Invested in UGB, builders fight Measure 37
Some production developers have spent millions on buildable land and fear market saturation
POSTED: 06:00 AM PDT Thursday, October 11, 2007
BY LIBBY TUCKER
Daily Journal of Commerce
Oregon home builders say they’ll grudgingly support Measure 49 this November.
The industry’s support comes as a surprise to some. A “no” vote would mean potential payouts from more home construction. A “yes” vote would likely lead to stricter land-use regulations.
But building Measure 37 subdivisions on farmland outside urban growth boundaries will dilute the industry’s ability to sell homes inside city limits, builders say.
Home builders have poured big bucks – as much as $600,000 per acre – into undeveloped land within urban growth boundary expansions. Renaissance Homes and Legend Homes, two of the state’s biggest home builders, are sitting on hundreds of undeveloped acres inside UGBs near Portland and Bend, waiting for cities to invest in the roads and sewer systems they need to start construction. If Measure 49 fails to pass, the value of those undeveloped acres could drop as supply allowed by Measure 37 comes onto the market.
“I voted against 37, and I’ll vote for Measure 49 because it’s a vast improvement over what 37 was,” Randy Sebastian, president of Renaissance Homes, said. “There’s so many uncertainties” under Measure 37, he said.
Measure 49 would stymie large subdivisions on land approved for development under Measure 37 by allowing no more than three homes on most claimant’s properties.
Measure 49 fast-tracks construction, increases regulation
Voters in 2004 passed Measure 37, which grants land-use waivers to owners that purchased their property before regulations were enacted or requires counties to compensate landowners for value lost as a result of land-use regulations.
The measure has created a host of legal headaches for landowners, developers, cities and counties alike.
In the past two years, more than 7,000 Measure 37 claims have blanketed the state, but almost no construction has happened. Oregon courts have ruled that landowners cannot transfer development rights, essentially locking owners out of construction loans.
By allowing owners to transfer their rights, Measure 49 would fast-track construction on about 42 percent of Measure 37 claims – those that seek to divide home sites into a few lots.
“I would expect Measure 49 to facilitate construction financing,” Bill Jaeger, an economist at Oregon State University, said, “and lead to some additional construction due to the streamlined processing for claims involving a small number of houses.”
Land that has been tied up due to legal questions surrounding Measure 37 claims would be free for development, he said, boosting Oregon home construction.
Regulators would also be free to pass more land-use restrictions under Measure 49.
Deterrents to development like tree-taking ordinances and environmental overlays have fallen off as a result of Measure 37, said Drake Butsch, a former president of the Oregon Home Builders Association.
Oregon land-use system broken, builders say
“I’m reluctant to support 49 because 37 is the only leverage we have to try and hold back extremely onerous regulation that’s running wild right now,” said Jim Chapman, president of Legend Homes, a Portland-based developer with subdivisions throughout Oregon.
But, Chapman said, “there’s nothing in the (land-use) system for getting beyond planning. Of all the boundary expansions there have been since we created the law, almost none of it has come online and given us any homes.”
Builders have avoided purchasing land approved for development under Measure 37 because of uncertainties surrounding the transfer of the property to a developer, Butsch said.
“A developer would much rather play a set of rules they know and have confirmed expectations knowing they will be able to develop,” Butsch said. “That’s a much smarter business than picking up odd pieces.”
Instead, residential developers bought up land inside the urban growth boundary in Damascus, North Bethany and Hillsboro. That land now sits empty, waiting for cities to build the infrastructure – roads, sewer, electricity – necessary for home construction.
Fewer than 200 homes have actually been built on the more than 18,000 acres added to Portland’s urban growth boundary since 2002, according to Metro. The land is slated to hold over 35,000 new homes.
Cities haven’t properly prepared the land brought in under UGB expansions, Chapman said, leaving home builders with few alternatives for development.
Legend Homes owns 160 empty acres in Bethany that it can’t build on until Washington County finishes a concept plan it was supposed to complete in 2004. The county says it still needs $350,000 to prepare the land for development.
Renaissance Homes is holding onto about 200 acres near Wilsonville and Bend that could fit about 1,000 homes, Sebastian said.
The company has so far stayed away from building on land approved for subdivisions under Measure 37 because of the law’s shaky transferability rules. It’s focused instead on subdivisions within Portland and Bend.
“If Measure 49 goes down to defeat, then we’ll certainly look at Measure 37 claims entering our business plans, as most home builders will,” Sebastian said. “But right now we have plenty of our own desirable land within the urban growth boundary.”