Missing Middle Housing

In Research & Data Stories by WP-admin

Introduction
In the Portland metro area and across the state, the demographics of cities are changing. Urban populations and housing prices are rising, while household sizes are declining [i]. With these changing dynamics, how can Portland metro communities “provide for the housing needs of citizens of the state” as called for in the Oregon Statewide Planning Goals and Guidelines regarding housing? What types of housing will offer affordable choices for area households throughout all life cycles while supporting inclusive, sustainable communities?

What is Missing Middle Housing?

Increasingly, affordable housing advocates, designers, planners, neighborhoods, and policymakers are looking to housing models that were prevalent in many American cities before suburban living preferences, the ease of automobile travel, prohibitive zoning, and inequitable lending practices. These communities included a mix of housing types and discrete densities interspersed with single-family homes to form an innate neighborhood that supported a variety of households. While evocative of many treasured, traditional neighborhoods, this diverse mix of housing types didn’t have a name until recently: missing middle housing.

Missing middle housing represents the gap between single-family housing and higher intensity multi-family and mixed-use buildings. These types range from duplexes, triplexes, quadraplexes, townhouses, rowhouses, stacked flats, courtyard housing of various kinds, cottage clusters, and small apartment buildings. Contextually-sensitive missing middle housing can be compatible with single-family homes and may be interspersed in neighborhoods or serve as a transition to higher-intensity or mixed-use corridors. The designers who coined the term often recommend that missing middle housing is no taller than two-and-a-half stories, ranging from two to fourteen units for compatibility with lower-intensity neighbors, while larger missing middle multi-unit buildings may be appropriate in certain contexts [2]. The resulting density may support broader community desires, including walkable retail, amenities, and public transportation through increased “feet on the street” [3].

Why Is Missing Middle Housing Important?

Proponents of missing middle housing assert that the various housing types support household diversity, including income, size, age, and preferences for multigenerational living, enabling inclusionary communities. Missing middle housing is often smaller, and therefore may be more affordable. Smaller households, those seeking to downsize, or age in place would have increased options through missing middle housing. First-time homebuying may additionally be more attainable, and diverse rental options embedded in neighborhoods with access to neighborhood amenities like schools and parks would be available.

While many are looking to missing middle housing to address elements of housing affordability and choice, does a need for these housing types exist in the Portland metro area? How do people choose their housing and what is important to them? What do demographic trends indicate about the potential market for diverse housing types?

Complicated Choices

The 2014 Residential Preference Study conducted by Metro lends insight into the complicated factors that influence how people choose housing and how preferences may shift given tradeoffs (note: the study did not include Washington State respondents). Fully 44 percent of respondents indicated that price was the top influencer when choosing a home, while 19 percent indicated that safety of the neighborhood was the most important factor. Characteristics of the home (19%), proximity to work (6%), shops and restaurants (4%), and quality of public schools (3%) were the top choices for the remaining respondents [5].

While affordability is a clear influence, the Metro survey also revealed aspirational preferences that speak to neighborhood context and characteristics. 55 percent of respondents indicated that they preferred their ideal home to be located in a neighborhood with “moderate foot and vehicle traffic during the day and some activities within a 15 minute walk.” While the survey revealed a general preference for a “medium-sized, private yard separating home from neighbor” (32%), 22 percent of respondents would prefer a “small private yard,” 14 percent wanted a “small, private courtyard, patio or balcony, and 3 percent preferred “no private outdoor space, or possibly a shared space” [5].

Regarding the current and preferred housing type of Portland area respondents, not all respondents are currently living in the type of housing they desire. 65 percent of respondents lived in single-family detached housing at the time of the survey, while 80 percent specified it as their preference. 8% of respondents lived in single-family attached, and 7 percent preferred it. There is a definite housing preference mismatch where 28% of respondents lived in a condo or apartment, but only 13 percent preferred it [5].

With affordability as the main concern and clear desire for neighborhood-scaled living with amenities nearby, Portland area households may find that smaller or shared outdoor spaces are a comfortable tradeoff for price and neighborhood characteristics. Additionally, while preferences clearly point towards a desire for single-family detached housing, smaller-scale attached housing may provide a first-time homeownership opportunity for those who cannot afford a single family home, option for downsizing to age in community, or opportunity to live near family. Given the complex tradeoffs households consider when selecting a home, missing middle housing may be a viable option to attain the walkable neighborhood characteristics that have a strong preference among households.

