Looking Back and Going Forward - A Tough Forecast

             If any “experts” pretend to know where the real estate segment of the economy is heading in 2026 maybe take their predictions with a large dose of skepticism
               In fact, as 2025 has drawn to a close it’s even challenging to dissect all that happened in a clear and convincing analysis. There is simply still too much of a firehose of conflicting data and national policy uncertainty spewing from the chaos of the Trump administration.   
            One day tariffs are going to be massive, the next negotiated or otherwise reduced. Trump wants Fed chair Jerome Powell gone, insulting him in typical Trump style, and having his lackey Jeanine Piro, US attorney for DC, try for an indictment.
            Could it be that Trump’s dispute with Powell is less about interest rates but has been accelerated by an earlier tour of a Federal Reserve construction project? Trump thought he had Powell in a “gotcha” media moment, pulling out papers he alleged showed massive cost overruns on the project. But Powell carefully pointed out that the numbers Trump showed included a project completed several years earlier.
            The upshot: Trump doesn’t like to be caught in his continual purveying of misinformation, especially as the cameras are rolling.
            Now The Dissembler in Chief is pulling out the stops in attempts to show he’s getting a handle on this pesky housing affordability issue.
            It started some weeks back with the idea of a 50 year mortgage to spread out the monthly pain of buying a home when interest rates are high. Most reasonable analyses pointed out the horrendous total interest payments in this scenario, as well as a drag on building equity over such an extended period.

            Also introduced more recently is the idea of Fannie Mae and Freddie Mac, stepping in to buy $200 billion in mortgages to be packaged in bonds to jumpstart the housing market. Another idea is to cap credit card rates at 10%, ostensibly relieving consumers of burdensome interest payments. In the latter, banks are not rushing to join the bandwagon.
            Trump’s carping about Powell and the Fed has hit strong pushback from former Republican and Democrat appointed Fed chairmen, as well as the head of the nation’s largest Bank who has supported the central bank’s historic independence. And Chase CEO Jamie Dimon said moves to “chip away” at the separation from interference could push rates higher.
            Chase CFO Jeremy Barnum said the 10% credit card rate idea would in effect reduce credit available for consumers, “the exact opposite consequence to what the administration wants..” Banks would likely offer less credit, Barnum said.
            Trump is also claiming he will find a way to prevent corporations and hedge funds from locking up portfolios of single family homes to flip. But data shows that the practice has been declining year to year and that about one-third of the buy, rent and flip market involved “mom and pop” investors rather than big money corporations. 

Trump behavior destabilizes the economy 

            Moreover, Trump and his sycophantic Cabinet and advisers seem oblivious that continuing inchoate foreign policy rumblings – from Venezuela to Greenland – and insults to long term allies in Europe and across the globe are destabilizing to the economy.
            In all of this there appears to be at least one potentially positive trend emerging. The stay put trend of homeowners enjoying low interest rates may be loosening, theoretically opening more inventory for the market.
            Axios reported in mid-January that mortgages above 6% now exceed those below 3% for the first time since 2020, showing a sight movement overall to the reality of market rates. But 80% of mortgages remain below 6%.
            As the report noted, at some point regardless of their mortgage rate homeowners are compelled to move—whether with a new marriage, a divorce, to downsize, have kids or retire. On the negative side as inventory improves slowly, a wave of pent up demand could drive up prices, in turn exacerbating the affordability problem.

Dollar decline with Trump term

            In the past two years the S&P 500 has risen more than 45%. But as the AI boom fuels the stock market there’s increasing concern of an expanding bubble that could drive more investment in assets such as real estate.
            Whatever the impetus, increasing investment in or migration to the housing market, without concurrent inventory increases, could further squeeze new homeowners out of the American dream of home ownership. Many of them are not in the investor club where members have enjoyed substantial returns and likely already have a primary home and maybe even a real estate portfolio.
            If we can’t deduce what is happening the present, or even coherently parse the past, how will we determine what’s ahead? Is the year ahead in this 250^th anniversary of the country a shining light at the end of the tunnel? Or is it, as the cliché goes, just a train roaring our way?  
      With the preceding smorgasbord of cliches and fractured metaphors on the table, let’s consider a single premise:
            Real estate is a tangible asset. You can buy it, live in it, rent it, improve it and sell it. It’s also something you can hold onto without the fear that in a single day it will be worth half of what you paid for it, except in extreme circumstances. And you can insure it against catastrophes such as weather or fire in most situations. 

