Developers could build three stories higher in Portland’s central city if they add some affordable housing to their project or pay an offsetting fee, under a proposal presented to the City Council on Tuesday.

City officials figure the new “density bonus” could yield 800 to 1,300 more affordable apartment units over the next 20 years, or generate $120 million to $200 million so others can build such units.

“I am frustrated that we are not capturing an adequate share of new private development that’s affordable,” said Commissioner Dan Saltzman, who oversees the Portland Housing Bureau. “We are not getting there with our public programs.”

Providing more incentives for developers could help build the city’s affordable housing stock, now in short supply, Saltzman said.

The city housing and planning bureaus proposed that developers could get the extra three floors by providing some apartment units affordable to people earning 80 percent of the median family income — or $58,800 for a family of four, $41,200 for an individual. The units must be maintained at that affordability level for 60 years.

For developers who choose to pay a fee in lieu of building the affordable housing, funds would go to the city’s Housing Investment Fund. That money would be earmarked for lower-income people earning 60 percent of median family income.

Saltzman noted there is a bit of a “war” over what income groups to support from the policy, which could prove a sticking point.

Commissioners Nick Fish and Amanda Fritz stressed the need to house the neediest groups.

“We know where the crushing need is,” said Fish, and that’s people earning 0 to 30 percent of median family income. Many of those people are now homeless, living in cars or other nontraditional housing.

Fritz cautioned that providing units to those earning 80 percent of the median will exclude many people of color earning lower amounts, making the central city “more white.”

The two bureaus hired consultants Economic & Planning Systems Inc. and Otak to evaluate density bonuses. The consultants met in two round-table discussions with local developers, and concluded that the system should work in the central city if done properly.

They advised pruning some of the city’s existing incentives that allow developers to exceed ordinary height limits, which include 18 density bonus categories and six categories that allow the transfer of density from one building to another.

For instance, in the 1980s, the city allowed developers to add up to three stories if they built downtown residential projects, at a time when the city was trying to attract residents to the central city. That worked well, but now planners say that incentive is no longer needed, along with several of the other ones.

Some of those, such as the density bonus adding bike lockers or ecoroofs, “are pretty sweet deals,” said Joe Zehnder, chief city planner.

Fritz suggested the city should simply require ecoroofs on all new buildings with flat roofs.

The two bureaus recommend pruning down the list so that affordable housing becomes the top priority for density bonuses. They also want to strengthen density transfers for buildings doing historic renovations and providing open space.

The city hopes to structure its system so it’s a better deal for developers to build the housing, because it can then tap their expertise. But developers may find building or managing affordable units is out of their area of expertise, or too much hassle.

In six other jurisdictions that have such density bonuses, it’s more common for developers to choose payments in lieu of building the housing, said David Schwartz, a Denver consultant with Economic & Planning Systems.

“It’s an unfortunate reality, but that is the case in most of these communities,” Schwartz said.

Those communities are Seattle, Denver, Austin, Chicago, Anaheim and Arlington County, Virginia.

In a typical development, a project initially limited to four stories could go up to seven stories, by including nine to 36 affordable units. A commercial developer could get the same added density by putting money into the fund.

The looming debate over what income levels to target could be a repeat of a recent fight over exempting developers from paying Systems Development Charges if they build middle-income housing in Old Town/Chinatown. Saltzman and Mayor Charlie Hales, who won that fight, supporting the idea of having more middle-income residents in an area now dominated by low-income people. Fish and Fritz and many low-income housing advocates resisted the idea, preferring to reserve the tax breaks for poorer people.

The housing and planning bureaus recommended targeting people earning 80 percent of median income sector, because more units can be built that way, Zehnder said.

If the city targets units for people with lower incomes, fewer units could be built.

Portland has a growing affordable housing crisis. It projects the need for 24,000 additional units in the next two decades just for those earning 50 percent to 80 percent of median income.

An additional 800 to 1,300 units could make a dent in the problem, supplemented with other efforts and financing streams. Saltzman said his staff are working on a proposal to rework the city’s property tax abatement system, another one of the city’s tools to get more affordable housing.

“Looking at who benefits is important as you go through this process,” said André Baugh, chairman of the Planning and Sustainability Commission.

However, he added, “You’re not going to solve the problem with this. It’s one more tool.”

What’s next?

The City Council will hold a hearing on the density bonus idea on July 9.

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