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Why is Building Housing So Expensive? Ten Reasons Why It's Complicated

Updated: Feb 22

Photo Credit: Blake Wheeler on Unsplash

This week, the Oregon Capital Chronicle published an article entitled When will housing affordability improve?  Spoiler alert: It will take some time. At the Missing Middle Housing Fund (MMHF), we think constantly about the reasons housing costs so much and takes so long to produce. This article, while not exhaustive, gives a great moment-in-time snapshot of the myriad reasons. 

In the interests of simplicity, here are some of the top reasons we are hearing from our network of housing doers and innovators:


  1. High demand and low inventory – self-explanatory if you’ve taken any economics class

  2. High interest rates – The low interest rate of 2.65% in 2021 fueled high demand, making prices skyrocket. Now, interest rates are at 6.77% for a 30-year mortgage, putting constraints on housing supply. Owners are staying put. 

  3. Constrained labor pool – Our construction workforce is aging and not growing. Fewer skilled laborers means higher prices and longer build times.

  4. Expensive building materials – Though prices have come down some since their pandemic peak, costs are still high for the basics. 

  5. Scarcity for some building materials – Multifamily electrical transformers (for one example) are in short supply, meaning monthslong waits for critical housing components.

  6. High costs and scarcity of developable land – Policy constraints like zoning and urban growth boundaries limit where homes can be built, driving the cost of available land even higher. 

  7. Red tape – Permitting times in Yamhill County (for one example) average 18 weeks.  In some of Oregon’s larger metros, it can be years. Few developers can hold carrying costs that long – it’s not worth it.

  8. Lack of financing – Especially for middle income housing, there are almost no available commercial loans. The cost to build is the same as market rate, but the revenues from rents and sales are lower, adding risk to lenders’ decisions. 

  9. Lack of innovation funding – Since housing development takes so long, few investors are willing to fund housing innovation – it takes a LONG time.  Being a housing innovation entrepreneur is a tough job. 

  10. The task is overwhelming – When faced with all the reasons above, death by a thousand cuts is a reality for housing creation. 


There is HOPE, however. The end of the article describes how governments across the country are rising to the challenge. Oregon has prioritized housing creation in this legislative session. Local jurisdictions are reducing red tapeAlternative financing methods are appearing. Innovation is everywhere we look. 


We are inspired by our partners across the state, and increasingly, nationwide. Please reach out if you are part of solving the puzzle. We’d love to learn more. 

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