ODOT claims that its policy is “fix-it first” maintaining the highway system.

But it is spending vastly less on maintenance and restoration than is needed to keep roads and bridges from deteriorating

It blames the Legislature for not prioritizing repair over new construction

But it chooses to advance policies that prioritize spending money on new construction ahead of maintenance

It diverts funds that could be used for maintenance to pay for cost overruns on capital construction projects.

ODOT pleads its maintenance backlog as a “bait and switch” to get more revenue that it then spends on capital construction rather than fixing roads

A proclaimed “Fix-It First” policy.

The Oregon Transportation Commission (OTC) which directs the activities of the Oregon Department of Transportation, has clearly claimed to prioritize maintenance.  In its 2020 Investment Strategy, OTC proclaims it prioritizes maintenance of existing roads:

Oregon is a fix-it first state. The Oregon Transportation Plan and Oregon Highway Plan focus on preserving the system; highway improvements are focused on enhancing efficiency and the capacity of existing facilities rather than building new ones. . . . Funding to preserve state highway assets is not adequate, resulting in a triage approach to preservation, rehabilitation, and repair, and maintaining status quo conditions requires more than doubling current funding.

The Oregon Transportation Commission has adopted the Oregon Highway Plan’s policy 1G for Major Improvements which says it will prioritize maintaining the highway system over expanding capacity.

A huge and growing maintenance backlog

So how is Oregon doing in implementing this policy:  Every report and inventory from ODOT shows that we have a major maintenance gap, and it’s getting worse.

ODOT’s June 2022 federally required Transportation Asset Management Plan (TAMP) reports that Oregon is spending $329 million annually less than is needed to keep roads and bridge at their current state of repair>  The state is spending less than half of what it would need to ($156 million of an estimated $320 million) just to “maintain current conditions” of Oregon bridges.  It is also spending only about 40 percent of what it needs to retain existing conditions on Oregon roads ($112 million of an estimated annual need of $273 million).  Bridges would require an additional 164 million and roads an additional $165 million, each year, in order to simply maintain current conditions.

ODOT’s Investment Strategy, adopted in 2020 admits it is dramatically underspending on maintenance, and that Oregon roads and bridges will deteriorate.  The state has other manifold needs that aren’t funded.

• ODOT’s plans say we need to spend $5.1 billion seismically retrofitting hundreds of Oregon Bridges:  It currently has funding for just 30 of 183 high priority “Phase I” bridges–the balance are unfunded.
• ODOT says we need to be spending $50 million per year to achieve compliance with the Americans with Disabilities Act on Oregon highways
• ODOT says we need to be spending $53 million per year to provide or repair walking and biking facilities along state highways.

In the face of a tight budget, ODOT has chosen to cut its operations and maintenance, but still expects an even larger shortfall.  In the years ahead.  ODOT’s January 2022 Budget Outlook predicted a widening budget shortfall:

ODOT now projects that the funding gap has shrunk to $144 million in 2027,   due to stronger revenue growth and larger fiscal year 2021 ending balances through budget discipline. However, revenues and expenditures remain out of alignment, and without additional revenue or expenditure reductions the gap will grow quickly. By 2029 the gap is projected to grow to $515 million.

In short, we’re not spending enough to maintain the current system, we’re cutting operation and maintenance budgets and are facing an even larger shortfall in maintenance funding in the years ahead.  And in the face of this, ODOT is marching forward with unfunded plans for huge construction projects that will plunge the state into debt for decades.

Blaming the Legislature

ODOT blames the Legislature for this policy choice.  In a 2020 memo to employees, published by the Oregonian, ODOT Director Kris Strickler says the reason the agency has to slash operating costs and maintenance is because the Legislature short-changed the agency.  Here’s the Oregonian’s coverage:

“Many will wonder how ODOT can face a shortfall of operating funding after the recent passage of the largest transportation investment package in the state’s history,” Kris Strickler, the agency’s director, said in a Wednesday email to employees, stakeholders and other groups, citing the 2017 Legislature’s historic $5.3 billion transportation bill. “The reality is that virtually all of the funding from HB 2017 and other recent transportation investment packages was directed by law to the transportation system rather than to cover the agency’s operating costs and maintenance.”

