Grants may create another jewel downtown but won't add affordable housing
by: Carole Archer, The Gresham City Council has ambitious plans for the Beech Street area, located across the street from the future Center for the Arts site. But some property owners say that what the city calls an “incentive” to build is really a penalty.

The city of Gresham hopes a new plan for Northeast Beech Street will stimulate property owners to build affordable housing and expedite the addition of another jewel to historic downtown Gresham.

But property owners don't see the incentive.

Today, Northeast Beech Street between Third and Fourth streets is little more than a footpath through weeds. If the Gresham City Council approves a proposal at its meeting Tuesday, Jan. 8, the narrow block will be transformed into European-style elegance. The street abuts the future site of the Center for the Arts, and the improved block would complement the city's vision for expanding the rapidly developing downtown area.

The city hopes to use $200,000 in Community Development Block Grant funds to add street lighting, green treatments, landscaping, benches and other amenities. The block is designated as a 'Shared Street,' defined as safely accessible to pedestrians, bicyclists and slow-moving traffic.

A 'reimbursement district,' which requires council approval, will promote affordable housing by requiring the block's property owners to reimburse the grant. Developing affordable housing is one way for property owners to escape the reimbursement fee. The other way is not to build in excess of 20 percent of the current square footage. So the funds will be spent even if property owners do nothing.

Reimbursement districts are typically granted to private developers. This is the first time the city is seeking to establish one for its own project.

The Community Development Block Grant could be legitimately used for Beech Street even without the affordable housing incentive because more than 51 percent of residents in the block's census tract are considered low-to-moderate income.

Incentive expedites project

But Sandra Doubleday, transportation planner, said the affordable housing incentive expedites the project by making it a higher priority for the city. She acknowledged that the affordable housing incentive is more about timing downtown's development than it is about affordable housing. The deadline for completion is in July.

'It's difficult if not impossible to put it in a little at a time, and the city does not have extra funds in order to do this,' Doubleday said. 'By encouraging affordable housing, it was a way to get the street put in.'

Two of the four properties on the block are established businesses with no plans to build affordable housing. The other two properties are vacant lots.

All of the property owners on the block say the reimbursement district is not enough incentive to build affordable housing because doing so is impractical. And some take issue with the notion that a penalty can be an incentive.

The vacant lots are at an inherent disadvantage because any development that does not include affordable housing will automatically cost $50,000 - money that would go back into the city's Community Development Block Grant coffers.

'If I'm paying for one-fourth of the road, I want to make sure everyone is paying for it,' said Gerald Coy, who co-owns the vacant lot on the southeast corner of Beech and Third streets.

Coy said he would like to develop condos and retail space on his property that would compliment other plans for the area, including the arts center. He plans to fight the city if the proposal is approved by the council, but, in the end, he would pay the $50,000 to develop his property because that is more practical than building affordable housing.

Tom Orth, who owns the other vacant lot on the northwest corner of Fourth and Beech streets, plans to build a high-end housing development. Orth said he likes the Beech Street proposal's design, and that it 'would breathe fresh air' into the area. But, like Coy, he said the $50,000 reimbursement pales in comparison to the impacts of developing affordable housing, which he said 'limits the ultimate sales price.'

'How many people are going to pay top dollar to live by the performing arts center when they have affordable housing in there?' Orth said. 'I don't want to sound prejudiced, but I just don't think that's the area for affordable housing.'

Questioning city's motives

Jerry McKay, a public accountant with an office on the southwest corner of Third and Beech streets, said the project would negatively impact his business, especially if it encourages the city to close Third Street for festivals or a street market. That happened last summer during the Mt. Hood Jazz Festival, and McKay's employees needed a police escort to access the office. McKay said the city stands to benefit without paying - be it through grants or reimbursements.

'The primary beneficiary is getting assessed zero, and that to me is unconscionable,' McKay said. He also questioned the city's affordable housing motive.

'They want the performing arts center to be the crown jewel of the city. Are you going to put affordable housing on it? Take a look at what's across the street,' McKay said, referring to the rows of new condominiums one block west. 'That's not affordable housing.'

Robert Barrie, whose wife is an attorney with offices on the northeast corner of Fourth and Beech streets, said they are thrilled with the project because it will increase their exposure to the public. But they do not plan to make any additions to the building.

'Our daughter is 2 years old,' Barrie said. 'We're not going to be doing anything with this building.'

Doubleday knows the reimbursement district may not be enough incentive for property owners to build affordable housing.

'It is up to them, and at this moment none of them have said they have any specific plans for their property,' Doubleday said. 'If they do nothing, they don't pay anything.'

'It's a tough one,' said Gresham City Councilor Paul Warr-King. 'I think further review needs to be done by staff to address the concerns.'

Warr-King noted that, for Coy and Orth, the value of a $50,000 reimbursement fee will decrease as the cost of building increases. In other words, they will be even less financially compelled to build affordable housing than they are now.

Matha Dilts, deputy regional manager for Housing and Urban Development, said in an e-mail that it is common for cities to use Community Development Block Grant funds to pay upfront capital improvement costs, 'provided that the assessments are not charged on properties owned and occupied by low and moderate-income persons.'

'When assessments are levied against non low-to-moderate income property owners, the proceeds are considered income that must be returned to the city's (Community Development Block Grant) program,' the e-mail reads.

So, if all the property owners do what they say - if Orth and Coy develop their property and pay the $50,000 - the city will get a new street for half the price in a low-income area whose demographics will change along with new development. But it will not get any new affordable housing.

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