In his Sunday column, Bulletin Editor John Costa talks to three of Bend’s biggest movers and shakers to find out why the Bend real estate market went belly-up and how to keep it from happening again. They offer a number of ideas. Some of them make sense; one is just crazy.
Developer Mike Hollern blames the Doctrine of Bend Exceptionalism – the peculiar notion that Bend is so special that it’s immune to outside economic forces.
“We were overwhelmed by the amount of money pouring in,” Hollern told Costa. “We thought that we were different from the rest of the country. It turned out that we are not so much [different].”
Hollern and attorney Neil Bryant said Bend didn’t do enough to provide roads, sewers and other essential public services as growth rampaged ahead of their capacity. “There was overwhelming growth for sure, [but] city leadership didn’t react forcefully enough on [things like] roads, transportation and sewer capacity,” Bryant said.
(It would have been easier for City Hall to provide adequate infrastructure, of course, if builders and developers hadn’t so stubbornly resisted any attempt to increase Systems Development Charges to a realistic level.)
Hollern and Bryant agreed Bend needs to spend more money to develop a first-rate education system, especially higher ed. They’re right – good schools are a more important “quality of life” factor for most folks than bike trails and trout streams.
So much for the sensible ideas. Now comes the crazy one.
Old Mill District developer Bill Smith tells Costa the reason for the real estate bubble and subsequent bust was … are you ready for it? … we didn’t build enough houses.
“Essentially, [Smith] said we were lulled into our own sense of superiority and did not address land use problems,” Costa writes.
“We ended up, he said, critically short of residential and industrial land.
“Because the city government was so slow to bring more land into the urban growth boundary, the real estate bubble was magnified here.
“That makes sense.
“Lots of people want to move here.
“The land laws restrict access, thus creating exclusivity with home prices spiraling upward.”
Unless Bill and John spent the last five years in a cave out near John Day, they should understand that what drove Bend home prices to insane levels was not that there weren’t enough houses for the millions who were desperate to live in our precious “paradise”; it was a speculative frenzy, pure and simple.
People (from Bend, Portland, California and all over the map) were frantically buying properties in the hope of flipping them to make an overnight killing, aided and abetted by dishonest appraisers who were willing to inflate home values and banks that were eager to lend hundreds of thousands of dollars to anybody who had a pulse. It was a classic speculation-driven bubble, no different in its essentials from the Dutch tulip craze of the 1630s, the South Sea Bubble of 1720 or the dot.com mania of the 1990s.
If Smith’s and Costa’s Alice-in-Wonderland logic was correct, we would still have people flocking to Bend and snapping up houses at inflated prices instead of having thousands of unsold homes on the market despite plunging prices.
And if Oregon’s and Bend’s land use restrictions are to blame, how come the bubble-and-bust cycle was even worse in areas – such as South Florida – that have virtually no land use restrictions?
At the end of his column, Costa has a bullet-point list of things Bend needs to do to avoid another bubble and bust. Here’s our list:
- Invest in things that really protect and improve Bend’s quality of life – schools, parks, police and fire protection, libraries, good public transit, good roads – instead of continuing to market this town on the basis of blue skies and bullshit.
- Don’t let growth outpace our ability to pay for the infrastructure that growth demands. (Raising SDCs would help.)
- Take some of the buckets of money we spend to attract tourists and use it to attract businesses and industries that bring living-wage jobs.
- Encourage developers and builders (maybe through some kind of SDC credit or deferral) to build realistically sized houses that ordinary people can afford, instead of 5,000-square-foot McMansions designed to sell for half a million dollars.
This article appears in Feb 12-18, 2009.
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Developer Mike Hollern blames the Doctrine of Bend Exceptionalism รข ” the peculiar notion that Bend is so special that itรข โขs immune to outside economic forces.
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That’s FUNNY. Hollern is the person who marketed the Bend Brand, he owns “Brooks Resources”, the very company that paid for ‘Smart Growth’ back in 1998, and created what became the Great Bend BOOM.
1.) COVA PR&MARKETING of Bend paid by the Bend taxpayer
2.) BUSH easy money for RE post 911
3.) Deferred SDC’s, lobbied by Hollern’s army
4.) 1031 exchange in Bend was NW epicenter
The best PR&MARKETING that money could buy, all managed by the team that inherited the company town, e.g. Shevlin-Hixson, aka Mike Hollern, Cali MBA who came to Bend in the 1960’s to turn an old washed up logging town into the next Aspen, CO.
