A national smart growth advocacy organization with a local presence is accusing a Portland affordable housing program of slowing the development of all kinds of apartments in the city.
Up for Growth has taken aim at the Inclusionary Housing policy that requires all apartment buildings with more than 20 units to make a certain number affordable to households earning 60% or less of the area median family income. The policy went into effect on Feb. 1, 2017.
On April 25, Up for Growth posted a detailed report on its website charging the policy has made it unreasonably hard to finance such projects and resulted in a sharp decline in the number of permit applications currently being submitted for them. The report, titled "The Cautionary Tale of Portland's Inclusionary Housing Policy," accused the Portland Housing Bureau of misrepresenting permit figures to obscure the problem. It attacks a recent Housing Bureau posting that said 3,913 new apartments of all kinds had been built since the policy took effect.
"The bottom-line number touted on the City of Portland's website — 3,913 units created under the new policy — may seem substantial in a vacuum. However, the city's approach to measurement is fundamentally flawed and misleading," said the report, which includes charts and graphs, and cites statistics showing that the number of permit applications has dropped 64 percent since 2017 and is now near historically low levels.
"In reality, Portland's inclusionary housing policy has forced the city to fall even further behind in meeting its housing needs — both affordable and market rate. A city and region growing as rapidly as Portland can ill-afford to fall even further behind in meeting its housing goals," said the report, co-written by Up for Growth Director Mike Kingsella and researcher Noel Johnson.
The Portland Housing Bureau counters by accusing Up for Growth of misrepresenting the figures. It said their report does not account for the fact that many developers "front-loaded" the permitting system before the policy took effect with applications for a record 19,000 apartments to avoid having to include the affordable units.
"Without this context that there was roughly four to five years' worth of average development moving through the pipeline, the statements about declines in permitting are misleading," said Housing Bureau spokeswoman Martha Calhoon.
The bureau also cites U.S. Housing and Urban Development figures showing that apartment construction has slowed down throughout the Portland region in recent years, a trend blamed on factors ranging from rising interest rates to increasing construction costs.
"The authors' findings also ignore broader trends in the multifamily residential development market," Calhoon said.
Policy up for review
Portland economist Joe Cortright has been following the debate closely and believes the evidence shows the permit applications have now slowed more than the two-year-old surge can account for.
Cortright admits council approval of the policy prompted a surge in permit applications before it took effect. That resulted in a temporary increase in the number of permits working their way through the approval process over the past two years. But new applications are down significantly, Cortright said, which means few additional apartments will be under construction within a few years.
"After the artificial bump, permits are lagging," said Cortright, who serves on an Up for Growth advisory committee but also runs City Observatory, an independent economic blog on such issues. Cortright posted his analysis of the policy on his blog on May 13. It is titled "Inclusionary Zoning's Wile E. Coyote moment."
As Cortright explains, "As you know from the Warner Brothers cartoon, the Coyote can go wildly charging off a cliff, and keep going forward for some time before he looks down, and then discovers there's no longer any ground beneath him."
You can read Cortright's analysis here.
The flap has erupted as Mayor Ted Wheeler is requesting $150,000 for the Portland Housing Bureau in his proposed budget for the next fiscal year for a market analysis on whether the policy should be adjusted.
"I want an independent outside economics firm to do an independent analysis of the inclusionary housing program and give us a no-holds-barred review of that program. I've always said, if the program needs to be trued, if it needs to be changed in any way, I'm certainly open to that," Wheeler told the Portland Tribune editorial board last week.
National organization, local analysis
Up for Growth is a national nonprofit organization that describes itself as advocating for accessible and affordable housing.
It supports public policies encouraging residential development in urban areas, meaning apartments in cities instead of single-family homes in suburbs.
The organization commissioned and released an ECONorthwest study last year documenting housing underproduction in Oregon and California since the end of the Great Recession. It included a focus on Portland.
"We need a Marshall Plan for housing," ECONorthwest partner Mike Wilkerson said when the study was released at an event hosted by Up for Growth and its local partner Oregon Smart Growth at the Mission Theater in Northwest Portland on Oct. 16.
Another local connection is Clyde Holland, CEO and chairman of the Vancouver-based Holland Development Group, who serves on the Up for Growth board of directors. Holland Development has built numerous apartment projects in the Portland region, including several at Orenco Station in Hillsboro, the region's premiere transit-oriented development.
During an interview in his Vancouver office, Holland said he supports state, regional and local land use policies encouraging more urban development to fight climate change and preserve farm and forest lands. And, Holland said, he is building projects in the city with affordable units.
But Holland said the Inclusionary Housing policy is increasing overall housing costs because the rents in the other units have to be raised to subsidize those in the affordable units. In a recent Portland project, rents in the non-affordable apartments had to be raised 12.3% higher to make it pencil out, he said.
Holland also said the policy already is prompting national financiers to pull back on their support for future Portland projects, especially with the city and state rent control policies that also are being enacted. Financiers won't consider projects where developers and owners have trouble guaranteeing they can also cover costs, Holland said.
"We're at an impasse. If you want more housing, it's got to be a good deal for all the partners, including the financiers who say what's feasible," Holland said.
Wheeler, who oversees the housing bureau, was a featured speaker at the Portland Up for Growth chapter's event where the ECONorthwest analysis of local housing trends was released.
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