A Preemptive Strike

FORGET THE STREET FEE. The next big ask from Portland voters could be the “sleep fee.”

As the city’s housing crisis worsens, groups looking for solutions are finding no easy answers, in part because Oregon has preemptively banned a laundry list of methods that other states use to create dedicated funds for cheap housing. That’s inspiring some novel ideas—which could be headed to the ballot in the near future—for how Portland can scrounge up new cash.

For months, Jes Larson, director of the Welcome Home Coalition, has been leading a group trying to find ways to fund more affordable housing in the city. The group’s looked to 700 other cities and found that many of the solutions used across the country aren’t possible in Oregon, thanks to statewide preemptions on things like inclusionary zoning, rent control, and real estate transfer fees.

“Many of the cities we looked at have committed local revenue to creating affordable housing,” Larson says. “But the most common mechanisms used in other cities are banned in Oregon.”

Other municipalities often generate housing funds by charging a document recording fee during real estate sales and by enacting a real estate transfer tax. Oregon can do neither.

Back in 2012, the Oregon Association of Realtors bankrolled a campaign to enact Measure 79, which amended the Oregon Constitution and banned local governments from charging a transfer tax—a fee, usually paid by the buyer at the time of sale, which other jurisdictions sometimes put into a kitty to reserve for creating affordable housing units.

The real estate association pushed the legislation through during the recession, when home sales were down, convincing voters that adding more cost to a home’s price could hurt the already-flagging market.

Opponents of the bill, such as Oregon Opportunity Network Executive Director John Miller—who also happens to be a real estate agent—said at the time that they failed to see how adding a few hundred bucks to the sales price would scare away a buyer. But the Oregon Realtors Association was able to spook voters into approving the ban.

Actually, the vote amounted to a redundancy. At the time, real estate transfer taxes were already banned, though a 60 percent majority in the legislature could have changed that. With the constitutional change, voters now would have to repeal the current law, and then get a bill through to add a tax.

Things have changed a great deal since 2012. The real estate market is on fire right now, according to the latest data from Nick Krautter, a local real estate agent who tracks home sales. He says Portland-area homes are selling at a record pace and for record prices.

“Pending activity is picking up, so expect the number of home sales to be higher for August,” Krautter wrote in his August 7 newsletter. “It appears the increased amount of buyers in this summer’s market have decided to cope with the rising home prices and are determined to make a purchase before prices rise even higher.”

In July alone, 1,162 homes sold in the Portland metro area, which is 106 more than June, according to Krautter’s data.

In other cities, that activity would have spurred a boatload of cash for cheap housing. Not so, here.

Transfer taxes aren’t the only way Measure 79 crippled advocates’ attempts to find funds. The association responsible for pushing the legislation through also made sure people buying or selling homes wouldn’t get dinged by a sizeable document recording fee—another popular way other cities collect housing money.

Portland’s recording fee is $45, Larson says, with just $20 of that set aside for affordable housing. Other jurisdictions charge hundreds of dollars for the same service.

“The measure was facilitated by homebuilders, who were able to convince voters that it’s overreach to have the state taxing people when they’re selling a home,” Larson says. “We’re missing an opportunity here in Oregon with banning a real estate transfer tax, especially with developers who are buying and selling again and again.”

In the face of these preemptions, Portland’s somewhat restricted in how it can pay for affordable housing. Right now, many projects are funded through the city’s urban renewal areas, where 30 percent of city renewal funds have to be spent on cheap housing. It’s valuable money, but it also severely limits where, and when, projects can be built.

Then there’s the city’s Multiple-Unit Limited Tax Exemption (MULTE) program, which allows developers to get out of paying property taxes on new developments in exchange for including a certain percentage of below-market rate units. City council recently voted to expand the program, but MULTE funds are not a cure-all.

So Larson and her organization have been looking for ways to create less-restricted housing revenue. Right now, they’re thinking about dipping into tourists’ wallets. The Welcome Home Coalition is polling locals to see if a hotel and dining tax would be a viable option.

“Tourists coming to Portland have expressed concern with visible homelessness in our city,” Larson says. “A hotel tax would be a way to generate revenue from tourism to address that problem.”

The coalition is also considering asking voters to approve a new general obligation bond or a property tax.

Housing Commissioner Dan Saltzman says he’s open to new ideas, but notes voters are often reluctant to pay more taxes.

“I think a general obligation bond has potential because most voters are cognizant of the need and it’s the most straight-ahead idea,” he says. “The dining and hotel tax is an interesting idea, but we’ll see what the polling shows.”

One probable opponent: Advocates for Portland’s tourism economy, who say pricier rooms and meals could scare away tourists.

“The main concern is that it could have a negative impact on the current tax collections,” says Megan Conway from Travel Portland, noting that Portland’s lodging tax is often less than similar cities. “Raising the tourism tax could result in us losing our footing as a more desirable meetings destination, which could in turn result in lower tax collections for the industry and the city.”

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