The public and likely the Legislature will be surprised to know that “directing money by law to the transportation system” somehow precludes ODOT from spending money to maintain those roads.  The truth is that ODOT’s deceptive cost estimates and discretionary reallocation of funds are really what’s short-changing operations and maintenance.

Constantly proposing new construction and under-estimating its cost

While ODOT blames the Legislature, it is the agency advancing hugely expensive new capacity projects, including the I-5 Rose Quarter (1.45 billion), I-5 Bridge Replacement/freeway widening ($5 billion+), I-205 Abernethy Bridge ($700 million) and Boone Bridge (not revealed).

The Legislature approves these projects based on cost estimates provided by ODOT and then ODOT treats this as a mandate to pay whatever cost-overruns the project incurs.  In the case of the I-5 Rose Quarter project, the Legislature was told it would cost $450 million in 2017; the current price tag is now estimated at as much as $1.45 billion.  ODOT told the Legislature the I-205 Abernethy Bridge would cost $250 million; its price tag has doubled to nearly $500 million.  These cost overruns directly reduce funding available for maintenance.  By failing to correctly estimate costs, and by always paying for cost-overruns, ODOT’s actual policy prioritizes new capacity construction over maintenance.

Diverting maintenance funds to new construction

ODOT routinely diverts funds allocated to and available for maintenance to fund capital construction projects.

It used interstate maintenance discretionary funds to pay for the planning of the failed Columbia River Crossing project.  It diverted funds that could otherwise be used for maintenance to pay for the Interstate Bridge Replacement project.  It routinely prioritizes capital construction in the use of “unanticipated federal funds” and “project savings.”  It cobbled together just these funding sources to pay for the initial work on the I-205 Abernethy Bridge before the Legislature authorized any funding for the project.  Each year it gets a tranche of what it calls “unexpected” federal funds (federal money that is unspent from nationally competitive programs that is allocated to the states).  At its July, 2022 meeting ODOT recommended (and the OTC approved) using this money, which could be applied to the maintenance backlog, to fund $10 million towards the Interstate Bridge Replacement project.

This bias toward highway expansion at the expense of maintenance will be amplified by ODOT plans to issue massive amounts of debt for new highway construction. ODOT is pursuing a risky bonding strategy for billions of dollars of Portland-area freeway expansion projects, that effectively pledges to use maintenance monies to repay bond-holders.  HB 3055 allows ODOT to pledge all of its state and federal funds to the repayment of toll-backed bonds.  If toll revenues are less than projected–which happens frequently–ODOT would be legally obligated to cut funding for maintenance statewide to pay back bond holders.

Bait and switch

For years, ODOT has come to the Legislature, pleading poverty:  It doesn’t have enough money to maintain our roads, therefore, we need to increase gas taxes, weight-mile taxes and registration fees.  Then, when the Legislature authorizes higher taxes, ODOT uses this money not to reduce the maintenance backlog, but instead to fund giant new construction projects.  When these projects go over budget, it cannibalizes funds that could be used for maintenance, and comes back to the Legislature, again pointing to its self-created backlog of funding needs to fix potholes and preserve bridges.  In reality, Oregon is a “fix it last” or “fix it never” state:  the maintenance spending backlog is just a perpetual excuse to force the Legisalture and taxpayers to give the agency more money, which it will then plow into expanding roadways.

Ignoring the Coast Guard dooms the I-5 Bridge Project to yet another failure

The Oregon and Washington DOTs have again designed a I-5 bridge that’s too low for navigation

In their rush to recycle the failed plans for the Columbia River Crossing, the two state transportation departments have failed to address Coast Guard navigation concerns

State DOT PR efforts are mis-representing the approval process:  The Coast Guard alone, decides on the allowable height for bridges, and only considers the needs of navigation.  

Make no mistake, the Coast Guard officially drew a line in the sand–actually, 178 feet in the air above the Columbia River–and has essentially said that the two state DOTs “shall not pass” with a river crossing that doesn’t provide that level of navigation clearance.

What the preliminary determination is intended to do is signal to the DOTs the kind of structure that the Coast Guard will likely approve.  But the Oregon and Washington DOTs aren’t taking the hint.  Instead, they’re pretending that this “determination” is really meaningless, and that if they just show that the height restriction would be inconvenient or expensive for them to comply with, that they can somehow force the Coast Guard to let them build a bridge with a lower navigation clearance.  That’s a clearly wrong reading of the law, and more importantly it means the two State DOTs are embarking on a risky strategy that’s likely to doom the current effort to build a new Columbia River Bridge.

