Building Permits in OregonAugust 7, 2017 Oregon’s population continues to grow, led by migration to the state. Housing availability for both buyers and renters has become a concern in many local areas. As more people arrive to our cities and towns, are we building enough housing for current residents and those coming to Oregon?
Residential building permits are issued before a building project can begin. They’re a leading indicator of anticipated construction and new housing supply. Let’s take a look at trends in building permits and population, to inform what we can expect in terms of new housing supply in the next couple of years.
It all starts with population growth. Oregon’s population added more than 600,000 residents between 2001 and 2016, averaging 1.1 percent growth per year during that time. The growth has not been evenly distributed across the state. Metropolitan areas in Oregon are growing more quickly than rural Oregon.
Metro areas gained 561,000 residents between 2001 and 2016, averaging 1.1 percent growth per year, while rural areas gained 43,000 and averaged 0.4 percent growth per year. Population growth stalled after the housing bubble burst and the recession that lasted from late 2007 until mid-2009. As house prices fell amid increasing supply due to foreclosures, many people who might have otherwise moved were locked into their current homes. Many real estate developers went out of business because they could not sell the new homes they had already built for what it cost them to build.
In-migration has picked up again each year since 2012. Between 2015 and 2016, Oregon’s metro population grew 1.7 percent and rural counties gained 0.8 percent.
Residential Building Permits
Residential building permits in Oregon averaged around 17,600 per year between 2001 and 2016, according to a U.S. Housing and Urban Development Department (HUD) database titled the State of the Cities Data Systems (SOCDS). The number of building permits statewide peaked at more than 30,000 in 2005, fell below 10,000 in 2009 through 2011, and has returned to more than 19,000 in 2016.
The Portland Metro area accounted for about 60 percent of statewide permits in the last few years, an increase from below 50 percent in 2001 through 2006. The share of residential building permits in metro areas outside of Portland has fallen about 10 percentage points between 2001 and 2016, while rural areas moved from capturing about 10 percent of statewide permits to about 7 percent in the last few years. Four rural counties (Gilliam, Grant, Sherman, and Wheeler counties) averaged zero permits between 2001 and 2016.
It makes sense that metro areas, with their larger populations, issue more residential building permits. But even taking into account population size, metro areas seem to have a persistent advantage in building. During the height of the housing bubble in 2005, Oregon’s metro areas averaged 9.0 permits per 1,000 residents while rural areas averaged 5.2 permits per 1,000 residents. When the housing market collapsed, metro area permits dropped to 1.8 permits per 1,000 in 2010. Rural area permits continued to drop until they hit bottom in 2011 and 2012 at 1.2 permits per 1,000 residents.
Since hitting bottom, residential building permits have started to rebound. From 2010 through 2016, metro areas have seen residential permits grow to 5.3 permits per 1,000. Rural area permits have edged up, but they started their recovery later and have grown slower than in metro areas, reaching 1.9 permits per 1,000 in 2016.
Types of Building Permits
Residential building permits come in two basic types: single-family and multi-family. The latter is broken up into three areas: 2-unit multi-family structures, 3- and 4-unit multi-family structures, and finally 5+ unit multi-family structures (think apartment complexes).
Between 2001 and 2007, single-family units represented more than seven out of 10 building permits issued. After the recession, from 2011 to 2016, single-family units fell to a little more than half of all building permits. Single-family building permits peaked in 2005 for both metro areas (20,301 permits issued) and rural areas (3,230 permits issued). The low for both areas occurred in 2011, when 4,055 metro permits and 727 rural permits were issued. In 2016, the number of single-family unit permits issued grew in both metro (9,561 permits issued) and rural areas (1,297 permits issued), but those numbers are still less than half of the peak numbers.
Oregon’s metro areas reached a new peak in multi-family building permits in 2016 (8,471 permits issued). In contrast, the peak in multi-family permits in rural areas happened in 2005 (461 permits issued). In 2016, rural areas issued 109 permits for multi-family units, less than a quarter of those issued at the peak. Most of the multi-family building permits are now and have always been for the 5+ unit multi-family
structures. Building permits for 5+ unit multi-family structures have rebounded faster than any other residential type of permit.
Oregon’s population has grown significantly since 2001, and permitted housing units haven’t kept up. The rebound in permits of 5+ unit structures is helping to alleviate the housing crunch, but there is more room to grow.