Constrained Market for Portland Area Households

According to the US Census, from 2010 to 2014, Portland area households were more cost burdened than Oregon and Washington households statewide, meaning that they pay more than 30 percent of income to housing. A housing cost burden may leave households without sufficient funds for other necessities like food, health care, transportation, clothing and may lead to households sacrificing education, savings, and emergency funds. The 2015 median household income for the Portland MSA of just over $63,000 a year translates into an affordable housing budget of roughly $1,600 a month, including rent/mortgage and utilities. According to Axiometrics, a real estate analysis service, the average rent in the Portland MSA was $1,780 per month in the second quarter of 2016, indicating a broad mismatch in the reasonable affordability and actual cost of housing [7]. Across the Portland MSA, the problem is especially acute for people of color, illustrating that the financial constraints families experience are often inequitable.

Additionally, Portland area households are increasingly finding that wages are not enough to afford housing, leading to concentrations of poverty in low-opportunity areas, social, racial, and economic segregation, and continuing the cycle of poverty. In the MSA, households would need to work 93.2 hours a week at the minimum wage to afford fair market rent.

For area households that are interested in purchasing homes, the average sale to list price shows that homes are selling for more than their asking price, indicating a competitive market where many potential homeowners are being priced out. Homeownership is the primary source of wealth for most Americans, so the high barriers to owning a home limit the opportunities for wealth building that lead to generational prosperity. Clearly, a need for lower cost housing with options for both accessible ownership and renting are critical in Portland.

Who Needs Housing?
Regional forecasts project that the Portland MSA in Oregon alone will gain over 274,000 households by 2040, a combination of new residents and individuals striking out on their own. To understand what types of housing these people will need, demographic trends point to changing households, needs, and challenges.

In Oregon and in the United States overall, the share of households with children has been declining. Conversely, the share of households that are non-family households, including single person households, has been increasing. Contributing to the rising share of one-person households is the increasing share of senior citizens, especially women, who outlive their spouses. This decline in average household size indicates a need for smaller housing units and different options than larger single-family housing, a gap missing middle housing types may be able to fill. Additionally, 26.7% of the Portland area’s renter heads of household are between the ages of 25 and 34, a time when many people are contemplating homeownership, but opportunities may be limited, especially for single-family units. Broadly, with an aging generation of baby boomers who may want to downsize and live in accessible, amenity-rich neighborhoods, coupled with a large echo boom generation who may be interested in first-time homeownership, a variety of housing options will be important to address Portland’s housing needs and provide choices for all households.

What’s Being Built
With a need for housing to accommodate 274,000 new households by 2040 within Oregon’s portion of the Portland MSA alone, how is the current state of residential construction keeping up and providing for diversifying needs? According to the US Census, almost 7,400 building permits for single-family homes were issued by MSA jurisdictions in 2016. However, the number of single-family construction permits declined 12% from July of 2016 of July of 2017, indicating that areas permitted for single family residential uses may be reaching development capacity and/or the economics of single family construction are changing so that the houses cannot be built at a price that the market will bear. According to a study by Oregon’s Department of Environmental Quality, single-family zoning is still a dominant land use in most Oregon cities. Within the Portland Metro urban growth boundary as of December 2015, single-dwelling residential zones comprised 48% of all land area and 77% of all land area currently zoned for housing [4]. The predominance of single-unit zoning coupled with declining single-unit permitting may point to a longer term trend where the desire for neighborhood-scaled living will become increasing unavailable.

Multi-family construction remained robust over the same July 2016 to July 2017 time period with an increase in building permits of 17% for a total of over 7,300 permits in 2016 [8]. However, the majority of these permits were likely for larger, multi-unit structures that exceed the smaller scale of missing middle housing types recommended by many designers for residential context. Additionally, new multi-family units are generally luxury and rent from $3 to $4 per square foot, a price far beyond the means of most area households [9]. With a MSA median household income that supports housing expenses of approximately $1,600 a month, newer multi-family units may not be attainable.

As indicated by the Metro Housing Preference Survey, 28% of Portland area households live in condos or apartments, but there is a mismatch between housing preference and availability where more individuals prefer single-family homes. The predominance of multi-family building permits may deliver more multi-family units to the Portland market while single-family construction declines, but these trends do not align with the desire for a neighborhood context and home privacy. Lower scale missing middle housing types like duplexes and rowhouses may be an opportunity to leverage declining single-family home construction within the overall robust Portland area housing market to meet in the middle of household preferences.

Are these construction trends an outcome of constraining zoning restrictions, development economics, or other market factors? Or perhaps a combination of all these factors to some degree? What barriers exist to providing the innate, inclusive housing types many neighborhoods traditionally provided, and who will create missing middle housing in the future? If regulations, markets, neighborhoods, and builders align to deliver missing middle housing, will it actually be affordable to Portland area households and lower the cost of new housing, or will the trend in housing price increases continue to missing middle housing? Next steps will address these questions and lend further insight into an important area-wide conversation.