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No Magic Wand

Years in the making, the affordable-housing crisis can't be solved by developers alone.

Housing is the political issue du jour in Oregon. Essentially ignored for at least a decade, it’s now bubbled to the top of state priorities, right up there with fixing public schools and creating jobs in rural Oregon.

“Three years ago, it was jobs, jobs, jobs. Now it’s affordable housing, affordable housing, affordable housing,” says Tom Kemper, executive director of Housing Works, the housing authority for Central Oregon. “Bend is one of the worst markets, but it’s a crisis across the state.”

Housing experts say the state needs to ramp up the current pace of affordable dwelling construction simply to avoid losing ground. The question is: Who is going to build the thousands of new units cities are clamoring for? The state’s housing development community is more than willing to do so — under the right conditions. But without some basic changes to the state’s zoning laws, and new incentives that could shift the affordable-housing movement into high gear, most developers say they can’t include too many affordable units in their plans.

And even with such concessions and policy changes, it could be years before the state makes a dent in the gap between those who need an affordable home and the number available to them. “This is a very complicated problem,” says James Winkler, president of Winkler Development Corp. “You can’t just wave a magic wand and make it go away. We need to create thousands of affordable units at the base level, and support the people who live there with social services and educational opportunities. Very few understand how much certain policies that most of us support are responsible for the problem.”

Myriad factors have played a role in creating the huge gap between Oregonians who need affordable housing and the number of units available to them. In a recent speech, Tina Kotek, speaker of the Oregon House of Representatives, enumerated the convergence of factors that led to the crisis. 

“A perfect storm put us here: Not enough new housing supply was built during the recession, and demand is up because of population growth and an influx of new residents,” she told the audience at the Oregon Leadership Summit in Portland in December. “It’s not as easy to buy a home now, either because of tighter lending requirements or too many people’s credit histories were ruined in the recession. So more people continue to rent — all of which is inhibiting mobility in the market. And then we have very low vacancy rates and wage stagnation. What is being built isn’t affordable workforce housing. This perfect storm has swept across the state — from Portland to Bend to Boardman.”

The situation has become so critical so quickly that, says Kurt Creager, executive director of the Portland Housing Bureau, the city would have to “double or triple” the number of new affordable units it is now building just to maintain its historic affordable housing level of 8% of all units.Escalating rents, driven by historically low vacancy rates across the state, have created a brand-new income group that is losing its housing: working families, many with moderate incomes, who are being pushed farther away from urban centers as they search for housing they can afford.

On top of that, the state’s policy that allows landlords to evict tenants without cause has thrown more folks on the street and taken more affordable units out of play as landlords have raised those rents to market levels. While housing advocates rail against such practices, it’s unlikely the policy could be altered in the face of certain opposition from the landlord lobby.

One actionable issue that has become a symbol of the crisis: Oregon’s statewide ban on inclusionary zoning, a prohibition that prevents local governing bodies from requiring builders to include a certain number of affordable units in their development proposals.

Only one other state has such a law: Texas. To many who are battling to create a better environment for affordable housing, being aligned with Texas is an embarrassment. Prominent members of the state’s building community, including John Russell, Homer Williams and Dike Dame, are onboard for overturning the ban. The latter, Williams & Dame, are moving forward with a new affordable-housing project in the South Waterfront neighborhood.“The ban was always ridiculous,” Russell says, “something forced on us by the homebuilders years ago. It’s time to wake up and get rid of it so we can address this situation. But don’t be fooled: Overturning it isn’t a cure for anything. It’s just one tool in the fight.”

The Oregon legislature tried to eliminate the ban last legislative session but fell short. This year legislative leaders are confident it will be overturned. At a January hearing on affordable housing in East Portland, a packed audience of 350 citizens heard Rep. Alissa Keny-Guyer (D-Portland) promise that this year state representatives would “pass the law instead of passing the buck” and overturn the ban.Former Multnomah County chair Diane Linn agrees with Russell that lifting the ban “will only get us to square one.”

Linn, executive director of the affordable-housing nonprofit Proud Ground, says the inclusionary zoning ban has accelerated the growing affordable-housing gap. Lifting it simply means affordable-housing advocates and builders can start to talk about what incentives will be required to encourage developers to break ground for such units. (Projects that include affordable units are more expensive for developers because of special requirements for the units and the fact that they cannot charge market rates for them. So they either have to jack up the prices of the other units or offset the lower returns with incentives.)

“Once the ban is lifted. we have to put an inclusionary zoning process into place, one that has to work for builders and developers,” she says. “We have to have a formula that defines what affordable means, what a successful project will look like.”

Actions that have been mentioned by multiple sources include:

allowing builders to add an additional above-code floor to projects if they include affordable units;

waiving certain project fees in exchange for inclusion of affordable units

helping builders identify sources of subsidies in exchange for inclusion of affordable units;

rewriting urban zoning codes to allow more multifamily, mixed-use and high-density projects;

offering property tax abatement for projects that include affordable units.

One measure that could spark activity in Portland: creating more multifamily zoning districts so that builders can increase density and number of units.“There’s a lot of single-family zoning within the city. Increasing the amount of multifamily zoning in the city would be a big help,” says Eli Spevak, founder of Orange Splot LLC, a Portland homebuilding company. “It’s a natural market base for affordable housing, but there aren’t many parts of Portland that are zoned for multifamily.”

In addition to such policy changes, and direct subsidies and incentives that builders can include in development proposals, elected officials and housing advocates are working to create more sources of revenues that will support the affordable market.

The city of Portland has established an affordable-housing fund and has begun to seed it with so-called linkage fees charged against Airbnb owners and new businesses that employ mostly low-wage workers. With those revenue streams in place, the city can float bonds to inject more dollars into the fund. That money would be used to subsidize projects dedicated to affordable housing.The key, builders, housing advocates and elected officials agree, is crafting a multipronged, long-term strategy to attack the crisis that utilizes all these tools.

The state has plenty of developers who have been nationally recognized for their affordable-housing projects. Such marquee builders as Gerding Edlen have built thousands of affordable units in recent years in such markets as Seattle and Chicago.In those cities, however, the law requires developers to include affordable units in multi-unit projects. The playing field is level. In Oregon the playing field has been laid out to discourage affordable housing. Without further incentives and subsidies, and basic policy changes at the state level, developers can’t make their projects work out financially if they offer units below market rates, Winkler says.

“Do developers have a responsibility to address the affordable-housing crisis in this state? Yes, we do,” says Winkler. “But so do our educators, scientists, politicians, businesses — all people have a responsibility to make their community better. The problem can’t be delegated excessively to developers. This is a shared obligation.”

 

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