Wondering About the State of Housing in Portland?

If you're like us, you're always wondering about the state of housing in Portland. The City surprised us this month with an early Christmas present in the form of it's "State of Housing in Portland" report. This 158-page tome by the Portland Housing Bureau covers everything from demographics and affordability to neighborhood profiles. We're not typically in the habit of regifting, but this year we're making an exception! Enjoy!

State of Housing in Portland: 2018 Report

The City of Portland released its State of Housing in Portland report for 2018 today, which shows that average rent growth in the city was just 2% in the second quarter of 2018, down from an average rate of 8-9% in 2015. Additional report highlights include:

• Vacancy and rent concession rates were above the 7 year average in 2016 and 2017
• The median home price rose 58% between 2011 and 2017
• Racial diversity in the city is increasing in almost every neighborhood except MLK-Alberta, the Interstate Corridor, and St. Johns
• Central City, MLK-Alberta, and Lents-Foster were the fastest growing neighborhoods between 2011 and 2016
• Northwest, the Central City, and South Portland-Marquam Hill saw the highest level of household growth
• Portland added 7,300 new housing units in 2017 - 91% were in multifamily buildings

The report also includes information on what neighborhoods are affordable to residents based on race, family size, and income levels. Read more.

RentCafe | Yardi Matrix| Portland Rents Up 3.1% in 2018

In the latest analysis of Portland metro rents, Yardi Matrix and RentCafe report the areas rents increased 3.1% in 2018--an exact match with the national average. Read more.

Report: Oregon House Speaker to Push For Statewide Rent Control

The Portland Tribune is reporting that Oregon House Speaker Tina Kotek says the 2019 Legislature will consider a statewide rent control and tenant protection program. Read more.

Important Tax Roundup for Multifamily Developers and Owners

Assessors Directed to Assess New Construction as if Stabilized
County assessors have been directed by the Oregon Department of Revenue to value newly completed income properties, including multifamily, at stabilized occupancy regardless of where the property is in lease-up.

Assessors are starting the income approach assuming 95% occupancy.

Assessors are assuming that concessions are temporary, and in many cases are using rents from the property’s website displaying asking rents -- not effective rents. Assessors are using low expense ratios—failing to recognize that over typical investment period expenses will increase as properties mature. For newly completed properties these are aggressively low in our opinion.

For 2018 and 2019 it will be critical to monitor assessors’ valuations as the multifamily investment market has changed from the last valuation cycle for newly completed properties with a 1-1-17 valuation date.

For 2018 assessments being mailed in November, the appeal deadline will be December 31, 2018.

New Construction Exemption Requirements
The Oregon Legislature passed legislation providing an exemption of newly constructed improvements for up to two years. The requirements are as follows:

1. The property is income-producing;
2. The property is under construction as of January 1 for the year in which the exemption is sought;
3. There has been no occupancy or income prior to that date; and
4. Construction is expected to take more than one year from commencement.

Commencement of construction is normally interpreted to be the pouring of foundation for the vertical building. Demolition and land preparation do not qualify as the commencement of construction.

The application deadline is April 1 for the tax year in which the exemption is sought. Timing is important to maximize the benefit of the exemption. Development should commence early in the calendar year. If you commence construction late in the calendar year you are not taking full advantage of the exemption. Please remember that this exemption applies to all types of income producing properties.

Christopher K. Robinson is an attorney specializing in property tax issues. He can be reached by phone at (503) 635-9330 or by e-mail at chris@ckrlaw-proptax.com.

Tina Kotek Drafting Legislation to Ban Single Family Zoning in Oregon Cities

The Willamette Week reports that Oregon Speaker of the House Tina Kotek is working to draft a proposal that would require cities with more than 10,000 people within an urban growth boundary to allow up to four homes to be built on land zoned for single family housing. Kotek's plan would give cities 16 months to come up with a plan to allow for duplexes, triplexes, four-plexes, and housing clusters. Portland has been working to pass a similar law, known as the Residential Infill Project, for the past few years. The vote on that plan is scheduled for Summer 2019. A recent report from Seattle finds that single family zoning in cities with high levels of population growth contributes to economic and racial segregation. Read more.

Interview with Liz Abauf, Prosper Portland Development Team Manager

Liz Abauf of Prosper Portland discusses recent developments with the Broadway Corridor, Lents, and Alberta area projects. Prosper Portland was previously known as the Portland Development Commission. Prosper Portland serves as the redevelopment and economic development agency for the City of Portland.

