City Council – Montavilla News

On January 31st, Portland City Council voted to adopt updates to the City’s Inclusionary Housing Code that promote the financial viability of multifamily housing developments offering regulated units for people making at or below the 60% median family income (MFI). The new rules, going into effect on March 1st with Multnomah County’s approval, will expand deeper property tax exemptions for projects beyond Portland’s Central City and will now include Montavilla.

Portland’s Inclusionary Housing rules went into effect in 2017. This program requires the building to reserve a percentage of units for income-constrained residents when a new development offers more than 19 residences. Projects could accomplish this obligation by providing at least 20% of units at an affordable rate for renters earning 80% MFI or offering 10% of units at an affordable rate for renters earning 60% MFI. Based on 2023 numbers, a one-bedroom apartment would cost up to $1,269 monthly for a 60% MFI renter or $1,693 for an 80% MFI renter. This amount is adjusted annually based on the Department of Housing and Urban Development’s (HUD) calculations.

_{City of Portland graphic showing the expanded area for expanded incentives}

To incentivize developers to choose the 60% MFI option, Portland offers a 10-year property tax exemption for affordable units targeting those renters. Additionally, builders in the Central City received a tax break on all units in the building if they reserve at least 10% for 60% MFI renters. City Council’s action will extend the Downtown tax incentive to higher-rent submarkets outside the Central City, such as Slabtown and the inner Eastside commercial corridors. Montavilla is the easternmost community to receive this expanded development incentive, and its inclusion could spur more mixed-income multifamily construction in the neighborhood.

Officials designed the ten-year property tax exemption to offset the lost revenue from Inclusionary Housing units, and the expanded discount for all housing units could be the catalyst to allow more buildings to break ground. Higher interest rates, expensive land, and rising construction costs have made numerous Portland developments financially unfeasible. A state-mandated Housing Needs Analysis identified the demand for approximately 120,000 more housing units in Portland over the next 20 years, but current conditions have slowed construction. This Inclusionary Housing update could be what the housing market needs to build more homes.

*_{Slide from Portland City Council presentation of the proposed changes to Inclusionary Housing}*

Multnomah County has to agree to the additional loss of property tax revenue before the new rules can take effect. Developments in the building permit process or under construction can opt into this new rule after March 1st. Additionally, the City temporarily lifted its forgone property tax revenue cap for six years, allowing as many projects as possible to take advantage of this new rule and putting Portland back on track to meeting housing needs.

Jacob Loeb

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Today, a presentation at Portland City Council revealed a potential new tenant at 8037 SE Stark Street. The presenter explained that a group of veterinarians intended to create an urgent-care veterinary clinic in the corner shopfront. However, required site improvements could diminish or cancel their plans. This project served as one example in the presentation to support a temporary suspension of nonconforming upgrade requirements.

In the City Council AM Session on Wednesday, June 23rd, Matt Wickstrom with the Bureau of Development Services (BDS) shared a slide deck endorsing the temporary regulatory changes. The proposal seeks to remove the nonconforming upgrade burden on tenants during a post-COVID-19 recovery timeframe. Currently, on projects costing over $306,000, the applicant must spend up to ten percent of the project’s valuation on improving the property to current zoning requirements. Nonconforming upgrades trigger on existing developments where a tenant proposes an alteration or renovations, but site features no longer comply with city standards. These fees can sometimes stifle businesses attempting to fill empty commercial properties as the project costs can increase beyond what their budget will allow. Older buildings are most susceptible to this type of hidden development cost due to the number of regulatory changes made over time.

The proposal would exempt projects from being evaluated for nonconforming improvements until March 21st, 2023. After that date, city staff expects Portland’s economy will have recovered. However, the proposal doesn’t consider project size or the applicant’s ability to pay for the upgrades. As a result, larger projects could slip through without meeting site standards, denying overlooked communities the neighborhood enhancements these rules were designed to provide. Example improvements include tree planting, landscaping, and bicycle parking around the site. Commissioner Jo Ann Hardesty expressed reservations over passing this moratorium, fearing that large developers would take the opportunity to shirk their social responsibility to provide projects that meet the cities livability standards.

Nonconforming Upgrades include:

Landscaping – particularly parking lot landscaping
Screening – separation between differently zoned sites
On-site pedestrian circulation
Bicycle parking
Trees

An amendment to this proposal delayed the final vote until next week. However, it is likely to pass when it next comes to City Council. The passing of this proposal will clear the way for the urgent-care veterinary clinic to proceed unencumbered by the costs of providing parking lot landscaping. Look for updates to this project in the coming months after next week’s vote.