In Central Oregon 

            All that said, let’s go deeper in what’s happening in Bend and Central Oregon using statistics from Beacon Appraisal Group as compiled from the regional multiple listing service.
            For the 12 months of 2025 Bend single family median home prices rose on less than one acre rose by 4.36%, from $710,500 to $741,000 as calculated on a rolling 12-month period.

            There were 1,738 sales in the past 12 months with 345 active listings, compared with 1,582 in 2025 and 319 listing then. Those numbers translate to approximately a 2.5 month inventory at the end of both 12-month periods.
            The number of sales at more than $1million was slightly more than 25%, continuing a trend of higher priced closing, with 103 of the 445 in that category more than $1.8 million. More than 41% of sales were in the $500,000 to $700,000 range.
            Results in both years indicate a mostly static market sales volume and sale prices trend of the past few years following dramatic price increases and total sales during and just after the pandemic period.
            Up to the north in Redmond, the region’s second largest real estate segment, median prices of home on under and acre rose 2.95% during 2025, from $509,000 to $524,000.
            Redmond year sales totaled only 626 a drop from 712 in 2025. There were a scarce 75 single family homes listed at year-end, compared with 111 at the end of 2025, an inventory of 1.5 months.
            For a summary of activity and the past year for smaller market segments in the region visit the Beacon Report:         

Bend home prices over 28 years

 The multi-family market 

            In recent years as an attempt stimulate more housing growth the City of Bend established tax incentives for new apartment development.
            One of the more notable examples is the new Jackstraw project in an area just north of the Old Mill area of the Deschutes River with a mix of retail, office, lodging and residential facilities.
            Jackstraw, a project of Portland’s Killian-Pacific, opened for leasing in late 2025, with approximately 313 units ranging from studio to three bedrooms. The developer received a 10% property tax deduction from the city, maintaining it would not be economically feasible given unfavorable interest rates and construction costs.
            With community and competitor backlash, the city backtracked on the incentives for another 1,600 unit  project proposed nearby by Los Angeles based Kennedy-Wilson, which led the company to delay plans and recast the design to include fewer units.
            Jackstraw’s leasing effort has moved lowly, with reports that more than 80% of units were still available as of early January.https://www.centraloregondaily.com/new-jackstraw-apartments-in-bend-still-has-hundreds-of-vacant-units/video_f095d305-79c0-5b00-ab8b-e1ad57842a43.html
            From a Q3  post regarding the regional multi-family market trends:
            The aggressive push for more apartments has run up against the reality of rents that have yet to adjust significantly to reflect area incomes. Vacancies in newer more upscale buildings have prompted incentives such as free months’ rent. And colorful balloons float above tent signs encouraging potential renters to take a tour.
            In single family neighborhoods rental signs that were largely absent only a few years ago now languish in front yards for weeks. One factor could be that single family home rentals were in demand for transient healthcare workers who enjoyed substantial six-figure incomes during the Covid shutdown.
          

 

Inflection Point? About face?.....Pivot?: Bend real estate market

             At the halfway point of calendar year 2025, and midway of Trump’s first year in office there appears to be no clearcut consensus as to direction of the economy or the various sectors such as real estate that it comprises.
            There is one widely accepted fact, however. TACO Don’s wild tariff swings are leaving a wake of uncertainty. The starts and stops are impeding investments in manufacturing, services and retail businesses, even though the stock market has rebounded from Trump’s tariff “Liberation Day” performance.
          Wall Street, or the investor class, now appears to have written off tariff worries--for now. But there’s still considerable concern on Main Street, which drives the economy with retail and services purchasing power. The upshot-- a nervous wait and see attitude.
        Barring an untenable spike in already high interest rates, will the great American dream of home ownership be more attractive as a refuge – a scramble to tangible asset safety? There’s no clear consensus.
        Pivotal to real estate is the direction of interest rates, against the backdrop of continuing tension between Trump and the Federal Reserve – specifically Chairman Jerome Powell, whose term expires under a year from now.
        In his trademark social media carping, Trump has been insulting and goading Powell to reduce interest rates. But the Fed chairman and the board majority prefer to hold the course given the potential effects of tariffs and other Trump policies to push inflation higher.
        Real estate markets, especially residential, have been struggling in many areas of the country. A Redfin report notes that 15% of national home sales contracts have failed. Central Oregon real estate has previously bucked national trends. But the region thus far has not been able to build itself out of high prices that challenge a large portion of the workforce to enter the housing market.
            One sign of a possible shift has emerged in Bend, by far the largest market segment in the region. From a marginally favorable sellers market for the past few months there are signs of a slight edge toward favoring potential buyers.
            But the caveat is whether any slight change – absent more favorable interest rates and a coherent administration tariff policy-- will benefit either buyers and sellers.
            In Bend, the largest regional submarket, the median price of a single family home on less than an acre was $724,500 for the 12 month period ending June 30. That was 1.90% lower than the $738,500 recorded over the previous 12 months of mid 2023 through mid-2024.
            Through June of this year the monthly median hit a high of $832,000 in April and a low of $700,000 in November and  December of 2024, and February this year.
            Of note, more than 24.66% of the total 1,610 sales for the 12 months closed at more than $1 million, including 84 at more than $1.8 million. Only 94 homes sold at less than $500,000.