Sold! 43 Units in Olympia, Washington

Campus Lofts was an adaptive reuse conversion.  Originally an office building adjacent to the capitol mall, Campus Lofts was converted into multifamily in 2017 under the City of Olympia’s community renewal program. The conversion also included the addition of townhome units with tuck-under parking. The asset features plentiful off-street parking, in-unit washer/dryer, multiple lounge areas, and modern interior finishes.

The unique conversion and newer construction - which included abated property taxes for 8 years - made Campus Lofts an attractive investment opportunity. The lease of the property and unstabilized operations—as well as the unknown market conditions in Olympia—was challenging to investors unfamiliar with the area. HFO positioned Campus Lofts as an opportunity to get in on the ground floor of multifamily housing in the state capitol’s emerging urban core.

Multifamily Tax Rates, Inclusionary Zoning, Opportunity Zones

Attorney Chris Robinson discusses the tax rates on newly completed multifamily properties in Gresham and Fairview. Recently adopted legislation allowing cities to adopt change property ratios which are resulting in unique tax issues for new properties.

Mr. Robinson also discusses inclusionary zoning. His prediction: the city realizes it has not worked and will be making changes.

Finally, Mr. Robinson discusses federal opportunity zones and the attempt to encourage new development in underdeveloped areas.

Apartment List: Millennial Renters Are Putting off Home Buying in the Near Term

A new study by Apartment List finds that while 90% of millennial renters would like to purchase a home, the majority are still struggling to afford a down payment. According to the study, 48% of millennial renters have no money saved for a down payment, and two-thirds would require at least two decades to save enough for a 20% down payment on a median-priced condo. Student loan debt is a major contributor to the lack of savings among the millennial generation. Only 12.1% of millennials who have a college degree and student loan debt will able to save enough for a 20% down payment within the next five years. Read more.

Sold! 89 Units in Aloha, Oregon

HFO is pleased to announce the sale of the Susan Marie Apartments. Susan Marie (1978) is a low-density garden-court apartment community. Its strong location near Aloha high school and the diverse unit mix made it an attractive investment opportunity.

Susan Marie was owned by the same owner/manager Susan Marie for more than 10 years. Although well maintained, the asset was purchased for its value-add opportunity. A portion of the units had been updated with washer/dryers. The new owner plans to upgrade unit interiors to market standards.

Landlords and Tenants Join Forces to Sue City Over Mandatory Rental Inspections

Landlords and tenants in Seattle have joined in a class action lawsuit against the city's ordinance requiring inspection of units. Tenants object to the inspections on invasion of privacy grounds, while landlords object to the City's fines for inspection delays. The lawsuit wants the city to obtain either tenant consent or a warrant.

Read the Institute for Justice news release on the lawsuit here

Read Seattle's Rental Registration and Inspection Code here

Read the King County Superior Court Complaint filed against the City of Seattle

Sold! 172 Units in NE Portland, Oregon

HFO is pleased to announce the sale of the Binford Garden Townhomes. This unique, 1940s-vintage, low-density community is located near the Rose City Golf Course in SE Portland.

The property offers direct access to Portland’s downtown and eastside neighborhoods. Approximately 80% of the Binford Garden Townhomes are two-story townhomes averaging 1,057 sq. ft. 

The property had been owner-managed for occupancy for more than 35 years. This long-term, owner management required strategic positioning for sale. Binford Gardens had to be marketed using projected operations because costs not associated with the property appeared in historical operations.

The HFO team also helped property owners overcome additional challenges that included its vintage. Unlike most assets of similar age, Binford Garden’s mechanical systems—including heat and electrical systems—were all original. HFO effectively demonstrated the opportunity in rent upside available to a new owner through market-rate management and value-add mechanical updates.

The City of Portland's (draft) 2019 Legislative Agenda

The City of Portland released its draft 2019 legislative agenda on November 14th.  The Portland Mercury reported that only a single town hall meeting on the agenda was held -- on November 27th.

There are a number of issues the city will be lobbying for at the state level relating to housing. They include:

• Establishment of a "just-cause eviction standard"
• Advocacy of rent control
• Funding tax exemption for developers who include affordable units in their projects
• Funding for social services for newly housed people

A final version of the agenda is due to be adopted on December 19th.