the country, according to a recent study by WalletHub.
Oregon ranks eighth in environmental quality and first in Eco-Friendly Behaviors landing them in second overall.
Oregon is behind Vermont and ahead of New York and Minnesota who land in the third and fourth spots respectively.
Small Business Friendliness Grade: C+
The Economist grades states on an A+ to F grading scale for its small business climate. Oregon is one of 4 states that earned a "C+"
Overbearing bureaucracy and excessive licensing is stifling small business in America.
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