How could their be any ‘blame’ the program worked to the everyones greatest expectations. Everyone knew the Bubble would eventually implode. Hollern Made Billions of dollars off SDC deferral. Today the City of Bend is bankrupt, and HOLLERN is still one of the richest men in oregon. Why the self pity??
Hollern and attorney Neil Bryant said Bend didnรข โขt do enough to provide roads, sewers and other essential public services as growth rampaged ahead of their capacity. รข There was overwhelming growth for sure, [but] city leadership didnรข โขt react forcefully enough on [things like] roads, transportation and sewer capacity,รข ย Bryant said.
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This is a dead horse, but has been addressed by Bend groups like “Bend Infrastructure First” for years.
By 2004 it cost $60k/home in Bend, to cover the schools, toilet, water, power, police, … infrastructure to cover Bend. Team-Hollern who controlled COVA,CORA,COBA, and virtually anything in Bend related to Real Estate refused to ever pay more than $12k/home. For builder’s it was there only really up front cost to city, as all other costs (easy-money) were no-money down, the city required real money up front.
Billions of dollars weren’t paid into the system, which were translated into pure profit for Brooks Resources, and competition.
All the while that Bend’s lobbyist’s and the BULL played down investing, towns like Wilsonville, OR paid the $60k/home, and today they’re sitting great, and Bend is Bankrupt. Who could have guessed??
More SDC’s and more taxes, who really pays in end??
Maybe the ultimate comsumer???
BWAHAHahahahahahahaha… Damn that hurt, I just fell out of the breakfast nook ROTFLMAO! Ah jeez, now my abs hurt like five hundred crunches ROTFLMAO! Please, pluuzzzeee stop.
Couple of years and houses around here will be selling for 60K… These bozos are supposed to be homies, but having gone through four, maybe five, booms and busts around here since 1974(pig-era), I’m not sure they were working in the same woods as I (my logging “career” began with Scanlon before they busted the union(logging)).
The Bend Bullshiten is why things went belly up.
Asking Hollern and Smith (not sure why Bryant is in there except that he’s an old-school buddy of Cushmans/Chandlers/Costa) what went wrong with the real estate market and what we should do to prevent future problems is like asking the foxes what happened to the chickens and then asking them for suggestions on how to improve the design of the chicken coop.
And also, if any organization pushed the idea of “Bend exceptionalism” harder than The Bulletin, I’m not aware of it.
Bruce, great article and I agree with your take on The Bulletin’s article to a large extent. I say RIGHT ON to your first three bullet points on your list. However, I think you’re a little naive in bullet point four in thinking credits will encourage builders or developers to adjust the size of the homes they build. With a very small exception, builders and developers look at the limits of what they are allowed to do and go there. A large portion of the licensed contractors out there simply build the same old crackerbox that they saw built down the street by a contractor that sold a home. If they’re required to do anything other than call up Jim-Bob down at the building department and ask “Can I do that?”, we’ll never see a change. On top of that, ole Jim-Bob down at the building department is actually working there to get in good with the afore-mentioned builders and developers so he/she can get a better paying job. So what we’ve seen is greed run wild with everyone out there padding the bank accounts of each other with extremely lax (at best) regulatory oversight. All the while the citizens of Bend have moaned and groaned about it ALL THE WHILE buying into the housing craze themselves which only supported the problem.
Rather than run on here, the point that I’d like to make is that I’ve met very few builders or developers that will do anything “for the good” unless either: 1. It’s EASY (heaven forbid it takes a college education to figure out) and they make a MUCH BIGGER profit, or 2. They are required to do so.
“More SDC’s and more taxes, who really pays in end??
Maybe the ultimate comsumer???”
Jed, I understand your “all taxes and fees are EEEEEEE-vil” mentality, but if we’re gonna have roads and sewers and cops and firefighters and schools SOMEBODY has gotta pay for them. Why not make the people who create the added demand for these things by moving here and buying new houses pay for them instead of making the existing homeowners and taxpayers pick up the whole tab?
“And also, if any organization pushed the idea of “Bend exceptionalism” harder than The Bulletin, I’m not aware of it.”
You got THAT right — and when (or if) the current bust ends, you know damn well they’ll be pushing it again. “Bend is PARADISE! We have 370 days of sunshine a year! We have mountains! We have rivers and lakes! We have mountain bike trails! We have three golf courses for every person! We have a UNIQUE LIFESTYLE! Everybody in the WORLD wants to live in Bend!” Etc. etc., etc., ad nauseam.
