Apartments go boom!

I think we can officially say we’re in the midst of an apartment boom.

Daily Journal of Commerce

Of course, any free market boom should be approached with caution, especially ones involving real estate development (understatement of the decade!) Developers are often like gold-hungry 49ers, all rushing to the same place to do the same thing and make the same fortune, then overdoing it and leaving a wasteland. The 1990s/2000s real estate bubble - based largely on suburban sprawl - left us with not just an economic catastrophe, but also empty subdivisions filled with big houses that require lots of $4 gas to drive to.

Fortunately this time, instead of a sprawl and mortgage boom, we’re talking about a boom of infill rental apartments in dense, urban neighborhoods. While there’s still a risk of overbuilding, shoddy construction and rash bulldozing (old buildings instead of cornfields this time), we are at least experiencing a “smart growth” boom. It’s a boom that meets many urban and regional planning goals: infill development, efficient use of urban land, neighborhood revitalization, transit-oriented development, housing choice, and (hopefully) equity. And for the most part, the free market is providing this boom, without the help of public subsidies. How did we get to this unlikely stage?


On the supply side, nobody has built apartments for awhile. Before the recession, most developers weren’t interested in building them. They just wanted to make a killing selling single-family homes like they had for decades. Municipalities piled on, drooling over the potential property tax base of single-family developments, and sometimes engaging in exclusionary zoning against multi-family housing. Meanwhile, renters continued to vie for the same old assortment of century-old walk-ups, shared houses, and tired, mid-century garden apartments. Then the recession hit, and nothing was built at all, apartments or otherwise.

On the demand side, people are literally lining up for apartments now. Standing in those lines are people who have lost their homes to foreclosure, people who cannot afford or are not approved to buy homes in the first place (read: most people under 40), and a growing number of young people and retirees that favor city life over picket-fence suburbia and driving. Cities, while not for everyone, are far more attractive and amenity-rich than they were 20 years ago. They are also the economic hubs.

The result can be seen in cities like Portland, Oregon, which currently ties with Minneapolis in having the second lowest apartment vacancy rate in the USA (2.5%), trailing only New York City (1.8%). That’s great for apartment building owners, who have been jacking rents and making more stringent lease-signing requirements. But it makes for a tough slog for apartment seekers, as several recent articles have reported.

Pent-up demand and insufficient supply has finally reached a tipping point in Portland. The apartment boom has begun, and lately it seems there is a new building proposed every week. The apartment boom heavily favors Portland’s dense, older neighborhoods within two or three miles of downtown, rich with cool restaurants, bars, coffee shops, bookstores, parks, bike routes and frequent transit. Mid-rise, urban-style apartment buildings are popping up in bohemian Southeast Portland, in rapidly gentrifying North Portland, and in tried-and-true Northwest Portland, among other places.

The Hollywood Apartments. Myhre Group Architects

Ground has broken on the 47-unit, five-story Hollywood Apartments next to that district’s iconic movie theater on NE Sandy Boulevard. This project caused some worry over blocked sight lines to the theater facade, as well as its non-provision of parking (which is not required near frequent-service transit - in this case three MAX lines and two bus lines). Buckman Court is also underway, providing 71 apartments at the corner of SE Morrison and 20th. Northwest and the Pearl are continuing their roles as dense apartment enclaves with projects like the 177-unit Parker (NW 12th and Pettygrove) and 179-unit Savier Flats (NW 23rd and Savier).

The Lloyd Blocks. Wowzers! GBD Architects

But the most ambitious Portland apartment project, by leaps and bounds, is the Lloyd Blocks. On a superblock bounded by NE 7th, 9th, Multnomah and Holladay - now home to an office tower and three acres of parking - three additional towers of 22, 18 and 13 stories will rise, with 780 apartments, commercial space and underground parking. The Lloyd Blocks will be one of the largest apartment projects in Portland history, and will provide much needed life to the largely 9-to-5 Lloyd District.

I’ve made an interactive Google map of 20 new Portland apartment projects based on information gleaned from newspapers articles and friends “in the know.” I’ve included key details such as number of units and stories, and who is building them (some information is missing). I’ve drawn polygons that show each project’s areal extent, so you can see what it is replacing. I've also hyperlinked articles about each project. By my count, at least 2,188 apartment units are proposed or under construction in Portland.

Link to map

I say, bring on the apartment boom, in Portland and elsewhere. Renters are facing a real crunch in what they can find and what they can afford. My only caveats would be the following:

First, let’s make sure these buildings are of the utmost quality, structurally and visually, so that they contribute rather than detract from the neighborhoods in which they rise. In Portland, the city’s rigorous land use, design and neighborhood engagement processes are helping us in this regard.

Second, I hope that developers can find ways to target vacant lots and parking lots for their projects, instead of demolishing historic buildings. This boom has already taken its toll on some beautiful, old buildings, some of which ironically sat next to empty lots that will remain empty. But I suppose that’s the way the cookie crumbles - developers purchase what’s for sale, not what’s not.

Lastly, I hope people can afford these apartments. Sure, any new construction will hold a premium over existing building stock. But if we’re looking at San Francisco-level rents just to live in a new building near downtown, we’ll end up with ghettos of designer jeans-clad well-to-doers in shiny buildings, while the rest of humanity dukes it out over old houses on Craigslist or settles for 1960s garden apartments. I’m glad we’re getting non-subsidized, market-rate apartments, I just hope that people like teachers and machine shop workers can afford to live in them.

Should we be worried about overbuilding? I don't think so. Unlike owner-occupied homes, apartments are flexible. No one can be “underwater” on their rent. Worst case scenario? We get some sparsely populated apartment buildings, the building owners drop rents to fill the units, and the city experiences a downward adjustment in rent prices. As long as people continue to move to cities like Portland (and they do), apartment developers and apartment dwellers should both come out ahead.