            As outlined in the July Beacon Report by Beacon Appraisal Group, there was nearly five months inventory of homes available for sale, as calculated by averaging the previous 12 month sales compared to homes currently listed. That was the same as June and has risen from a low of 2.5 months in November and December of 2024.
            That level of homes listed in relation to past sales puts Bend on the edge, or by some interpretations, of  a shift from a sellers to buyers market. However, consistently high prices along with buyer and seller hesitancy given economic uncertainty could keep the market in more of a static situation than revealing a trending direction.
            In Redmond, the second largest regional market segment, the  rolling 12-month median price of a single family home on less than an acre was $518,500 or 1.57% higher than the $510,500 for the previous comparable period. Redmond inventory was lower than Bend, at three months, with 693 sales during the period and 166 listings at the end of June.
            There were only two sales at more than $1 million, with most clustered in the $400,000 to $600,000 range.
            Together, Bend and Redmond account for about 75% of all single family home sales on less than an acre in the seven submarkets tracked by the Beacon Report with data from the regional multiple listing service.
            Of the five other submarkets, Sisters and Sunriver held positions as the highest median priced areas of Central Oregon, with Sisters recording a median of $739,000 in June and Sunriver $897,000. Note that Sisters and Sunriver include Black Butte Ranch and Sunriver Resort, respectively.
            Median prices for June in the other three submarkets ranged from $360,000 in Jefferson County (Madras); $394,000 in LaPine and $417,000, Crook County (including Prineville).

Some indicators of a changing market

 Hints of an evolving market can be noted in anecdotal and on the street observation.
Open houses, once an oddity of the blistering Covid era market, now dot the Bend weekend landscape. 
            For Sale signs also remain in front of homes after the listings are no longer active on the multiple listing service, providing brokers an opportunity to reset the date for the number of days the home has been on the market. That also leaves the listing broker with an opportunity to interest a potential drive-by  buyer.
            Builders are also stepping up to energize sales. Some are offering interest rate “buydowns” and also credits for “upgrades” that would add thousands of dollars to the listing price.
            “We’re tired of these rates, and we know you are too. So we decided to take it down a notch!,” reads a recent email from a large Bend builder.
            The term “Price Reductions” on listing flyers and email blasts is now obsolete, in favor of more euphemistic terms like “New Price,” “Revised Price” or “Price Adjustment.”

 Multi-family housing:: Struggling From Oversupply

 Another indication of softening of the real estate environment is a glut of vacant apartments in Bend, coupled with more new ones flowing through the construction pipeline.
            A report by a leading Bend commercial brokerage estimated earlier this year that as many as 1,000 Bend and Redmond apartments were vacant, noting that another 1,000 were expected to come to market in the near future.

