There’s a bit of schizophrenia on Medford’s home-building front.
On one hand, contractors and subcontractors are going to town, dawn to dusk, trying to fill the demand for housing.
Yet a review of single-family residential building permits issued for the fiscal year 2017-18 that ended June 30 indicates a significant decline over recent years.
The city issued 281 permits for construction valued at just under $67.9 million in 2017-18. That was on the heels of 341 permits and construction value of $78.6 million in 2016-17 and marginally higher than the 249 permits worth $59.1 million in 2015-16.
There is a fairly simple explanation for the apparent downturn, suggests Southern Oregon Builders Association Executive Officer Brad Bennington. When costly code changes loom, builders pull permits to essentially lock in present, rather than future, codes.
“The seismic framing and energy requirements that kicked in on Jan. 1 provided a lot of motivation because they added a lot of costs,” Bennington said. “It changed the engineering and a lot of stuff. It was a doozy. If I was building a subdivision, I would have pulled as many permits as I could have.”
Permits are good for a year, and the first inspection activates the permit another 12 months, effectively providing a nearly two-year window. Builders also can pay an administrative fee to extend the permit for a second year.
Labor shortages have plagued the industry in the years following the Great Recession because many building-trade workers moved from the region, retooled their careers or simply retired.
“Every contractor who can fog a mirror is building as fast as they can, and still the 1,300 Realtors here don’t have enough houses to sell people,” Bennington said.
While the city’s new construction excise tax is workable for builders, it still prices some people out of the market. The tax on a new, entry-level $300,000 house is $900.
“Whatever affordable housing looks like, it’s still going to exclude more people from that home,” Bennington said. “There are studies out there that show every time the price of a house goes up $1,000, it has a significant impact on the number people who can buy it.”
More developable land could ease the shortage, but it’s not necessarily a panacea, he said.
Earlier this week, Medford Mayor Gary Wheeler said the city was bracing for a deluge of development requests inside its expanded Urban Growth Boundary, once its Transportation System Plan is in place.
“I’ll bet as many cheeseburgers and chocolate milkshakes as you want to eat that there will be a huge uptick when that happens,” Bennington said. “We’ve got acute shortages across the board, and the biggest cost driver is buildable land. Without buildable land, there is no further conversation about construction. No buildable land, no construction — it’s just that simple.”
Even if new starts accelerated dramatically here and in other parts of Oregon, Bennington said, it couldn’t keep pace with demand stimulated by in-migration.
Oregon was the most-moved to state in the union in 2014 and 2015, was No. 3 the past two years — pushing the population past 4.1 million — and is on track for a top-five finish once again in 2018.
An estimated 5.5 million California residents turned 65 last year, and many of them are looking to retire elsewhere.
“California is a high-tax-impact state,” Bennington said.
As a result, the decades-old pipeline to the Rogue Valley isn’t going to run dry anytime soon.
With the median sales price of many major metro residences running $600,000 or more and the average approaching the million-dollar mark in many ZIP codes, consequences are felt in Jackson County.
“We don’t have an affordable housing crisis in Southern Oregon. We’re too affordable — just not for the people living and working here,” Bennington said. “The people reaching retirement age have a house that may have sold for $1.2 million, have Social Security, savings and a pension. They come up here, look around east Medford and see a beautiful house that would cost two or three million down there and pick one up for half a million. They’re close to a high-quality regional medical center, and there are wineries in every direction. We’re going to continue to see high rates of people moving to Southern Oregon, buying everything as fast as we can build it.”
The ripple effect, however, doesn’t end at the retirement level.
“The problem exists for companies here in the Rogue Valley trying to recruit professionals from other parts of the country,” said Colleen Padilla, executive director for Southern Oregon Regional Economic Development Inc. “If people are coming from California, housing prices aren’t out of line for them, but availability is a bigger problem.”
But for people looking to relocate from the Midwest or South, the housing costs can be staggering.
“People can be quite surprised by our housing prices,” she said. “And it makes it difficult for our companies.”