City to implement construction excise tax
In an effort to raise money for affordable housing programs, the Newberg City Council has approved a construction excise tax that will take effect on Jan. 2.
The tax, approved at the Nov. 2 council meeting, would affect new projects in Newberg and fund affordable housing, encouraging builders to pursue affordable-to-the-consumer projects. Legislation passed in Salem in 2016 spells out how the money may be spent and the money collected from the up to 1% tax will create incentives for builders to build affordable housing. Some of the money brought in from the tax could potentially go to Oregon Housing Community Services, down payment assistance programs and other avenues that seek to create and promote affordable housing.
"The CET was discussed at three separate council meetings and came via a recommendation from the City of Newberg's Affordable Housing Trust Fund Commission," Mayor Rick Rogers wrote in an email. "Prior to that, a citizen's group, Housing Newberg, presented the concept some three (or more) years ago. The legislation that allowed the CET was Senate Bill 1533, passed in 2016."
Rogers said the council received plenty of feedback from the community prior to its approval of the tax. A handful of developers and realtors spoke against the ordinance, with affordable housing advocates speaking in favor of the proposal. The Portland Home Builders Association encouraged modifications to the proposal to make it more palatable, which Rogers said included a change that will allow for later payment of system development charges, which will reduce carrying costs for builders.
"Affordable housing is a vexing problem with no simple solution," Rogers explained. "Unfortunately, this means no 'silver bullet' or 'magic wand' exists that will solve the problem in Newberg, Oregon, or many other parts of the country. The CET becomes a tool that we hope can be used to incentivize builders to creatively construct affordable units. In exchange for affordability, the CET can provide financial incentives (SDC waivers and the like).
"Bend has had a program for over 10 years and they have managed to construct quite a stock of affordable units even during their unprecedented boom. We hope this tool will allow us to do the same."
The council chose to place a sunset clause on the legislation, which was characterized as a "prudent" decision. If, in five years, no significant change in the housing stock has occurred, the future council will have the choice to end the CET if they see fit.
Opponents of the decision argued against the tax before the council and some of what ended up in the final decision came as a concession to their concerns. Rogers also serves as executive director of the Newberg affiliate of Habitat for Humanity, so he's been around his share of developers.
"I have heard some of that negative feedback from some builders, who say that it just adds to the cost of the house, which will be passed on to the homeowner and made less affordable in the end," Rogers said prior to the council's decision. "The counter-argument to that is that money brought in by this will allow the city to provide incentives to developers to build more affordable properties in the first place."
For more information on the CET and how it will impact local projects, visit https://www.newbergoregon.gov/pc/page/construction-excise-tax.
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