Prolog:  The failure of the CRC

As we’ve pointed out, this is deja vu all over again.  The Columbia River Crossing project similarly ignored Coast Guard signals that a low bridge would be unacceptable.

More than a decade ago, the Oregon and Washington DOTs advanced a plan for a new fixed-span I-5 bridge with a navigation clearance of 95 feet.  The DOTs did their own analysis of shipping needs, and claimed that, in their opinion, 95 feet would meet the reasonable needs of river users.  The trouble is, that determination isn’t up to state DOTs:  it’s the exclusive legal province of the US Coast Guard, which is charged by Congress with protecting the nation’s navigable waterways.  (Despite the moniker “Department of Transportation” state DOTs have essentially no legal or policy responsibility for commercial water traffic.

Early on in the bridge design process–in 2005–the Coast Guard signalled its likely objections to a mere 95-foot river clearance.  But state DOT officials blundered ahead, insisting that their own analysis was sufficient to justify the low design.  At the time it issued its record of decision in December 2011, the Coast Guard filed a formal objection, noting that the two state DOTs had not provided sufficient information for the Coast Guard to make the determination as to the needed clearance.  The Coast Guard wrote:

. . . the Coast Guard’s concerns with the adequacy of the Final Environmental Impact Statement (FEIS) have not been resolved . . . As previously stated, the Coast Guard cannot determine if the preferred 95-foot bridge clearance will meet reasonable navigation requirements based on the information provided for review.

In addition, the Coast Guard noted that the FEIS failed to consider the environmental effects of different bridge heights:

The FEIS does not address current and future impacts to navigation/waterway users as a result of proposed decreased vertical clearance, nor does it study alternatives to a vertical clearance other than 95 feet.

As the bridge permitting agency, the Coast Guard determines the reasonable needs of navigation when acting upon a permit application.

Only after completing the FEIS and getting a ROD did the two state transportation departments start applying for the needed Coast Guard bridge permit.  In December 2012, the Coast Guard made it clear that the proposed 95-foot clearance would not be sufficient.  Ultimately, the Coast Guard insisted on at least a 116-foot river clearance.

Here we go again

Even though they’ve been working on reviving the Columbia River Crossing since 2018, the two state DOTs only submitted a new navigation report to the Coast Guard in November 2021.  For more than three years they’ve been operating under the assumption that the Coast Guard will go along with a 116-foot navigation clearance.  But in its “Preliminary Navigation Clearance Determination” the Coast Guard has said that won’t be nearly enough.

The Coast Guard is crystal clear about its approval standard:

“Generally the Coast Guard does not approve bridge proposal with vertical navigation clearances below the ‘present governing structure’ when the existing VNC has been and is currently needed unless there is a compelling navigational reason to do so.” (Harris to Goldstein, June 17, 2022, p. 2)

The real takeaway from the Coast Guard letter is that the I-5 bridge needs to provide 178 feet (or more) of vertical navigation clearance.

. . .  the Columbia River (specifically the section of the Columbia River immediately east of the existing I-5 twin bridges) has and needs to continue to provide VNC equal or greater than the existing I-5 twin bridges of 178 feet. Our PNCD concluded that the current proposed bridge with 116 feet VNC, as depicted in the NOPN, would create an unreasonable obstruction to navigation for vessels with a VNC greater than 116 feet and in fact would completely obstruct navigation for such vessels for the service life of the bridge which is approximately 100 years or longer. (Emphasis added)

The implication is that if the two DOTs can work out a financial deal with existing river users it can get Coast Guard to approval a lower bridge clearance.  But Coast Guard’s past comments and current review indicate that it is not merely looking out for the interests of current river traffic and industry, but is intent on protecting the current navigational channel for future industry and activities.

