Vacancy rates are a sign that old assumptions don’t match current realities—and that’s a solvable problem.
The Oregonian and Willamette Week recently reported that nearly 1,900 rent-restricted apartment units sit empty in Portland. In a city where so many are homeless, this is a problem. But we can lower barriers to filling these units—and make progress toward our communities’ long-term housing goals—if we see the problem accurately and make targeted adjustments.
“If we look at the causes of vacancy holistically, the remedies are clear.”
First, the numbers: Nineteen-hundred units translates to about 7% of Portland’s rent-restricted supply. That’s a higher-than-acceptable vacancy rate, but by how much? In today’s soft market, market-rate rental properties in the Portland-metro area are reporting vacancy rates of about 6%. Rent-restricted properties aim for vacancy rates of about 3% to 5% in a normal environment—but today’s environment is not normal.
Difficult operating conditions, including rapid inflation, have turned the financial screws on many affordable properties since the pandemic. Financial distress has sapped property management and oversight capacity in the same period. At the same time, the rental market has softened, and supply and demand for specific unit types are imperfectly aligned. These and other factors contribute to current vacancy rates. HDC’s Natalie Thornton discusses vacancy drivers in detail in an article posted to our blog today.
The good news is that when we look at the causes of vacancy holistically, the remedies are clear—and property owners and their partners are already working to enact them. Here are some approaches that work:
Invest to stabilize tenants and their homes. Lowering tenant rent burdens can help to fill empty units. But simply dropping rent prices is not always an adequate tactic to attract tenants, and the loss of revenue can contribute to property destabilization. On the other hand, investing in debt reduction, as the Oregon legislature has started to do, will reduce properties’ monthly costs, stabilize buildings, and give owners more flexibility in pricing rents. The Portland City Council is likewise considering deploying funds for stabilization as well as for eviction prevention support and rent subsidies.
Prioritize property management and oversight capacity at financially overstretched properties. It takes time, experience and attention to care for these buildings, to support the tenants, to make sure the rules are being followed, to keep up with maintenance and repairs, and to quickly attend to issues that arise, including preventing and filling vacancies. Adequately resourcing property and asset management doesn’t grab headlines, but it will lead to both increased physical and economic occupancy and improved living environments that attract tenants. The Oregon legislature is putting $3.3 million into that upstream work and has charged HDC with stewarding and disbursing these funds. (Sign up for updates.)
Reduce administrative red tape. Actions like simplifying waitlist processes and improving referral coordination will speed tenant placement. The legislature adopted a bill which calls upon Oregon Housing and Community Services (OHCS) to identify options for improving the efficiency and effectiveness of affordable housing operations, and OHCS has already started doing that work.
Give units time to lease up. It’s important to note that current high vacancies are partly a reflection of the fact that many newly built properties are just coming online. While the vacancy rate cited was over 7%, roughly 200 of these apartments were vacant because they had just been built.
With these strategies, we can do more than lower vacancy rates. We can lower housing barriers for our neighbors who are struggling. We can create properties that are financially more stable, operationally better functioning, and better suited to our communities’ most pressing housing needs.
The need for deeply affordable homes keeps growing, and the operating conditions causing properties to financially struggle are not subsiding. In the face of these challenges, our job is to build on our successes and strengths and keep moving forward. In the past decade, we’ve grown our supply of permanently affordable housing by thousands of units. Thanks to bold decisions by voters and elected leaders, many of these homes serve residents with very low incomes, and many come with service programs designed to support people exiting homelessness. With enough political will, we can also reduce vacancies quickly and drastically—and in the process move toward our long-term housing goals. Let’s adjust to today’s realities. We know how.