Facebook ads increase

            The City of Bend has aggressively pushed new multi-family developments, initially offering substantial tax breaks to a couple of projects south of the downtown area. The city then backtracked on breaks for subsequent projects, shifting to a tax increment financing strategy, rather than upfront break, to encourage building in the urban core.
             A major Los Angeles based developer has backed off plans to begin consruction of a 1,600 unit project, citing interest rates, high construction costs and a generally unfavorable multi-family market.
            The aggressive push for more apartments has run up against the reality of rents that have yet to adjust significantly to reflect area incomes. Vacancies in newer more upscale buildings have prompted incentives such as free months rent. And colorful balloons float above tent signs encouraging potential renters to take a tour.
            In single family neighborhoods rental signs that were largely absent only a few years ago now languish in front yards for weeks. One factor could be that single family home rentals were in demand for transient healthcare workers who enjoyed substantial six-figure incomes during the Covid shutdown.
            For investors in multi-family projects, capitalization rates – as calculated by net income in relation to listing prices – have started to rise. The higher the “cap rate,” the more attractive to a buyer, the lower better for the seller. And investors require cap rates closer to prevailing interest rates.
            Local commercial brokers say there may be a tipping point wherein apartment owners decide that more substantial resets of rental rates make more sense than leaving units vacant. Again, interest rates are a factor, especially for newer projects still carrying higher rates of recent years with possible balloon payments coming due and refinancing providing little cash flow relief.
            A turnaround in the multi-family market may have to wait until overall direction of the economy is more clear, allowing for loosening of interest rates and giving renters and their employers more confidence in the future.

Housing: A Macro View from Axois

     As reported by Axios, the national housing picture is exhibiting clouds on the horizon. Updated on February 19, 2025

Talk about a head fake. After a surge in homebuilding in the final weeks of 2024, new data today shows a sharp pullback in activity.

Why it matters: Few sectors capture the story of the economy in recent years better than housing — Americans' frustration with high prices, elevated borrowing costs, CEO uncertainty, and a supply-demand mismatch (for goods and workers).

• Two new economic factors could be added to that list of long-running housing issues: President Trump's trade war and deportation policies.

"[U]ncertainty over the scale and scope of tariffs has builders further concerned about costs," Robert Dietz, chief economist at the National Association of Homebuilders, said Tuesday alongside an index that showed dampened industry sentiment.

The intrigue: High housing costs — made worse by an upswing in mortgage rates — are keeping some would-be buyers sidelined. Trump's policies could have more inflationary consequences than not.

• Homebuilders rely heavily on immigrant workers, who could be difficult to find with a crackdown on immigration (though at least one top Fed official has pointed to immigration contributing to higher rents).

2024 down; 2025 Ahead - Major changes or more of the same? Too many unkowns

             Now that 2024 is in the rear view mirror, along with the presidential election, are there any emerging clues to the 2025 real estate market direction?
            To hear newly-installed Trump tell it he’s going to take care of one critical variable – interest rates.
            “I’ll demand that interest rates drop immediately,” Trump said. “And likewise, they should be dropping all over the world. Interest rates should follow us all over.” Trump blustered in a virtual appearance before the the World Economic Forum, often jusst shortened to “Davos,” for the cognoscenti of the financial world.
            Well now, that taken care of, everything should be hunky dory in real estate. He’s president and  never lies, dissembles or breaks a promise. Let’s keep an eye on eggs, which Trump touted before the election would be less costly along with prices of other consumer goods. 
            As  Elon Musk, often called Trump’s “First Buddy,”shakes things up in the federal sphere, one of the more curious new presidential edicts, euphemistically known as executive orders, is to force federal remote workers back to the office. This could mesh with another strategy to sell much of federal office space. Fewer employees left after firings and resignations would mean less needed office space, and what is left would be made unattractive to returnees.
            Maybe interest rates will fall along with the price of eggs as the bird flu abates. Maybe the idea of a “sovereign wealth fund” Trump has floated will be a reality, funded by all that surplus oil revenue from ramped up “drill baby drill.”  But how does that work to reduce the the country’s current budget deficit? One possibility mentioned is to issue more debt to “fund the fund” so to speak.
            Hmmm. Reduce the deficit by borrowing to invest and build sovereign wealth? What could go wrong?
           Let's pivot from Trumpisms, albeit realizing that  the chaos created thus far by the new administration will nevertheless hang over the economy in some way at least in these early days and weeks, and likely much longer.  

The Year Past 

            Looking back at 2024 in Bend real estate maybe the most salient observation could be the lack of any well-defined trend. Inventory of single family homes for sale remained tight, prices remained high relative to local median incomes and total sales stayed about the same as the previous 12 months.

