The score so far for Portland’s new below-market-rate housing mandate: 60 homes

That’s not enough yet to dent the shortage of low-cost homes — but it’s probably too soon to know if we could be doing better.

by Michael Andersen | Sept. 20, 2017

A proposed 89-unit building at SE 17th Avenue and Tenino that would potentially include 35 below-market-rate homes under the city’s new program. Rendering: Myhre Group Architects via Portland Bureau of Development Services.

It’s probably too soon to know if we could do better

Do those low numbers mean the new mandate is malfunctioning? In its report, the city argues that it’s too soon to say and it makes a pretty good case.

  1. At least a few builders do think they can make projects work under the new rules, even in the face of a possible glut. As we reported in February, a few private buildings eligible for the old rules have voluntarily opted into the inclusionary housing program. A few others have been freshly submitted, city economist Tyler Bump said in an email Tuesday, bringing the total to six. Those six buildings are where the 466 new homes (including 60 price-capped homes) are coming from.
  2. Builders continue to work on a few potential plans, too: as of Feb. 1, the city has received 11 “early assistance” requests for developers to have open-ended conversations with city regulators about how to make “inclusionary housing” projects work. That’s far from a guarantee of building — many early assistance meetings go nowhere — but it’s a sign that builders still see potential. “Two are in the Central City and nine are outside the Central City, mostly in the inner neighborhoods, but a little further from the Central City,” the city said in its report.
  3. Because the city rule exempts projects from the new mandate if they include fewer than 20 homes, some predicted a surge of 19-unit buildings. That hasn’t happened, at least not yet. From Feb. 1 to Aug. 1, the city took in 10 applications for 15–to-19-unit buildings, basically in line with past trends. However, if this were going to change, it would make sense if it took a year or two to appear. That’s because it’d depend on landowners realizing that their land isn’t as buildable as it used to be, and demanding less cash for it. Six months may be too soon for this to happen.

So, what can Portlanders conclude about their new affordability program?

Photo: drburtoni.
  1. It seems reasonable to conclude that the current program doesn’t oversubsidize development. If it did, more builders would be opting into it in order to pocket the extra profits.
  2. The current housing backlog creates an opportunity to test tweaks to the program. The next year or so is a one-time chance to temporarily rebalance the program and see what happens. If lots of builders with old “pipeline projects” were take advantage of that rebalancing by opting in to the affordability program, the public would know its incentives had gone too far and could safely be scaled back.
  3. Reducing demand for parking seems to be crucial to the program. One of the last-minute tweaks to the city’s incentive package was to lower auto parking requirements for projects that include below-market-rate homes. According to the city, four of the program’s six new buildings are taking advantage of that. The catch: This incentive is useful only if enough people are willing to pay full price to live in a building without on-site parking. This means that when fewer people demand on-site parking — fewer residents and, just as importantly, fewer real estate investors and lenders — more below-market-rate homes get built.

News & views about how to get more abundant, diverse & affordable housing in PDX. A project of @1000oregon: http://portlandforeveryone.org.

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