The reasons for the Coast Guard’s decision are clearly laid out in its June 17, 2022 letter:

• Current users need to move structures and vessels with a clearance of between 130 and 178 feet.
• Vessels and their cargos are growing larger over time.  Marine industries need the flexibility to accommodate larger structures in the future.
• There are no alternative routes for waterborne traffic to reach areas East of the I-5 bridges; in contrast their are many alternate routes for terrestrial traffic (cars, trucks and trains).
• Water access to the area East of the I-5 bridges, including PDX airport and the Columbia Business Center marine industrial area in Vancouver may be needed in the event of a natural or national emergency
• Historically, the Columbia Business Center has been a preferred site for shipyard activity (it housed the Kaiser Shipyard in World War II) and may be needed again for this purpose in the future

The Coast Guard’s conclusion makes it clear that it is strongly committed to maintaining the existing river clearance, that it won’t approve a 116 foot bridge, and that the economic effects of this would be unacceptable.  It also pointedly directs the two state DOTs to evaluate either a tunnel or a moveable span to meet its 178-foot requirement:

The Columbia River System is an extremely important interdependent-multimodal supporting national and international commerce critical to local, national and global economies. Reducing the capability and capacity of the Columbia River System would severely restrict navigation. IBR’s proposed bridge as depicted in Public Notice 02-22 with its 35% reduction of VNC from 178 feet to 116 feet is contradictory to the U.S. Coast Guard’s mandate from Congress to maintain freedom of navigation on the navigable waters of the U.S. and to prevent impairment to U.S. navigable waterways. As new structures are built, navigation clearances should be improved or at a minimum maintained. Any proposed new bridge should have a VNC of greater than or equal to that of the existing I-5 twin bridges of 178 feet or preferable, unlimited VNC, as well as a HNC as permitted during the final USACE 408 permit. There are alternative options to accomplish this VNC to include a tunnel or a high-level lift bridge or bascule bridge, which would provide an unlimited vertical clearance. A modern similar successful project is the Woodrow Wilson Bridge over the Potomac River in Washington, DC that was completed in 2009. It is a higher-level double bascule lift bridge on an interstate (I-95) with transit. The added height of the new bridge reduced the number of bascule bridge openings for vessel passage by 76%. (Emphasis added)

The DOT Strategy:  Maximum Risk

Once again, the state DOTs have delayed as long as possible confronting the issue of the navigation clearance.  This time, having learned from its prior experience, the Coast Guard has insisted that the navigation issue be addressed prior to the environmental impact statement.

Still, the DOTs are equivocating, implying that the Coast Guard decision has no weight, and arguing that the legal standard for review involves some kind of balancing of DOT interests in a convenient and cheaper low clearance bridge and implying that the DOTs and not the Coast Guard are the ones who determine the minimum navigation clearance.

The best way to minimize risk is to advance a series of possible alternative solutions through the SEIS process.  At a minimum, these should include a lower level bridge with a lift span, and some kind of tunnel.  In the event that the Coast Guard sticks to its preliminary determination, which is a strong possibility, if not a very high probability, this will mean that the project will be able to move forward.  The DOTs solution, to move forward with only a fixed span, runs the risk that the Coast Guard will hold firm to its announced intention to require a minimum 178 feet of clearance, meaning that two or three years from now the project will be back to square one with no legally buildable, environmentally reviewed project.  All of the project sponsor’s supposed concern with being able to compete for funding will be jeopardized by this reckless decision to look only a fixed span.

The Coast Guard has told Oregon and Washington that a new I-5 bridge must have a 178-foot vertical clearance for river navigation–vastly higher than the 116-foot clearance the state’s have proposed

A fixed span with that clearance would be prohibitively expensive and would have to be huge–nearly 2 miles long, and would have steep grades. 

An easier solution would be a new bridge with a moveable span, such as that built for I-95 in Washington DC, yet IBR officials tell falsely claim an I-5 liftwapan would have to be “the world’s largest”

Three Portland area bridges have bascule spans of comparable size to that needed for the I-5 bridge, and much larger bascule and vertical lift bridges have been built elsewhere.

Our story so far:  For the past three years the Oregon and Washington Departments of Transportation have been trying to revive their plans for the failed Columbia River Crossing, a massive freeway expansion project between Portland and Vancouver.  The project would require replacing the existing I-5 bridges over the Columbia River, and the height of these bridges will be determined by the US Coast Guard.  In June, the Coast Guard issued its “Preliminary Navigation Clearance Determination” (PNCD) saying that the bridges would have to at least preserve the current navigational clearances (178 of vertical space.  That immediately threw a wrench into the DOT plans to build a fixed span with just 116 feet of clearance.  The Coast Guard declared unequivocally:

Our PNCD concluded that the current proposed bridge with 116 feet VNC [vertical navigation clearance], as depicted in the NOPN [Navigation Only Public Notice], would create an unreasonable obstruction to navigation for vessels with a VNC greater than 116 feet and in fact would completely obstruct navigation for such vessels for the service life of the bridge which is approximately 100 years or longer.

