Even with new city incentives designed to encourage housing construction, rising development costs and higher interest rates continue to pose major challenges for Portland builders.
A new report from Portland Permitting & Development highlights the financial pressures affecting housing production across the city, even as officials attempt to stimulate new development through temporary fee waivers and other incentives.
Construction costs have increased about 50% since the start of the COVID-19 pandemic, significantly raising the cost of building new housing.
Higher interest rates have also made it more difficult for developers to secure financing for new projects, creating additional obstacles for housing construction.
These economic pressures have contributed to a slowdown in housing development compared with the peak years earlier in the decade.
City officials say the combination of rising material costs, labor shortages and financing challenges has made it increasingly difficult for some housing projects to move forward, particularly larger apartment developments that depend on outside investment.
To help address these challenges, Portland created a temporary incentive program that exempts many new housing projects from system development charges, or SDCs.
The program is designed to reduce upfront development costs and help encourage construction of 5,000 housing units over three years.
As of mid-January, projects representing about 1,720 housing units have entered the program, indicating that some developers are responding to the incentive despite ongoing economic challenges.
City officials say the incentive has helped move some projects forward that had previously been stalled in the permitting pipeline.
However, the report notes that broader economic forces continue to influence development activity, and local policy changes alone may not fully offset those challenges.
The city plans to continue monitoring housing production and will release additional reports evaluating the program’s impact as more projects move through the development process.