            All this, according to the Market Action Index of First American Title Co., translated to “stasis” and a “slight sellers market,” thanks to continued low numbers of homes for sale as reported in early January.
            That assessment could easily be translated to “nothing new to see here,” in that virtually the same language had been used in nearly all of the title company’s weekly reports for 2024.
            The final Q4 2024 Beacon Report by Beacon Appraisal Group shows the the rolling 12- month median price of Bend single family homes on less than an acre was $710,000, a 3.0% drop from the $732,500 for the previous 12 months of 2023.
            The median monthly price hit a hgh of $800,000 in October and the low point in February, at $682,000.
            There were at total of 1,582 sales during the 12 months, a slight uptick of 17 closings compared to 2023, with an inventory of 2.5 months as calculated using the 319 active listings at the end of December and dividing inventory by the average monthly sales in 2024.
            In Redmond, Central Oregon’s second largest market segment, median prices for the 12 months rose by $23,000 to $509,000 from $486,000 at the end of 2023, a slight bump of 4.73%.
            Redmond sales also rose by 16%, or by 114 additional sales in 2024 from the 598 in 2023. Inventory there was also tighter than in Bend, at only a 2.0 months supply.

Affordability Remains an Issue

            Moving into the new year, the quest continues to find  strategies that will that will enable families with the Bend median household income of slightly under $89,000 to obtain affordable housing. At the median income level, with an optimistic 6% interest rate, a healthy 30% down payment, and modest $550 monthly debts a family could afford a home priced at $447,000.

            According to the Beacon Report, only 78 homes out of the total 1,582 homes sold in Bend during 2024 were priced from $400,000 to $500,000 – and only five listed in that range at the end of December.
            There is a disconnect between the availability of “affordable” homes for those with median incomes, and the high end of Bend sales  Last year 393 homes, or 24.8%, sold for more than $1 million, and 73 above $1.8 million.
            As has been reported throughout the country, among factors that likely drive higher sales prices are owners with low interest rates, or even no mortgage, who have been in their homes for a considerable time, and others who bought during the early 2000 decade recession. These may be able to roll generous cash margins into other properties – without the onus of having large mortgages at currently elevated interest rates.
            Also part of the affordable equation for the local workforce is the availability of rental inventory.

The Rental Market

In the past few yeas Bend has experienced a substantial increase in multi-family investment and new construction- to the extent that for Q3 2024 one of the region’s oldest, leading commercial brokerages concluded: “Looking ahead the wave of new apartment development will hit the brakes.”

Also in the third quarter of 2024, Compass Commercial’s Navigator market report noted that the region’s slowing population growth had reduced demand, resulting in “stagnated” rental rate growh with increased length of vacancies leading to more landlord concessions.

“Rent rates will likely remain flat, at best, for the next couple years. For property values to rise again, we will need to see both increasing rents and declining interest rates,” the Q3 report for 2024 noted.

That assessment was validated later in 2024 when a Los Angeles based owner delayed planned construction of a massive 1,600 unit mixed use project on former industrial land near the Old Mill District, citing interest rates as a reason.
            Another factor is the city’s pause and reconsideration of offering tax deductions to developers in that area, after two builders had received them and started construction of apartments.
            Now, seemingly a whiplash about face in barely three months, Compass Commercial’s new multi-family report for the final quarter of 2024 cites an assessment of the national real estate site CoStar which paints a much rosier picture.
             “Among apartment markets with inventories under 10,000 units, Bend landed among the top 10 performing markets, a cohort that spanned the Pacific Northwest, Midwest, and Sun Belt regions,” Compass quotes from CoStar.
            If the more recent analysis and predictions for 2025 come to pass, compared to the report only a few months agin, the Bend multi-family market would indeed be a turnaround star.

 

Tourism and Real Estate

        Finally, a look at the Central Oregon tourism sector, which contributes substantially to the local economy in terms of employment in lodging and other service businesses, by some estimates  as well as real estate in the form of vacation home puchases.
             In a presentation to city officials in early January the senior budget and financial analysit for the Community Economic Develoopment Department noted that development fee revenue since 2022 showed, “development is slowing down…the type of development is changing.”
            Reasons, he noted, could be due to, “everything that happened with Covid and the macroeconomic picture with interest rates? Or is that just….a result of Bend hitting a certain size.”
            And every city that hits that certain size then slows down or the development type changes,” according to Roger Serat.
            Amond the dramatic shifts Serat noted were fees for  short term rental permits, which in 2024 according to his research showed a decline from $301,119 in fiscal year 2022 to only $42,561 in 2024.
            One report said that all of Central Oregon, including resorts such as Sunriver,  Black Butte Ranch and Eagle Crest brought in $1.5 billion in related tourism revenue for 2023.
            However, statistics from Visit Bend, the city’s tourism promotion group, have shown lodging room occupancy dropping by 6.5% in July and August of 2024, likely due to wildfire smoke in the region but possibly also the tailing off of post-pandemic travel.
            What’s the bottom line?
            With the background of a chaotic first few weeks of the Trump administration best not to count on anything in real estate – especially as to lower interest rates suddenly creating a boom in sales.
            If tariffs on Canadian building products continue to be an on and off and on again roller coaster expect new construction and housing affordability to be problematic.
            Moreover, if the stock market – a favorite performance metric of Trump– can’t digest economic uncertainty maybe look for real estate sectors to tread water in the near term.