B.J. Harris, US Coast Guard, to FHWA, June 17, 2022, emphasis added.

The Interstate Bridge Replacement Project is hoping to get the Coast Guard to back down, in part by asserting that it would be impossible to build a lift span to provide the Coast Guard’s requirements.

IBR Administrator Greg Johnson testified to the Joint Oregon-Washington I-5 Bridge Committee, that if the Coast Guard required the I-5 bridge to be built with a lift span, it would be the largest such structure in the world.

.  . .  a cost of putting what would in essence be the largest lift span in the world. We’re talking about an additional $400 million in that way. So, these are the trade offs that we have to look at the viability of a lift span that large which has never been operated at that size before . .  .

(emphasis added)

That’s simply not true.  In fact, there are other lift spans in the Portland area that are as large, or larger, than would be needed to include a lift span on the I-5 bridges, as we document below.

But Administrator Johnson’s claim is both ominous and vague.  How large would the navigation opening in a lift span need to be?   That determination will be made by the US Coast Guard.  The current bridge has a vertical navigation clearance of 178 feet. The 2012 Navigation Impact Report prepared for the Columbia River Crossing documented the existing navigation clearances of the I-5 bridges, which are 178 feet vertically and 263 feet horizontally.  The bridge also has a barge navigation channel with a maximum horizontal clearance of 511 feet, but this barge channel has a vertical clearance of from 46-70 feet.  The Coast Guard’s preliminary navigation report said that a new bridge should at least preserve both of the current horizontal and vertical clearances.

Needed Navigation Clearances:  178 feet high, 263 feet wide

In addition, maximum river channel on this stretch of the Columbia River is already constrained by the next downstream bridge, which is the Burlington Northern “9.6” bridge (less than a mile West of the I-5 bridges).  This railroad bridge has a swing span with an opening width of about 230 feet. In order to provide a 263 foot wide channel, the I-5 bridge would need two bascule leaves with a length of 135 feet each.

One does not have to look far in the Portland Metro area to find such bridges.  There are three in the center of downtown Portland, the Morrison Bridge and the Burnside Bridge.  The Morrison Bridge (1958) has two bascule lift sections, with an opening of 284 feet.  The Burnside Bridge (1926) also has  two bascule lift sections, with an opening of 252 feet.  The Broadway Bridge (1911-12)–a slightly different kind of bascule–has an opening of 278 feet.

The Morrison Bridge (1958):  284 foot wide opening

The Broadway Bridge (1911-12):  278 foot wide opening

Nor is the width of the needed roadway an obstacle.  The Morrison Bridge has a roadway width of 90 feet—exactly the same as the width proposed for each of the two aborted Columbia River Crossing bridges.

Woodrow Wilson Bridge:  A modern busy Interstate with a lift-span

But can we have lift spans on Interstate highways?  Actually, the answer is yes.  I-95, the one of the nation’s busiest freeways connecting the major metro areas on the East Coast has a lift span in Washington DC.  The Woodrow Wilson Bridge, opened in 2009, has a modern double leaf bascule bridge that carries 12 travel lanes and 250,000 vehicles per day across the Potomac River.  Also, there’s some question about the width of the roadway on the bascule bridge.  For the record, the Woodrow Wilson Bridge has two separate sets of “leaves” for the north and south bound sections of I-5 (i.e. it’s like two bascule bridges side by side).

Woodrow Wilson Bridge

The Woodrow Wilson Bridge allows for a relatively low level crossing of the Potomac River, minimizing the height and footprint of interchanges on either side of the river (shown above)

Rather than towering over the Vancouver waterfront, and requiring lengthy elevated roadway sections across downtown Vancouver and over Hayden Island, a bascule lift-span bridge could be built at a much lower level, eliminating the need to rebuild intersections high into the air to meet a fixed span high enough to clear 178 feet.

