Toward More Affordable Housing

By Don MacGillivray

In Portland the local government is scrambling to find ways to alleviate the one year old housing crisis. Developers have built over 24,000 new apartment units in the last few years for people coming to live in Portland, but this just exacerbates the crisis because 85% of these units have market rate rents.

Only 3% of the units are considered affordable. In addition, the average rent for an apartment in Portland is now $1,600 a month. Unfortunately 26,000 affordable housing units are needed for those earning 30% of the median family income (MFI) as calculated by the federal bureau of Housing and Urban Development.

One of the several solutions is the implementation of a mandatory “Inclusionary Zoning” policy that is now know as “Inclusionary Housing.” The name change replaces the confusing and unpopular term of zoning with one that gives attention to the great need for more affordable housing.

Inclusionary Housing is the concept of allowing people with diverse incomes to live in new medium to high density apartment developments by making some of them affordable to middle income renters.

These housing policies can be flexible and made to suit the both the local market and the community and will help create mixed-income neighborhoods, combat displacement, gentrification, and the income segregation of neighborhoods.

In California more than 100 local communities are using inclusionary policies to help increase their amount of affordable housing.

Inclusionary Zoning is allowed in every state except for Texas and Oregon until just this year. In 1999 the State of Oregon passed legislation requested by developers and realtors that banned Inclusionary Zoning due their belief that it would negatively impact their business.

In the “hot” market conditions of today, the construction industry chooses to build only housing for prosperous renters leaving many others struggling to find housing they can afford.

In March of this year, the Oregon Legislature passed a measure (Senate Bill 1533) allowing cities and counties to use Inclusionary Zoning/Housing as a means of making more apartments affordable and inclusive to a greater variety of renters.

Commissioner Dan Saltzman and the Portland Housing Bureau through the Portland resolution 37187 are working to implement this program. A Panel of Housing Experts has worked over the summer to develop a community wide, data driven process to lead to implementation rules agreeable to both developers and housing advocates.

It remains controversial as the legislation includes a variety of bonuses for developers to offset lost revenue from lower rental apartments. Due to the housing crisis The City is the first jurisdiction to implement Inclusionary Housing.

The efforts of the City are commendable, but the development industry remains skeptical and wary of everything that is proposed.

The work of developing a policy involves a great deal of economic modeling to test the viability of the various options, but there are always questions about outcomes. It is suggested that a “real” (built) project be tested in the models to see if it works in a real world situation.

It is unlikely that whatever is decided will be to the satisfaction of everyone. Teams of consultants from David Rosen Associates and ECONorthwest have completed a feasibility analysis of the proposed policies and the results of this work is available on the Bureau of Housing web-pages.

The recommendations from this work were reviewed by the Committee of Experts and released to the public September 19. The Planning and Sustainability Commission will consider these proposals at their hearing on October 11 and in a work session on October 25. The Council is expected to consider the final policy recommendations in December of this year.

In mid September, Commission Saltzman issued a policy statement to have 30% of the units be affordable. The concept under consideration would have 20% of the units in an apartment building affordable with rent based on 80% of the MFI and 10% of the units with rent based on 60% of MFI.

Incentive bonuses suggested for all buildings include: 1) an increase in the size of the building, 2) an exemption from the Construction Excise Tax, 3) a ten year property tax exemption on the affordable units, 4) a waiver of the System Development Charges on the affordable units, 5) an option to pay a fee-in-lieu of providing mandatory units, and 6) an option for credits in exchange for building the affordable units off-site.

In addition to the scale, the required number of affordable units, and other incentives are part of the mix. It is important that the new policy remains economically viable for residential developers. The success of the Inclusionary Housing Policy will help to address skyrocketing rents in Portland by making positive changes in housing development practices of the private sector.

The larger central city apartment buildings are being given the most consideration in this process. Buildings along the neighborhood arterials are likely to be zoned either Commercial Mixed Use 1, with 3 stories, and a height of 35 feet or Commercial Mixed Use 2, with 4-5 stories, and a height of 45-55 feet. The Inclusionary Housing Policy is not likely to affect the streetscape unless the bonus square footage adds a story or two to the proposed three or four story buildings.

For information about the Inclusionary Housing Policy contact Matthew Tschabold, the Equity and Policy Manager with the Portland Housing Bureau or visit the Bureau of Housing web-pages.

Toward More Affordable Housing

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