Milwaukie City Council enacts 1 percent tax on new construction
The Milwaukie City Council on Nov. 21 approved an ordinance of a 1 percent construction excise tax on new or additions of residential, commercial and industrial development over $100,000 in permit value to fund affordable housing incentives.
"We've just taken our first really concrete step toward housing affordability," Mayor Mark Gamba said after the unanimous vote.
This fund would assist in developing additional supply of affordable housing units and assist community economic development efforts toward curbing commercial gentrification. Milwaukie has been negotiating with affordable-housing developers in Portland in an attempt to attract them to town, said Community Development Manager Alma Flores.
"Until then, we still will have a crisis," Flores said.
In April 2016, the Milwaukie City Council adopted an ordinance to declare a housing emergency in the city in response to the regional housing shortage. On April 18, councilors extended the housing emergency by six months, but soon before the Nov. 21 meeting, it was brought to the city's attention that the declaration expired Oct. 18.
City Manager Ann Ober said that City Council will soon consider a new resolution extending the declaration of a housing emergency because the emergency still exists. Ober said that the 90-day rule for no-cause evictions remains in effect because the authority to require additional eviction notice is consistent with a declaration of a housing emergency, but is not dependent on it.
"Council must conduct a hearing to reconsider the protections if the vacancy rate rises above 4 percent or in April 2018, whichever happens first," Ober said. "The rental vacancy rate for the metropolitan region rose above 6 percent for both the second and third quarters of 2017. This means Milwaukie city staff will go before Council in December to conduct the hearing."
Milwaukie city councilors recently have expanded Enterprise and Vertical Housing Tax zones to waive taxes on new projects to incentivize additional development in order to increase the supply of housing and mixed-use projects. In 2015, Milwaukie adopted commercial Bancroft financing so that certain developers could pay off system development charges in installments.
"Additional tools and resources are still needed to mitigate the impacts of increasing rents and home prices to maintain affordability across all income levels, particularly to help fund housing developers to provide much-needed affordable housing options to our residents," Flores said.
After 4 percent of the collected excise tax goes to administration of the tax, 50 percent of the taxes will go to developer incentives to build low-income housing.
The other 50 percent of the residual taxes will go to various programs, depending on whether it's being collected from residential or commercial/industrial development. From commercial/industrial developers, the remaining 50 percent will go to economic development programming citywide, with emphasis placed on areas that the city has adopted plans in place, like the North Milwaukie Industrial Area Plan. In residential developments, the remaining 50 percent would be broken down as follows: 15 percent for homeownership programs like down payment assistance and 35 percent for the city's affordable-housing-related programs and incentives such as fee waivers.
Senate Bill 1533B, passed in 2016, allowed Milwaukie to enact the tax.
Mayor Mark Gamba said that 1533A, the portion of the bill allowing cities to require a portion of new construction be set aside for affordable housing, wasn't strong enough to make it worth pursuing.