In contrast, a fixed-span high-level bridge violates both the pledges to respect the environment and promote equity.  It hurts the environment, because the high bridge requires vehicles to climb over a much higher elevation, leading them to consume more fuel and emit more pollutants than would be the case with a lower elevation lift-span crossing.  This is especially true for heavy trucks that will struggle to climb the high bridge’s steep grades, and which will create a safety hazard for faster moving cars.  The high bridge is also inequitable for those who are not traveling by car:  those who walk on bike or on foot will find the steep grades associated with the high bridge much more taxing the motorists, who will simply have to press harder on the accelerator pedal.

Not the world’s largest lift bridge

Rethe Bridge, Hamburg:  308 foot opening

An I-5 lift span meeting the Coast Guard’s requirements would not only not be the largest lift-span in the world; it wouldn’t be even the largest lift span in the neighborhood  That particular honor belongs to the Burlington Northern Willamette River Bridge 5.9, which has a vertical clearance of over 200 feet, and a moveable span that is more than 500 feet long–higher, and almost twice as wide as the needed opening for a new I-5 moveable span meeting Coast Guard requirements.

The Burlington Northern Willamette River Bridge: 200 feet high, 500 foot opening.

This lift span was paid for by the federal government in 1989 and has a lift span that is 516 feet long and it provides a vertical clearance of 200 feet.  The lift span was added to the existing bridge in place of a swing span  for a cost of less than $40 million (about $125 million in today’s construction expense).

Repeating Past Mistakes:  Planning a Bridge Too Low

A decade ago, the Oregon and Washington Transportation Departments tried to force the Coast Guard to agree to a fixed Columbia River Crossing I-5 bridge with a height of just 95 feet over the river, arguing (exactly as they are now) that this lower level best balances the needs of different forms of transportation.  Balancing needs of road users, though, is not the legal standard applied by the Coast Guard, which following federal law, prioritizes the needs of river navigation.  As the Coast Guard said in its review, road users have many alternate routes for crossing the Columbia River; waterborne commerce has none.

 

The two DOTs attempt to force the Coast Guard to agree to a lower bridge height added more than a year of delays to the CRC process (which ultimately failed) as well as millions of dollars in added planning costs.  The IBR team has no plans to seek a bridge permit before 2025, and thereby seems intent on repeating this mistake–moving forward with attempts to convince the Coast Guard to approve a lower navigation clearance, while spending tens of millions of dollars planning a bridge that may not meet the Coast Guard’s legal requirements.

References:

• Federal Highway Administration (1989-2003).  https://www.fhwa.dot.gov/programadmin/pt2006q1.cfm
• FHWA, Highway Construction Cost index (2003=1)  2021Q4=2.19
  https://explore.dot.gov/views/NHIInflationDashboard/

What City Observatory did this week

Fix it Last.  The Oregon Department of Transportation claims that it has a “Fix-it” first policy–prioritizing spending funds to preserve existing roads and bridges.  But their actual budget priorities make it clear that they routinely short change maintenance and repair in favor of costly and ineffective road expansion projects.  While ODOT routinely blames the Legislature for this problem, it is actually a combination of ODOT systematically understating the costs of major capital projects, and then administratively reallocating funds that could be used for repairs to fund expanded highway

ODOT’s own federally required “Transportation Asset Management Plan” shows that the state is spending $320 million less per year than is needed to maintain the state’s roads and bridges at the current state of repair.  And ODOT has cut funding for maintenance in its current budget, while at the same time proposing to spending billions on Portland area freeway widening projects that will plunge the state deeply into debt.  ODOT continues to violate its own stated policies, and then tries to use the maintenance deficit it created (and ignored) to build a case that it be given even more money.

Must read

The Climate bill:  All EVs and no urbanism.  The big news out of Washington this week is that Democrats have reached a compromise with West Virginia Senator Joe Manchin about the outline of a pro-climate spending bill.  It heavily focuses on subsidies to manufacturing electric vehicles.  The Urban Institute’s Yonah Freemark has a quick take on the policy direction, fretting that the draft legislation would do nothing to:

—Encourage mode shift out of cars (it provides $0 for e-bikes & nothing for transit electrification);
—Encourage more environmentally sensitive land uses; and
—Reduce the resource intensity of the transport sector.
. . . one of the primary impacts of this bill is simply reaffirming the automobile dependency of the US, giving people huge incentives to invest in cars—and doing almost nothing for an alternative system.