           

A Tax on Activity That Creates the Problem: The Real Estate Transfer Tax

            Note: The following commentary first appeared as a guest column in the Bend Bulletin.
              Housing affordability for working families is near the top of 2023 agendas for Bend and other Oregon cities that have experienced rapidly appreciated home prices.
            How to address the challenge, wherein a free market sets prices, will require cooperation by government, nonprofit and private sectors – all of which will benefit from strategies to improve livability of a community.
            In Oregon, one of the most effective and least burdensome methods that could help fund affordable housing is—for now-- not possible. It’s called an excise tax in some states, a transfer tax in others.  Significantly, the tax can draw revenue indexed to inflated housing prices that have created the affordability problem, in turn serving to mitigate it.
            In Oregon a state law specifically prohibits a tax on the sale of real property unless it was enacted prior to March 31, 1997. Only Washington County, with a tax of 0.10% of closing prices, was grandfathered under that legislation.
           Oregon is one of 14 states that don’t tax the sale of real estate, according to the recent data from the Lincoln Intitute. https://tinyurl.com/2omsj9j9
           Even though state law already prohibited a transfer tax, Measure 79 passed by voters in 2012 by an approximately 59 to 41 percent vote embedded the prohibition in the state constitution.
           According to campaign reports, by December of 2011, a year before the vote, substantial funding to support the measure had come from from the National Association of Realtors, which reportedly gave $735,000 and the Oregon Association of Realtors, $332,140.
           At a recent Bend Neighborhood Leadership Alliance meeting, board members heard Bend housing director Lynne McConnell note two of the major challenges for creating more affordable housing in the city – money and available land.
            A board member raised the question of why a transfer tax, or another measure could not be implemented to create funds for affordable housing.
            To that issue, at the meeting assistant city attorney Ian Leitheiser explained state law and the constitutional barrier to a transfer tax.
           In Leitheiser’s words, there is, “…a large well-equipped industry or two with powerful lobbyists in the state that will squawk pretty loudly when people start talking about transferring their bread and butter of selling real property.”
            Given that the rolling median price of a Bend single family home sold in 2022 was $723,500 it’s unlikely that a transfer tax rate similar to Washington County’s 0.10%, or $723.50 in this case, would significantly impede real estate sales.
            The tax could be paid by either buyer or seller, or shared between them. Sales subject to the tax could also be tiered to reduce impact in lower price ranges.
           The MLS of Central Oregon database shows 2022 sales in Bend of single family homes on less than an acre $1,908,095,782. A modest transfer tax of 0.10% would have yielded $1,908,096. The sales do not include single family homes on more than an acre, townhomes and condos or undeveloped lots.
           A local option tax for cities and counties would allow them to target strategies for their specific needs. Provisions could require that the tax sunset or have to be reauthorized after a defined period. Proceeds not deployed could be returned to a housing trust fund and redistributed to qualified projects, maybe to reduce infrastructure costs for new construction.
            Funds might also be used with other sources to provide transitional shelter opportunities for homeless populations.
           A ballot initiative to repeal the Measure 79 constitutional roadblock to a transfer tax would be a step in the right direction, while concurrently repealing the related 1990s legislation. Perhaps the industry groups that backed the transfer tax ban could come together to support its demise.
            The financial impact on home buyers and sellers, and real estate and building industries, would be minimal. The benefits for more affordable housing could be substantial.
-by Lee Hicks

 

