Portland Metro Is Raising Rents, Land Value & Housing Costs to Force High Density
From: metrourbancentersreport.pdf, (local copy) (some bold added)
As a result, higher underlying land values can change the financial equation to favor higher density development forms. This higher-density development could only be supported if supportable rent levels rose
An impediment to substantive changes in rent levels in Urban Centers is competition from other areas,often neighboring Urban Centers.Many Regional Centers are participants in the same sub-regional market for certain goods and services.Another competition related problem for the Urban Centers is the loss of traditional office space demand to industrially zoned land.In terms of residential development,only highly desirable housing markets can support the values necessary to allow for high-density
SUMMARY OF EXPLANATIONS
• The primary reason for underbuilding in urban areas is the lack of financial feasibility.There is little evidence to support the conclusion that the high densities required in Urban Centers,in the absence of public assistance,are profitable under current market conditions,and that developers and property owners are either unaware that they could make more money by building denser,or prohibited from doing so by physical or policy constraints.
• Land values are good indicators of when density becomes profitable.If land values stay low,density does not work financially. If the public sector wants the private sector to build more densely it must do something to affect demand and supply conditions so that land prices increase,1 or it must subsidize development cost so that there is profit to developing more density before the market would otherwise provide it.
• Zoning is still ahead of the market.Market conditions and public policy have not made land scarce enough, have not made central locations superior enough in terms of transportation or amenity,and have not seen demand great enough to cause land values to rise fast enough in Urban Centers that rents can be demanded that make high density profitable without public assistance (e.g.,land assembly,fee
• The fact that zoning is ahead of the market is not a condemnation of public policy. Planning is looking ahead to encourage the metropolitan area to be a metropolis it is not quite ready to be. Getting lower than planned densities should be expected.