Building affordable housing not so affordable
The high cost of creating publicly supported affordable housing projects in Portland came into sharper focus over the past week.
On June 1, Oregon Housing and Community Services announced it was recommending grants to nine affordable housing projects in different parts of the state. The state agency that helps fund such projects said the most expensive ones were in Portland. According to the announcement, the costliest was the North Williams Apartments, which is being developed by Bridge Housing for $387,468 per unit. The cheapest outside of Portland was the Claxter Crossing Apartments, being built in Salem by North River Development, which will cost $121,520 per unit.
Then on June 5, Mayor Ted Wheeler unveiled the first new apartments being purchased with the city's affordable housing bond. The building nearing completion at 105th Avenue and East Burnside Street will cost $275,000 per unit. The City Council is expected to approve spending $14.3 million of the voter-approved $258.4 million bond on it this Wednesday.
And on June 7, the Metro Council referred a $652.8 million affordable housing bond to the November general election ballot. The regional government estimates the cost of the new projects it will finance at $253,186 per unit. Preservation and renovation of existing housing is estimated at $225,180 per unit.
There are many reasons why the costs in Portland are so high. For starters, land prices in the city are the highest of anywhere in the state. Construction costs also are high because of the shortage of workers and the number of other projects already underway, in addition to the requirement that contractors pay the equivalent of union wages on publicly funded projects.
The council also has approved a number of goals for city-funded projects that increase costs. They include locating them in desirable areas near transit and other amenities, where land costs are especially high. The council also wants such projects to last up to 100 years, which means they must meet high standards. And the council wants them to include such features as common rooms and open spaces for the residents, and to be energy efficient, all of which increases construction costs even more.
Justifying the costs
Wheeler defended the high construction standards when he appeared at the new East Portland building last Tuesday.
"The life cycle costs of a building have to be considered. If buildings are built on the cheap, the maintenance costs are much higher over time. Things like the roof, siding and heating system have to be replaced every 25 years. But if you build them better to start with, everything lasts longer," Wheeler told the Portland Tribune.
But during his news conference, Wheeler also stressed the importance of passing another measure that will appear on the November ballot. It is an amendment to the Oregon Constitution that will ease a current restriction that prevents Portland from partnering with private businesses and nonprofit organizations on its bond-funded affordable housing projects.
The restriction means that the city must pay all construction costs of the projects and own them when they are finished. This is different from how affordable housing is transitionally funded, which is with governments using other revenue sources — including urban renewal funds — to pay only a portion of project costs.
"If the amendment passes, we can build more than the 1,300 units we've promised the bond will produce," said Wheeler, noting it also will allow Metro to create more units if its bond passes in November, too. Metro says it will preserve or build up to 3,900 units if the amendment passes, but only up to 2,400 units if it fails.
Lower costs, more housing
The bond funds could build even more housing, however. Not every affordable housing developer agrees with Wheeler. The least expensive project recommended for funding by the state is the Gooseberry Apartments, which will be built in Southeast Portland for $116,665 per unit. It is being developed by Relay Resources, a nonprofit with a history of building relatively inexpensive projects in East Portland and other outlying areas.
The project will be built by Home First Development, an affordable housing building company co-founded by Rob Justus. His company also is the builder for the least expensive project recommended for state funding, the Claxter Crossing Apartments project in Salem.
Home First specializes in three- to five-story projects that meet some, but not all, of the city's requirements. The company generally steers away from city-funded projects, however, to avoid complying with all of the requirements that increase costs.
Justus admitted his projects require major maintenance every 20 years or so, but said the city-funded ones do, too.
"It's not true that city-funded project never require work. All buildings do. There's just never been an independent audit that compares ours to theirs," he said.
Justus pitched building a ready-to-purchase development to the Portland Housing Bureau in the past as a pilot project. Former PHB Director Kurt Creager was considering the idea when he was replaced by Wheeler last year. Justus said he has heard nothing from the city about it since then.
But Justus is not without clients. In addition to the Claxter Crossing Apartments, he is on track to build the second-least-expensive project recommended for state funding, the Fisher Road Apartments in Salem for $125,065 a unit. He also is working on an affordable housing project across the river in Vancouver, Washington, that will cost between $115,000 and $120,000 per unit.
"We have plenty of work," Justus said.
Metro refers housing bond
The Metro Council unanimously voted to refer a $652.8 million regional affordable housing bond to the November 2018 ballot on Thursday.
The measure is projected to create up to 2,400 new homes — or up to 3,900 if a proposed amendment to the Oregon Constitution passes to ease an existing prohibition against private businesses partnering with governments on such affordable housing projects.
The Metro measure would create a new affordable housing function for the regional government. All seven council members said the affordable housing crisis is a regionwide issue that demands a regional response.
The vote followed a three-plus hour hearing dominated by supporters of the measure, inlcuding affordable housing advocates, social justice advocates, and public employee union leaders.
The most prominent opponents were two well-known free market advocates, Portland State University associate real estate finance professor Gerard Mildner and John Charles, president of the Cascade Policy Institute. Both said that government-funded housing is an inefficient way to create a limited number of additional homes that are unlikely to make much of a difference.
Metro says the owner of an house with an average assessed value of $250,000 would pay $60 a year for the life of the bond.
You can read a previous Portland Tribune story on the issue at: tinyurl.com/yaxhkg3h.
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