Because from the beginning the infrastuture of a city has been paid for after people move in, not before. The community as a whole needs to be taxed for services, you do not get to pick and choose what your tax dollars go for you can only hope and pray you get lucky and have intelligent people running the public works (unfortunately we have not had that for many years). I have never had children in school so by your reasoning I should not pay any school support taxes.
Are you suggesting that if you were not born here you should pay additional dollars to live here?? Sounds un-American to me.
“The community as a whole needs to be taxed for services, you do not get to pick and choose what your tax dollars go for”
The community as a whole IS taxed for services. I pay for roads and schools and police etc. and pay plenty. But development needs to pay its own way, or at least a reasonable part of its own way, when it generates the need for more services. When a development puts 2,000 more cars on the roads, is it fair to make the people who already are here and who get no benefit from that development pay the whole cost of improving the roads to accommodate those 2,000 cars?
You know why developers are so dead set against increasing SDCs? Not because they give a damn about the affordability of their houses, but because higher SDCs would cut into their profits. They sell their houses for whatever the traffic will bear, no more and no less. If the most they can get for a house is $500,000 and SDCs are $60,000, then their profit is $20,000 per house less than what they could get selling the same house with SDCs at $40,000.
Low SDCs mean taxpayers are subsidizing developers. It’s as simple as that.
Jed, there are those who would indeed argue that if you were not born here you should pay additional dollars to live here. If you haven’t noticed, it’s the locals who’ve been hit hardest, not the newcomers. And quite frankly, if they lose their asses I could give a rat’s ass.
“I’m not sure how HBM seems to separate Bend being a desirable place to live from increased real estate speculation – they go together!”
Bend is a nice enough place, in its way, but not the “paradise” it was made out to be by our own marketing hype — all those newspaper and magazine puff pieces touting the glories of our “unique outdoor lifestyle” didn’t just happen along by accident. (I’ve been a journalist and PR guy for a lot of years and I know what I’m talking about.) The hype encouraged people to come here, which brought about more hype, which encouraged more people, which drove up prices, which ultimately fueled an out-of-control speculative market.
Bend was just as “desirable” a place to live (if not more so) in the 1960s, ’70s and ’80s before all the hype started.
Bend was really desirable in the 60’s, 70’s and 80’s, yeah right!! If you wanted to barely make it in business, work in dying industries and have minimal cultural or shopping experiences.
HBM, Why do you still live in Bend???
“The point is; that if Bend wouldn’t have lived up to the hype for a lot of people, it wouldn’t have been growing for the last 50 years.”
Fact is, for most of those years it was BARELY growing — if at all. The crazy growth didn’t start until the mid- to late 1990s — coinciding with the PR blitz that got as listed in all those magazines as “10 Best Places” to do whatever. This was NOT a coincidence.
“Bend was really desirable in the 60’s, 70’s and 80’s, yeah right!! If you wanted to barely make it in business, work in dying industries and have minimal cultural or shopping experiences.”
Jed, I was talking about desirability in terms of recreation and lifestyle, not economic opportunity. Bend never was great for economic opportunity — still isn’t.
“but if it wasn’t an inherently beautiful place with a great lifestyle for a lot of folks most of them would have turned around and gone back where they came from!”
I suspect an awful lot of them would like to go back where they came from NOW, but they’re underwater on their mortgages and likely to stay that way indefinitely.
You can’t eat the lifestyle and you can’t pay the mortgage with it.
“HBM, Why do you still live in Bend???”
Stuck here until my wife is ready to retire and we can sell our house. Bend was a nice place until it was trashed by insane, out-of-control growth. Now it’s kinda like San Jose with junipers instead of palm trees.
Bend a paradise? Give me a break. There are so many towns with similar outdoor experiences, REAL high education, cheaper real estate etc around the Mountain and Pacific NW states. What makes this “unique” is that it is marketed that way by those who will gain the most. Most people here are not friendly and are stuck up for no apparent reason I can figure out. Very icy town and if you like to recreate in a dustbowl surrounded by volcanos, then Bendover is the place for you….. I always heard there was a pact between the Kirbys-Miller-and other “homey” builders who only would pass business between themselves until they raised up Bend as high as they felt their bank accounts warranted. This town is a good old boys town full of Rapepulicans……………….