Until recently, redeveloping houses in the urban core was a business of last resort for big builders.
Portland’s long-established neighborhoods were unwelcoming to builders content to focus on the suburbs, where they found large tracts of undeveloped land and where scale worked in their favor.
But the housing crash changed all that. As the region has emerged from recession, Portland and even some of its suburbs are seeing a rush of individual homes in single lots being torn down and replaced, usually by bigger or more expensive houses.
Builders who have gotten into the business say the trend that was inevitable, given the region’s land-use restrictions. Fallout from the housing crash and subsequent recession has hastened things along.
In the boom years, and even in the steady years that preceded them, builders had little reason to build anywhere but the suburbs. There, they had room to spread out. Building 30, 50 or 100 homes on one large site is easier and more cost effective than building a single house on a single lot.
Then came the housing crash, which put a stop to most construction as demand for new homes dried up overnight.
It also stopped development — the process of buying land, getting “entitlements” (regulatory approval) and otherwise readying everything for construction. Financing dried up, too, and builders were left with a shortage of shovel-ready lots able to accommodate the efficient construction the suburbs once promised.
But with prices buyers are willing to pay going up in the central city, some builders are seeing more upside to urban projects instead. They might not be able to sell 30 homes, but they can sell one high-end home in the city for quite a bit of money.
“In order to meeting the housing demand, we need entitled lots,” said Gordon Root, a longtime Portland-area developer. “Well, you can’t get more entitled than a finished home sitting on a lot.”
Infill construction, of course, is not entirely new to Portland.
Jeff Fish and others have been doing it in Portland for years, building on empty lots and even tearing down houses from time to time to rebuild in place. But Fish operates in a world largely isolated from some of the newer competitors. His houses are mostly starter homes priced at $300,000 or below.
“It’s been kind of surprising,” he said. “I personally thought when the market picked up and was going strong we’d be fighting over lots.”
But much of the new wave of infill construction is happening in neighborhoods where homes can sell for half a million dollars or more.
Their arrival has been jarring for neighbors who thought that staying away from new subdivisions would save them from construction next door. Neighborhood groups have also voiced concerns about the size and design of some infill homes, which can look out of place in neighborhoods built out decades ago.
But that’s precisely what the Portland area’s land-use laws are supposed to encourage, Root says.
“The voters have voted, time and time again,” he said. “You can’t build outside the (urban growth) boundary, so you’ve got to renovate and rejuvenate. So that’s what we do.”
And now that it’s here, builders say, it’s not going anywhere.
Financing for new suburban buildable lots is only just now starting to flow again. The process to get them shovel-ready can take years, so even the lots in the pipeline won’t ease the crunch in the short term.
“If you’re a homebuilder looking for lots, you’re just having a miserable time trying to find them,” said Jeff Smith, owner of J.T. Smith Cos., which focuses on building and developing in the suburbs. “We used to not look at anything less than 30 lots. Now we have to look at everything just to keep everyone employed.”
Those who have adopted urban infill, meanwhile, think the model has a long future. Many see a shift toward urban living that that will draw more and more homebuyer interest in the years ahead.
“The way people are living now encourages living close in, in walkable areas or with transit nearby,” said Vic Remmers, owner of Everett Custom Homes. “Right now we’re really focused on doing things in the city. As long as there’s lots available and we’re successful, we’re going to keep at it.”
— Elliot Njus