Bend facing land use challenges...Residents restless for action

            “Hello Bend city government. Are you listening?”
            That is the admittedly tongue in cheek question that may be on the minds of many Bend residents as the city faces challenging issues of a growing homeless population and escalating housing costs while grasping for elusive solutions.
            This dilemma is recently illustrated with two projects under review by city planners, one a proposed mixed use development in a thus far all residential neighborhood, and the other to revise the code regulating controversial short term rentals, or STRs.
            In public comments on planning applications for both projects, the frustration of residents has boiled over.
            The milieu has revealed a culture in which city staff appears reticent to respond proactively to city code issues, unless having “direction,” from a council experiencing turnover in members and leadership.
            In the past year, the elected mayor and two city councilors have resigned, and the two recent council replacements have said they don’t intend to run for election in November.
            One current councilor is running for mayor against a former council member who is vowing to improve constituent communication by listening to the city’s network of volunteer neighborhood associations.
            A look at the proposed development on a lot zoned commercial convenience at the intersection of Mt. Washington Drive and NW Awbrey Road highlights a split between the council’s push for more multi-family and “middle housing,” and the character of an existing neighborhood.
            Maybe more significant, it shows how investors and developers are working to bend current development rules to fit a narrative of more needed housing density, while raising the alleged NIMBY (not in my backyard) and YIMBY (yes in my backyard) tension.
            In the past two years the project, dubbed Compass Corner, has been proposed, withdrawn, then put on hold twice -- most recently after a failure to comply with development code provisions was revealed.

The opposition to Compass Corner

            The latest delays came after more than 70% of the nearly 300 residents commenting on the project objected to it in some form—some urging that it not be considered at all, and others recommending substantial changes.
            The development team took their message to local media, resulting in one report that for and against comments were more evenly divided, and emphasizing the ostensible NIMBY – YIMBY rift over increasing housing density.
            But several detailed analyses by some of those commenting pointed city planning officials to a major flaw that had been used to justify an additional fourth floor. They argued that the ground floor lacked sufficient commercial area, that was instead taken up by substantial space for building systems such as heating, ventilation and air conditioning and the elevator shaft.
            The city planner then informed the development team of the problem, prompting a request to delay the application for slightly more than a month.
            Some observers have asked why the city had not recognized the problem earlier, perhaps saving many hours of time put in by the staff, the neighborhood association which tracked the proposal and even work of the development team.
            Instead of waiting to see what various plans the developers were proposing, couldn’t the city staff have guided the process with neighbors and the developer was a question asked.

Short Term Rentals due for code changes

            In another planning application process, city staff responded to a discussion by the city council which turned on potential ways the code provisions for short term rentals might be revised to encourage more long term rental housing.
            To that end the city STR program manager and staff conducted a survey of fewer 752 STR permit holders – under 70% of the more than 1,000. Only 44% responded. Out of that number of open ended responses, staff attempted to determine how many would consider renting long term.
            The key question asked:
            “What types of incentives would encourage you to rent to a long-term tenant (30 days or more)?
            A review of the scattered responses showed fewer than a dozen of the 300 answering that question mentioned removal of a requirement that there be a single STR rental within a 12 month period.
            Other responses cited the need for a subsidy to offset loss of higher revenue from STR rentals and changes in landlord-tenant laws regarding evicting problem tenants, among other measures that they would favor.
            Yet, with the scant comments related to removing the once in 12 months requirement, the city staff recommended a code change to accomplish that.
            A staff presentation to the Bend planning commission noted that the change would mesh with the city council’s objective to: “Reduce regulatory barriers for housing development, with an emphasis on incentivizing rent and price restricted affordable housing, middle income housing, and housing that serves vulnerable community members.”
            Another code change presented by the staff, at direction of the council, was to extend the required separation between STRs from 250 to 500 feet. In effect,  if a Type II “whole house” permit for unlimited nightly rentals were terminated, it could not be renewed if another existing Type II permit were within 500 feet.
            The planning commission went a step further and amended by a 3-2 vote September 12  for the proposed code to include any "Vacation Nightly Rental" in buffer calculation. These permits, issued before the current code effective date of April 15, 2015, were grandfathered and would not terminate if a property is sold.
            The STR section of the city development code emerged after complaints of noise, parking impacts and other problems with nightly rentals in several neighborhoods, as well as incursion of STRs into other newer and established areas of single family homes.
            A city staff presentation on the proposed code changes estimated that eligibility for new Type II STRs would be reduced from 54% of city housing areas to 34% with the new 500 foot buffer provision.

