With hopes of improving Portland's brand-new affordable housing policy, Portland City Council has begrudgingly agreed to woo developers with... its original affordable housing policy.
“[It’s] an imperfect tool. And it’s not even my favorite tool,” said Commissioner Nick Fish before yesterday's vote. “But... I think in a crisis we should be opportunistic.”
That tool, dubbed the Multiple-Unit Limited Tax Exemption (MULTE), would incentivize residential developers to lease 20 percent of their apartments to low-income renters.
The decision comes at the end of the city’s year-long slog to create and retain affordable housing after passing its “Inclusionary Housing” (IH) policy—a program that requires any new apartment building with 20 or more units to lease a chunk of those units below market rate. (Psst...it's still not very "affordable"). But, instead of spurring a wave of affordable new housing across the city, the policy has nearly ground residential construction to a halt. Hence the “crisis" Fish mentions.
Months before the IH policy went into effect on February 1, 2017, developers wanting to avoid the onerous rule submitted building permits for no less than 19,000 units across the city. Since then? Only 12 buildings (containing a total of 682 units) have applied for new permits from the city’s Bureau of Development Services. In the past, the city fielded permits for between 3,000 to 6,000 new units a year—making 2017's numbers look even more lackluster.
This dramatic drop in permits isn’t unexpected—developers who offer lower rents make less money. The same goes for construction staff, contractors, building managers, and other workers. While the new IH policy comes with a few incentives like tax breaks and waived parking requirements, they clearly haven't been enough to get developers to bite.
Enter MULTE, the older city policy that was replaced by the IH program last year, which essentially turned MULTE's optional incentive program into a requirement. Mayor Ted Wheeler has since suggested the city offer MULTE to the specific developers who rushed to submit building permits before IH went into effect in February 2017.
MULTE is only a temporary attempt to create affordable housing, according to the city, and it's not going to replace the shiny new IH plan. The council hopes this band-aid solution (or, what Wheeler called a “reach back into the pipeline”) will convince those developers to make a slice of their thousands of projected units affordable.
“This will not solve the housing crisis,” Wheeler said before the vote. “But if we want affordability built now, the best place is to look at those projects that are… ready to actually be built, and have some of those units, which could come on as soon as a year from now, be affordable.”
Before voting in favor of the decision, Commissioner Dan Saltzman warned developers: This isn’t a retreat.
“Inclusionary housing is… a bedrock of developing residential housing in Portland. It’s not going to change, and it has to be accepted by the development community as much as complying with a fire code or a building code is," he said. "These are things that are not debatable.”
Comissioner Amanda Fritz was hesitant to support the additional tax break, since the "affordable" units remain out of reach for a majority of Portland's lower-income residents. Fritz left the dais instead of voting yesterday, not wanting to entirely derail the program.
The MULTE tax break still needs the Multnomah County Commission's approval to take effect—a vote that remains up in the air. It's also unclear if developers actually plan on taking the city or county up on the MULTE offer. But at this point, it appears the city doesn’t have many other options.
In the words of Fish: “We think someone’s going to take advantage of this... we hope so."