Wealth determines homeownership in California.  Our conventional way of describing housing affordability is to compare home prices to incomes, and by any measure, housing has become less affordable, especially in California. But Metrosight Economist Issi Romem points out that it’s now wealth, not income, that determines home ownership.  California has the lowest homeownership of any state, and somewhat paradoxically has a higher fraction of homes that are owned free-and-clear (i.e. with no outstanding mortgage).  It’s because the California housing market (and state law, in the form of Proposition 13) have enshrined accumulated wealth.  Few young adults can afford homes without financial assistance from previous generations (something that skews homeownership to whiter, wealthier, long-time residents).  As Romem explains:

The growth in free-and-clear ownership can be seen across all regions of the state. The trend extends to even the youngest households, with residents 24 and younger. In addition to reflecting the increasing concentration of the nation’s wealthy in California, this growth might be the result of more young adults living with their parents – or more young adults living in homes their parents bought them.

Such inherited or gifted houses lock in wealth for future generations, and in some cases keep a property itself in the family for generations. That’s particularly common in California owing to property tax laws – Prop. 13 and its extensions – and the practice keeps a sizable share of homes off the market interminably.

As Romem notes, neither rising incomes nor reduced down-payment requirements are effective in counteracting this dynamic. In California, supply restrictions, coupled with generous subsidies to long-time owner occupants have combined to make housing wealth a root to riches, but only for those with the wealth or family connections.

Oregon largely eliminates parking requirements.  Coming on the heels of statewide legislation legalizing four-plex housing in most of the state’s single family residential areas, Oregon has adopted new rules eliminating or greatly reducing parking requirements in cities.  Sightline’s Michael Andersen describes new rules adopted by the Land Conservation and Development Commission that give cities three options for phasing out or reducing parking requirements.  As Anderson explains:

In some situations—within a half-mile of relatively frequent transit, for homes of 750 square feet or less, and for homes meeting affordability targets—minimum parking mandates will no longer apply for jurisdictions within Oregon’s eight largest metro areas.  This doesn’t prevent parking lots from being built, but it does remove the current prevailing requirements to construct a specific number of stalls: one stall per bedroom, for example, or three per 1,000 square feet of retail space.

As Don Shoup observed years ago in his magisterial book, The High Cost of Free Parking, parking requirements essentially trump zoning for high density housing:  Even when zoning codes technically allow apartments, the requirement to provide “free” off-street parking for each dwelling makes higher density construction uneconomical.  When these units aren’t built, housing supply is constrained, and rents are pushed up higher.  Oregon’s move is an essential part of a a comprehensive strategy to improve housing affordability.  Other states should take notice.

New Knowledge

The Covid Pandemic and the Donut Effect. The shift to work from home during the Covid-19 pandemic has triggered some noticeable changes in urban housing and labor markets.  This study charts how increased work from home has affected population, rents and home prices between cities and suburbs in the first year following the pandemic.

The authors find that in the nation’s largest cities, increased work from home has triggered a relative decline in demand for central locations relative to suburban ones.

Rental rates in the central business districts (CBDs) of the largest 12 US metros have fallen almost 20 percentage points relative to the change in the bottom 50% of zip codes by population density.3 Similarly, home price growth in CBDs have realized losses of around 15 percentage points compared to changes in such lowdensity zip codes. Migration patterns as measured by the USPS show a similar pattern of reallocation. CBDs of the top 12 US cities have seen net population and business outflows cumulating to about 15% of their pre-pandemic levels. In contrast, the bottom 50% of zip codes by density have gained about 2% of their pre-pandemic stock for population and businesses.

This study provides a useful baseline of how the short-term effect of work from home.  The authors point out that their findings don’t necessarily apply to all  metro’s just the 12 largest.  They also show that the migration effect is largely within metropolitan areas, rather than across them:  to the extent people are moving as a result of increased work from home it seems to be primarily about people moving from the city center to the suburbs of that metropolitan area.

Nicholas Bloom Arjun Ramani,  The donut effect of Covid-19 on cities, Centre for Ecoomic Performance, Working Paper, No.1793 September 2021, https://cep.lse.ac.uk/pubs/download/dp1793.pdf

In the News