IN MARCH 2016, Portland won permission to force developers to build affordable housing. Developers struck back.
In a pell-mell period lasting nearly a year, developers clogged the city’s building permit pipeline with 19,000 proposed housing units—scrambling to get them submitted before Portland’s affordable housing mandate began in February 2017.
Some of those projects were the equivalent of spaghetti thrown at the wall. Some were legitimate proposals. But the rub for the City of Portland was that, because they were submitted prior to the cutoff date, none would be required to offer affordable units.
Now the city’s trying to convince those trigger-happy developers to get on board anyway.
According to a proposal that the Portland Housing Bureau (PHB) unveiled late last month, officials will try to entice builders to voluntarily include affordable units. To do that, PHB plans to revive a tax exemption program that’s been sitting on the shelf: the Multiple-Unit Limited Tax Exemption, or MULTE, program.
Yes, MULTE has a stultifying name, but its concept is simple: The city’s going to dangle the promise of 10 years of property tax exemptions in front of developers—if they pledge to make a percentage of their new buildings affordable for those same 10 years.
How affordable? The plan the city’s considering would require one-fifth of a project be affordable to people making between 60 and 80 percent of the area’s median family income, which ranges from $40,380 to $53,800 per year for a three-person household.
The offer would be open to developments anywhere in Portland, but the program would max out once PHB awards $3 million in tax exemptions over a two-year period.
The big question is: Will anyone bite? PHB thinks so.
As I’ve reported, the city’s new mandatory affordability policy—called inclusionary housing, or IH—has coincided with a steep downturn in the number of housing units proposed in the city.
In the year since IH was put into place, the city fielded applications for 682 units of housing. In comparison, from 2013 to 2017, the city built between 3,000 and 6,000 units per year.
The reasons for this change are disputed. Some say the IH policy has made building in Portland unappealing. Others point to different factors—like rising construction costs, a softening of rents, and the astronomical price of land in the city—that could be slowing things down.
The reality is probably a mix of those things, but the city is hoping that rising costs and cooling rents are the big factor. If that’s the case, the same developers who flooded the city with permit applications prior to IH might now be hungry for the tax exemptions the PHB plans to offer and—voila!—affordable units.
There are certainly plenty of projects that would, in theory, be eligible for this deal. According to a recent report from the Portland Bureau of Planning and Sustainability, there are thousands of units of housing sitting in the city’s permitting pipeline.
Even a fraction of those offered at below-market rates would be progress. If there’s one thing the city’s housing crisis has shown, though, it’s that in Portland, progress rarely comes easily.
This might work, emphasis on “might.” Inclusionary housing policy, as a mandate with no other attached benefits to balance it out, was pretty obviously destined to fail.
But with these tax breaks, what we are really doing is subsidizing affordable housing. Which is fine, just call it a subsidy, not a tax break.
In Los Angeles, developers get a density bonus (i.e., they can build more units on a particular land parcel than the zoning allows) in exchange for designating a certain percentage of units as affordable. This is a less direct subsidy, because you are simply upzoning rather than giving away potential taxes. And it has worked – being able to build more units means enough of a profit to also include lower-than-cost units and still have the project pencil out.
There is a hard floor for new construction where the costs simply can’t be lessened – represented by the cost of land, permitting, design, materials, labor, utility/grid hookups, etc. You simply can’t build both new and affordable without subsidy, because the biggest factor in an overall project cost is the land cost, and in a hot market like Portland the land cost is going to be high.
None if this is witchcraft, or particularly complicated, it just seems to escape the likes of Chloe Eudaly, PTU, and apparently now Mayor Wheeler (whom many of us hoped would actually be the “numbers” and “data-driven” guy we were promised).
This is way too little, way too late. My biggest question, though, is what the City is planning to do to help those making *less* than 60-80% of the local median income for a family of three? Are those who make less than that supposed to just go freeze to death on the streets with the rest the long-time homeless population? Oh that’s right, we put them in family shelters with gas leaks, vermin infestations and collapsing roofs! Serving only the “wealthiest” of our City’s income-challenged population is no kind of solution at all. Temporary solutions will not cut it. The way the City has been handling the housing crisis over the years has just been cruel and incompetent. It shows a level of denial of the scope of the problem on the part of City employees, officials and planners that is nothing short of horrifying.
RAS, the City should just fund housing for everyone who wants housing? With what money? And then what happens when that housing fills up and more people show up who also want cheap/free housing? Yes, we should be offering a certain amount of subsidized housing so as to allow people with lower incomes and necessary jobs the ability to live reasonably close in to the city center to facilitate a functioning city.
But at a certain point this issue simply cannot be the sole responsibility of the city of Portland and its taxpayers. There is only so much tax money to go around. Where are you going to take money from in the existing budget for more housing money? Should we defund our already poorly funded schools? Should we stop fixing our roads and updating our power grid? Should we stop treating our drinking water? Should we stop or drastically reduce our transit system?
I won’t argue with you that Portland could be doing a lot better – I’m pretty much constantly criticizing Wheeler, Eudaly, and co. for their abysmally stupid response to housing issues, especially their recent policies that do more harm than good, but we also have to recognize that the issue on a broader scale is much larger than any individual municipality can, or should, be expected to solve. Portland is not the only city seeing high housing costs and a rising homeless population – in fact, our situation absolutely pales in comparison with Los Angeles, or San Francisco for that matter.
To your original point though – what is wrong with helping people at the margins? Just like it’s cheaper for a business to retain an existing customer than to draw in a new customer, it’s also more cost-effective to prevent folks on the margins from becoming homeless in the first place as compared with assisting people who are already homeless. If we are looking at the issue from the point of view of trying to minimize the number of homeless people, there is nothing at all wrong with helping people at the 60-80% income level, as we get the most bang for our buck there. And I suspect people at that level who are a paycheck or two away from homelessness would tell you to go fuck your own face if you suggest we should leave them hanging just to spend 2-3x as much per individual to help the already homeless instead. Resources are finite. We should seek to maximize the good we can do with what we have.