Newberg struggles to find affordable housing solution
One might think that affordable housing is a simple concept and all that is needed is to construct smaller homes that people can afford. This thinking might work in a perfect world, but instead the reality is complex and includes a web of legalities, land and zoning issues, combined with the need for profit.
Housing Newberg is a commission comprised of 38 community members who want to solve Newberg's growing housing problems. The commission gathered eight times from October 2016 to October 2017 in the attempt to resolve these issues and have drawn information from research and studies to discern the lay of the land.
"For Newberg residents aged 16 and above, 6,500 people wake up every morning and go to work outside of Newberg, and 5,500 people come into Newberg to work every day. If you live and work in Newberg, you make much less than if you lived in Newberg and go someplace else to work. Or if you live outside of Newberg and commute into Newberg to work, you make more. That is what the data says," Newberg Community Developer Director Doug Rux said, basing his comments on a 2012 study.
The problem is that too many of those who work in Newberg cannot afford to live in Newberg and too many people are commuting from far away to work here.
"Because of this, we are losing too many qualified employees. In losing employees, we are losing community," as stated in a Housing Newberg proposal presented before the Newberg City Council in December.
Affordability is defined in different ways; the commission aligns Newberg with Housing and Urban Development's Portland metropolitan statistical area (MSA) definitions.
The reality is that the definition of affordable according to HUD does not help the housing crisis in Newberg, as it is defined as, "A family at 80 percent of median income not spending more than 30 percent of their income on housing."
HUD's Portland area average median income is $74,700 and does not reflect the income reality in Newberg, which the commission says is around 17 percent less. This means that a family of four would need around $59,000 in income to be at 80 percent of the area median income. In short, a mortgage cannot be in excess of $250,000 with payment and utilities not to exceed $1,495 per month.
The quandary is that developers are building few $250,000 homes or other dwellings in Newberg.
In the meantime, Senate Bill 1051 passed in the last session of the Legislature. The bill is a mandate for cities with a population of more than 5,000. SB 1051 uses the figure of 60 percent of the area median income instead of the 80 percent figure to classify a development or property as affordable housing. This changes the numbers from $59,000 for a family of four to $45,000 and not exceed $1,125 a month for payment and utilities. It also decreases the allowable asking price for the home.
Yet, the commission and the city use the 80 percent data for their analysis.
To complicate things further, not only do the prices of homes need to drop, the developers are required to keep the affordable housing units for 60 years under SB 1051. If they sell the units, the new owners will need to honor the bill's intent as well. Developers do not want to do this mainly because of a reduction in profits and as a result, the developers will not want to build affordable housing. The commission is looking for incentives to encourage developers to build affordable housing in Newberg.
The real dilemma is that the developers are building houses that are selling for $400,000 or more, twice the amount of what many people can afford.
"What increased substantially is the land cost and infrastructure costs and the developers responded with building bigger and bigger homes to make a larger profit. People are not building the 1,100- to 1,200-square-foot homes anymore," Rux said.
In the attempt to wade through the complex web of legalities, smaller lot sizes and higher prices, the commission produced several possible solutions and one of them is to impose a construction excise tax.
"To attract developers to want to build affordable housing, there are questions in the city as how to do that," he said. "One is construction excise tax (CET). We can approach developers and possibly ask the developers to opt out of paying the excise tax, if they comply with the 60 years."
In 2016, the Legislature passed SB 1533B, which authorized cities and counties to pass a construction excise tax as a means to provide funding for affordable housing, either through direct expenditure or through incentives.
Setbacks in affordable housing continue to increase while the commission plays catch up with new legislation and examines realistic and possible solutions. Accessory dwelling units, zone changes, narrower streets, annexations, subsidized work and living spaces are a few options that the commission is considering for the growing problem of affordable housing in Newberg. These options have been presented and the council is evaluating those options.