Portland City Council made some important tweaks today to an existing program that could mean the area will see an increase in affordable housing development.

The Portland Development Commission's Multiple-Unit Limited Tax Exemption (MULTE) program allows developers to get out of paying property taxes on new multifamily housing developments for 10 years in exchange for including at least 20 percent of the units at below-market rates.

A few years back, when Portland was hurting for tax revenue during the recession, PDC undertook a study deemed the "Big Look," as a way to figure out where to come up with some extra tax dollars. One of the ways the task force convened to study the issue found was to cap the amount of foregone property tax revenue from the MULTE program at $1 million.

With revenue up, and the area in the middle of a serious housing crisis, the commission today voted in favor of increasing the cap on the amount of foregone property tax revenue to $3 million. Housing Commissioner Dan Saltzman estimates the additional $2 million will add about 200 affordable units per year to the Portland area.

"We have very few tools to incent the private market to create affordable housing," Saltzman says. "This is one of them."

The ordinance included a few other major changes, including a provision that will allow tenants to stay in the affordable units even as their incomes increase. The affordable units will now be available to to tenants earning between 60 and 80 percent of the area median income, or, in certain "higher opportunity" (read: more expensive) neighborhoods, between 80 and 100 percent of median area income.

The ordinance also put some increased tenant protections in place, requiring developers to give tenants at least 180 days notice if their rent was going to increase and requiring 240 days notice to the Portland Housing Bureau before a rental increase.

The new ordinance also requires at least 5 percent of all units be adaptable to accomodate tenants with physical disabilities. One other tweak was to change the program's strategies to encourage minorities and women to participate in the program.

The four commissioners present (Commissioner Amanda Fritz was excused) also changed the application process to become non-competitive. Prior to today, developers could only apply for a MULTE once or twice a year, which disincentivizes the program in a hot real estate market like, Mulltnomah County's, where developers don't want to wait to start projects.

Though the new ordinance increased penalties against developers who don't keep their multifamily units at affordable rates for 10 years by making developers report on current rents and, if they're no longer being held at below-market rates, making the developers start paying their property taxes. Commissioner Nick Fish suggested the city should take penalties one step further by charging non-compliant developers all the taxes going back to the first year.

"If someone during the 10 years breaks the covenant," Fish suggested. "Why don't we just move to collect the property taxes as if the abatement was never granted."

PHB Assistant Housing Director Javier Mena replied that such a move may discourage developers from taking advantage of the program. Fish didn't seem convinced.

"But we typically say that a 60 year covenant is the gold standard," he says. "Here we're talking about 10 years, and there is a debate of whether 10 years is enough. If you don't fulfill the 10 years, why should you get a pro rata benefit? Why shouldn't you forfeit the whole program?"

Fish also suggested that, in order to keep these units at below-market rates for more than 10 years, developers could have the option to re-up on the MULTE program after the first 10 years has passed. As Fish mentioned, many affordable housing developments require the units to be reserved at below-market rates for 60 years.

Saltzman said he'd look into both of those options. The issue now move on to the Multnomah County Commission for a vote.