STR map if 500 ft buffer

            Written comments directed at the revisions were split between most full time residents in single family homes favoring the extended buffer as a way to reduce STRs. But owners of the  “whole house” night rentals were vigorously opposed.
            Among the objections, some STR owners pleaded that local real estate brokers had told them the value of a home with a permit could increase by $40,000 to $100,000 over comparable properties. The owners said their purchase was for an income producing investment that would be jeopardized if they decided to sell, noting the increased buffer could prevent the property’s continued use as an STR.
    Bend has been on the radar as attractive for nightly rental investors. In 2020 a Bay Area based website concluded that, "All in all, Bend is one of the best markets for Airbnb on the West Coast...a must-invest for out-of-state and Oregon Airbnb hosts."
            Objecting to the proposed code changes, a Los Angeles based STR investor wrote that...”…people like me really would appreciate our STRs staying eligible in the case of a sell—we have banked on it.”            Another out of town investor wrote he had, “….factored in the value an STR permit..” adds to property values.
            “Our realtor indicated that it can be upwards of $40k in desirable neighborhoods. We used this information when making our offer and knowingly paid over-asking because of this value boost for an STR-eligible property."
            Noting the code change would wipe out equity in his investment, the owner added:
            “Speaking for myself, this means we will need to hold onto our property longer than originally planned in order to make up for this lost money.”
            The idea of STR-permitted properties as lucrative investments was supported in code change comments by the political committee of the Central Oregon Association of Realtors.
            Voicing opposition to the extended 500 foot distance between STRs, the Realtors wrote that, “…the ability to periodically rent a home is an important, and increasingly common, criterion for home buyers within the City.”
           The Bend city council  will have a first reading and public hearing on the measures at an October 5 session.
            The following evening after the planning commission action, STRs were prominently on the agenda of the Neighborhood Leadership Alliance. It includes representatives of neighborhood associations throughout the city which are intended to act as sounding boards for government leaders.
            That discussion leaned to the modest effect the code change to reduce the once in 12 months nightly rental requirement would have on increasing long term rentals. Although the code presentation memo by staff cited city council goals to create workforce housing, the lead staff planner conceded that the change was not intended to improve housing affordability but could increase overall inventory.

Original STR Regulations Aimed to protect neighborhood integrity

             A city staff attorney at the Alliance meeting explained that the original STR code created in 2015 was not focused on housing affordability.
            Instead, “…the focus then was on neighborhoods, preserving the good things ….it was about neighborhood integrity, character, balancing all of these things. The regulatory structure was created around that.”
            With the STR buffer extension,the city predicts there will be fewer new Type II limited nightly rental permits as existing ones are terminated at the time of sale if there are others within 500 feet.
            But in the background are other two other issues of the STR code that many residents have urged the city to address.
            One is the so-called “transfer loophole.”
            As written in 2015, the code specifically states that STR permits “do not run with the land,” and therefore cannot be transferred. However, a so-called “transfer loophole” allows a property seller with a STR permit to void it, then apply on behalf of a buyer even before the sale closes.
            This is a frequent tactic that results in property buyers being enticed by real estate brokers with the prospect of acquiring a property with a permit.
            A number of comments regarding the newly proposed code changes urged the city to also look at closing the transfer loophole. This would further eliminate some STRs even if they were in locations at 500 feet or more from another at the time of sale.
            Critics of the existing STR provisions say the city should do more to thwart permit applicants from violating the covenants, conditions and restrictions, CCRs, of neighborhoods. But the city has repeatedly said it cannot interfere with “private contracts,” a position that most legal analysis supports.
            However, some have argued that a current stipulation that STR applicants acknowledge by signature they have read neighborhood CCRs should be strengthened to “affirm” a permit would not be a violation. Many CCRs prohibit rentals of fewer than 30 days in single family neighborhoods.
            Even so, a city attorney has said he would like to put more distance between the city and any relationship to CCRs by merely “suggesting” that an applicant read them.
            That position has been taken in the city planning staff responses to those commenting on both the Compass Corner apartment project off NW Awbrey Road and the proposed STR code changes.
            In effect, the only alternative is for either a Homeowners Association, or HOA, or lacking the latter, an individual property owner to take legal action to enforce the CCRs.

PREVIOUS POSTS ON SHORT TERM RENTALS

Tourism and neighborhood nightly rentals: Bend struggles with the issues

 Get out those CCRs- renewed focus on short term rentals and multi-family units