Hoping to add affordable apartments for families, County agrees to change tax program

November 8, 2018

Chair Deborah Kafoury at the Board of Commissioners meeting Nov. 8, 2018.
Taking another stand against the region’s housing crisis, Multnomah County is joining with Portland to adjust a tax incentive for housing construction so it produces more apartments for families and others struggling to find affordable places to live.

Generally, the City of Portland’s Multiple Unit Limited Tax Exemption (MULTE) program awards 10-year exemptions on property taxes to housing developments that meet basic affordability requirements.

The program was expanded last year to help support Portland’s inclusionary housing mandate. Under that mandate, projects with at least 20 units must set aside at least one-fifth of those units for families earning less than the median income.

To pay for exemptions that would help offset developers’ costs, Portland and the County agreed last year to forgo up to $15 million in tax revenue over a rolling five-year period.  

The latest changes to the tax program — approved 4-0 by the Board of Commissioners on Thursday, with a Portland City Council vote to follow — won’t make any new revenue available.

Instead, the changes will adjust the pool of projects eligible for the subsidies to include projects that were in development before the inclusionary housing mandate took effect last year. Some 42 projects, with more than 8,000 units planned, will now be eligible for exemptions.

The tax exemptions are “a good tool for us to have participation from the development community,” said Dory Van Bockel, a program manager for the Portland Housing Bureau.

Chair Deborah Kafoury’s office worked through the proposed changes with the Housing Bureau and Mayor Ted Wheeler’s office. From now on, qualifying projects must serve households earning no more than 60 percent of median income. For a family of four, that’s just $48,840 a year. Previously, the cutoff was 80 percent of median income.

In addition, projects can qualify by counting the number of bedrooms set aside as affordable, in addition to units.

For example, instead of merely having 20 out of 100 units designated as affordable, a qualifying project could offer 20 bedrooms, spread over a smaller number of affordable units: six units with three bedrooms, and one unit with two bedrooms. Any combination of units and bedrooms adding up to 20 would be allowed.

That adjustment reflects families’ struggle, in particular, to find affordable housing. Most new construction, whether affordable or not, has favored studio or one-bedroom units.

Overall, more than 55,000 households in Multnomah County are cost-burdened and struggling to pay rent. Data from a City of Portland review of its inclusionary zoning program found new construction apartments in the central city rent at $2,000 a month, and $1,700 citywide.

Commissioner Jessica Vega Pederson at the Board of Commissioners meeting Nov. 8, 2018.
Van Bockel said rents are easing after a boom in luxury and top-market apartment construction, but not for moderately priced units or family-size units. Other reports have found rents in the metro area are holding steady or even increasing for people on the margins.

In units subsidized by the exemptions, tenants’ discounts will average $1,100, Van Bockel said.

Commissioner Jessica Vega Pederson said the revised exemption program will open opportunities in developments across the community, especially in areas like east Portland, where neighbors are increasingly hard-pressed to find rents they can afford.

“But for this we wouldn’t have had any way to get affordable housing for families into these projects,” Vega Pederson said. “These are places where we really want to encourage this development.”

A recent report by leading local economic firm ECONorthwest, funded by the Oregon Community Foundation, found high housing costs and lagging incomes are the single biggest driver of homelessness in our community.

“We’ve reached a really great compromise,” said Commissioner Lori Stegmann. “It’s absolutely critical that we’re encouraging more three- and four-bedroom units.”