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Tourists will help pay for affordable housing

Airbnb units remove housing stock, so lodging taxes will help replace it.


Out-of-town visitors staying in Airbnb rentals will help replace some of the affordable housing stock those short-term rentals have removed from the market.

By a 4-to-1 vote, the Portland City Council agreed Wednesday to dedicate at least $1.2 million a year in lodging taxes from short-term rentals to the city’s Housing Investment Fund. That will triple the amount of annual funds dedicated to the fund, which has a current balance of only $1 million.

The Portland Housing Bureau hopes to leverage the new revenue stream to sell a bond measure next year that could raise $12 million to $30 million for new affordable housing, says bureau Director Kurt Creager.

The city has an estimated 24,000-unit shortfall of affordable housing, and this is one of several initiatives being undertaken by the City Council to address that.

“Today we add one more important piece to the tapestry of resources we require,” noted Commissioner Dan Saltzman, who oversees the housing bureau.

Saltzman and Commissioner Nick Fish lost a previous bid to dedicate lodging taxes from short-term rentals into the Housing Investment Fund. But Mayor Charlie Hales, who has made addressing the city’s housing affordability crisis a top priority, changed his mind, assuring it would pass this time.

Hales said he ordinarily hates to dedicate the city’s discretionary revenues into a specific program. “Extraordinary times require extraordinary measures,” he said.

Airbnb now lists about 2,500 Portland homes, condos and apartments for short-term rentals, and several other companies also list properties here. It’s possible that hundreds of affordable units have been taken off the market, such as rooms for rent in homes, accessory dwelling units or entire homes, because renting those with Airbnb has proven more lucrative than traditional long-term rentals.

“We know that market-affordable units have been taken out of service,” Creager said. The bureau is trying to determine how many.

Supporters of the ordinance said there’s a “nexus,” or connection, between short-term rental taxes and the affordable housing fund.

“We’re taking revenue from an activity that is making the current problem worse,” said Fish, who earlier raised the strongest objections to the city’s legalization of short-term rentals.

The city collected about $1.2 million in short-term rental lodging taxes, mostly from Airbnb-listed properties, in the fiscal year that ended June 30. The figure this year could easily be higher, as some of Airbnb’s competitors had not been collecting the 11.5 percent lodging tax, 5 percent of which goes to the city.

The resolution passed Wednesday dedicates at least $1.2 million a year, rising each year with inflation. If revenues top that, the addition money would go to the Housing Investment Fund as a “one-time-only” move.

Jes Larson, director of the Welcome Home Coalition formed last year to address the housing crisis, praised the decision, though she said it is far from enough to solve the affordable housing shortfall in Portland.

“By our estimation, we need $50 million dedicated annually in this fund,” Larson said.

The housing crisis is the “elephant in the room,” said John Miller, director of the Oregon Opportunity Network.

“How do you eat an elephant? One bite at a time.”

The City Council previously raised the amount of urban renewal money dedicated to housing, and granted additional money to the Housing Bureau. Saltzman noted he is working on a density bonus incentive, which would give developers a carrot to build taller buildings if they include some affordable apartments or pay a fee in lieu of that. He also is working on what he now terms a “developer fee,” earlier called a “linkage fee,” a new idea of raising property taxes where past city investments or zone changes have helped make properties more valuable.

Commissioner Steve Novick, concerned the decision might mean less for transportation spending, approved the resolution but said he might seek reductions in the Housing Bureau’s budget to compensate when the council adopts the next city budget.

Commissioner Amanda Fritz, casting the lone “no” vote, is concerned the move takes general fund money that could otherwise go to the parks bureau she oversees, or other priorities such as retaining 13 firefighters now being paid with short-term funds.

“This is irresponsible,” Fritz said. “This vote means that some of those cuts will happen.”

The Housing Bureau received $6.1 million in general fund money in 2012-13, but is set to get $18 million in ongoing funding in 2016-17, plus $5 million in one-time money, said Andrew Scott, city budget director.

“This is a budget shell game,” Fritz said.

Scott noted that his latest budget forecast, issued this week, projected there won’t be any more money available for new or expanded city programs in the next city budget, beyond the $5 million already approved for the Housing Bureau and other must-fund items, such as rising pension contribution costs.

Dedicating $1.2 million from lodging taxes into the Housing Investment Fund means there is, in theory, now a projected $1.2 million shortfall for the next budget, Scott said.

Hales argued the city economy is booming, making it an apt time to address the housing crisis. He expects the next budget forecast, due in April, will show even more city revenues coming in than this week’s forecast.

“I do not think we’re up against it here,” Hales said. “This is a city that is financially strong.”

stevelaw@portlandtribune.com

503-546-5139

@SteveLawTrib

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