POSTED: 01:30 a.m. HST, May 12, 2012
PORTLAND, Ore. >> John D. Gray, 92, got wind about three years ago, near the bottom of the Great Recession, that Habitat for Humanity was doing something pretty interesting here in Oregon’s largest city. In a depressed real estate market, Habitat, the nonprofit housing group, was betting big: trying to buy vacant land on the cheap, shopping from banks in repossession and foreclosure sales to squirrel away for housing projects years in the future.
Gray knows a thing or two about business cycles and buying opportunities. He made his fortune after World War II selling chain-saw equipment for a once-burly timber industry in the Pacific Northwest, riding the crest of America’s first real housing boom. So he called a friend, who set up a meeting with Habitat’s local chief executive in east Portland. Would $1 million in cash help out in the effort? Gray asked.
His philanthropy in turn opened doors with other donors, including a lumber company heir who had never given to Habitat, but who was inspired by Gray’s example to chip in $250,000. Gray then upped the ante again, adding another $1 million to the statewide Habitat for Humanity office.
This spring, the first 22 homes in the largest Habitat project in Oregon history — a 65-unit subdivision left partly built by a private developer who abandoned it when the market crashed — is rising on Portland’s east side. Habitat, meanwhile, has become the 10th-largest homebuilder in the Portland metropolitan area by housing volume, according to a local building trades association, and even more dominant on the lower-income east side through the $10 million land-bank fund that Gray helped anchor.
The 150 lots bought by the fund will keep the group busy for five years or more, even as it has increased its home-building output by 50 percent, to 30 homes a year from 20.
“Recirculation,” Gray said in describing his money’s new path, from the old lumber and construction scene of the 1950s and 1960s — the GI Bill, suburbia on the rise, America in its lion phase on the world stage — to the new era of wounded, postcrash housing economics. “What they were doing seemed like a smart idea,” he said.
Other Habitat branches have also pivoted in the recession, trying different angles in a dark time. In Nevada and Florida, for example, some Habitat groups stopped new construction entirely and shifted to renovation, buying abandoned properties in cities racked by high foreclosure rates. Across most of the nation, one-at-a-time houses, financed by church suppers and staffed by volunteer hammer-swingers, are still the norm for Habitat, an ecumenical Christian group that was founded in 1976 in Georgia.
But business leaders and housing experts said that Portland — partly through Habitat’s timing in betting big in a down market, partly through a donor network led by Gray that stepped up to help even as corporate support mostly collapsed — is creating something that will resonate long after the recession: Habitat neighborhoods.
“That fact that John Gray had given us $1 million gave us legitimacy,” said Steve Messinetti, the president and chief executive of Habitat Portland/Metro East. “And then the market, and the depressed prices, allowed us to carry out our goals.”
The scale and scope of the new Habitat projects, city officials say, will allow entire blocks on the city’s struggling east side to be anchored by owner-occupied housing. Those owners, under Habitat’s model, would earn 30 percent to 60 percent of the median Portland area household income (around $20,000 to $40,000 a year for a family of four), living in homes they helped build themselves, and paying down their mortgages with zero-interest nonprofit loans.
“As a housing commissioner we feel like we’re trying to plug a lot of leaks in the dike,” said Nick Fish, a Portland city commissioner in charge of the housing bureau and parks and recreation. And the city’s budget has still not recovered from the downturn. Habitat, especially in east Portland, he said, is filling the gap.
“One of the ideas that they have floated is a plan, outside government, to take back blocks of the city, block by block, using their tool kit, with modest government contributions,” he said. “We can start building around their work.”
There was a kind of bleakly fortuitous stroke of luck in the Habitat capital project, Fish and other housing experts said. The area that Messinetti’s Habitat branch was focused on, east Portland, was also the hardest hit by what Fish called the “predatory lending and foreclosure mess.” The city expanded its boundary east into what had been an unincorporated area in 1988, he said, and the final, frothy wave of the easy-money era broke there in an area that never shared the hip West Coast prosperity of downtown.
Now, as the economy here and along much of the coastal strip north to Seattle is recovering, vacant land in Portland is being snatched up. A big national homebuilder based in Miami, the Lennar Corp., said in December it was expanding in the Portland and Seattle markets, and prices for vacant land have soared, said Dave Nielsen, the chief executive of the Homebuilders Association of Metro Portland. “Good for them,” he said, referring to Habitat. “If they were trying to do it now, they’d be in a bidding battle.”
Gray said that for him part of the appeal of a big Habitat play was the idea that social stability of families and neighborhoods and economic stability in housing go together. It is a lesson, he said, from personal experience. He grew up in the 1920s and ’30s, the son of a rural schoolteacher who was widowed young and raised three boys in a four-room house with no running water.
On the dining room table of his downtown apartment, he pulled out a family album, stabbing a picture of the house with his finger, still amazed after more than 80 years that his mother’s landlord, a farm family, never raised the rent — $2.50 a month — even after rural electrification came through in the 1930s.
Sen. Jeff Merkley, D-Ore., who started his career at Habitat for Humanity, said he thought the housing bust, and Habitat’s new chapter here, had validated the idea that different economic models have value.
Many of the families he worked with two decades ago in east Portland, for example, are still in their homes, he said, and the homes those families bought for $30,000 to $50,000 back then are now in some cases worth five times as much.