The primary focus of this meeting lies in the presentation of the Inclusionary Housing (IH) Working Group Recommendations, a cost comparison analysis, a local policy impact analysis, and a discussion on recommendations to address housing feasibility issues.
In the spotlight is the city's IH policy, which has faced scrutiny since its initiation in 2017. A specialized work group, convened last fall, was charged with examining the efficacy of this policy. Members of this group, who hail from a variety of backgrounds, have voiced concerns about the city's alleged overestimation of the number of housing units created through the policy.
As the Portland Business Journal uncovered in December 2022:
...the Portland Housing Bureau's (PHB) claim of having assisted an estimated 891 people living in IH units and having another 1,250 people on the waiting list for IH units under construction was significantly inflated.
The reality, as the work group discovered, was that the actual number of people in private developments was significantly lower, at 587. An additional 576 were headed for units still under construction. These revised figures were obtained via a copy of corrected PHB data, suggesting that the city combined private and affordable projects to inflate the total number of people being helped by the IH.
With a need for at least 23,000 additional housing units to cater to low and moderate-income households, Portland's housing challenge is daunting. The PHB's Inclusionary Housing Program is aimed at fulfilling this need by promoting economically diverse neighborhoods and housing affordability.
Nonetheless, the city’s budget office estimates the cost of constructing 20,000 affordable housing units to be a whopping $9.8 billion. The City of Portland's contribution would be $3 billion, based on the current rate of $150,000 per unit. This fiscal challenge, coupled with the perceived inefficiency of the IH, indicates that the upcoming work session will be a pivotal event in shaping Portland’s future housing landscape.Whether you're a concerned citizen, a housing developer, or simply interested in the future of Portland, this work session is an important opportunity to understand and engage in the city's housing strategy. Be sure to mark your calendars for this critical discussion on Portland's housing crisis.
Additional Reading:
As Dr. Gerard Mildner wrote today:
Since implementation of the city's IH (a/k/a IZ or inclusionary zoning) policy, production of multi-family housing in Multnomah County has collapsed.
Annual Multi-Family Housing Units Permitted, Multnomah County
2013 3,004
2014 4,226
2015 3,750
2016 4,133 IZ Legislation Passed
2017 6,217 IZ Grandfather Date
2018 5,344
2019 5,165 IZ Grandfathered Units Built
2020 2,024
2021 2,835
2022 1,944
Establishing cause and effect is complicated because the city allowed development proposals that were initiated by February, 2017, to be exempted from the IZ rules. Once those grandfathered units were completed, multi-family housing production in the city fell dramatically. In effect, the IZ program has become a tax on housing development, with predictable results.
Details on the consultants' report can be found here
In slide 41, the consultants found that the residual land value of a housing development fell from $100 per square foot to $39 per square foot, meaning that housing developers under IZ cannot compete with other land uses for development sites. Many developers have chosen projects of 19 units or less to avoid this requirement.
In slide 32, the consultants found that the IZ rules are particularly onerous in high and medium rent neighborhoods (where 1-bedroom rents exceed $1,800). In lower rent neighborhoods, the required discounts in rents are above market rents (meaning no cost of compliance). Unfortunately, those rents rarely justify new construction.
The policy shows some potential for producing subsidized units with Type 1 construction (ie, above 5 stories with steel and concrete materials), provided the developer is able to receive a 10-year property tax abatement.
Of course, Type 1 construction is the most expensive form of development. In slide 10, the consultants find that type of construction can produce units at $493,000 per unit, while Type 4 construction (3-4 stories of wood construction over a concrete podium) produces units at $422,000, and 2-story construction with either tuck-under parking or surface parking can produce units at $287,000 or $302,000 per unit.
Mayor Ted Wheeler has pledged to scrap inclusionary zoning if it's not working. (June, 2023)
Developers we spoke with say it's not working. (July, 2023)
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