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City Council takes two big strides to boost affordable housing funding

Three weeks after declaring an “affordable housing crisis” in Portland, the City Council unanimously approved two new policies Wednesday that will dedicate tens of millions of dollars to build new units in coming years.

By a 5-0 vote, the council agreed to a 50 percent increase in urban renewal funds “set aside” for affordable housing. The move is estimated to bring $66.7 million in additional funds over the next decade, perhaps enough to build 650 to 670 new units. The policy change means 45 percent of tax-increment financing, the primary source of urban renewal funds, will be directed to the Portland Housing Bureau for affordable housing projects, instead of the Portland Development Commission, the city’s urban renewal agency. The previously policy set aside 30 percent of tax increment funds for housing.

Led by the Metropolitan Alliance for the Common Good, housing activists earlier this year mounted the so-called “TIF to 50” campaign, trying to boost the housing set aside to 50 percent. In a deal negotiated between Mayor Charlie Hales and Commissioner Dan Saltzman, who oversees the Portland Housing Bureau, the council settled on 45 percent as a compromise, which still equals a 50 percent increase in housing funds.

Mayor Hales and PDC Executive Director Patrick Quinton said the new money won't require the urban renewal agency to abandon any of its past commitments to projects. However, Hales said he intends to seek a two-year extension of the Lents Urban Renewal Area — essentially keeping much of the area's property value off the regular tax rolls — to limit any impact on redevelopment projects in that part of town.

The Interstate Urban Renewal Area in North Portland is in line to get the biggest boost for affordable housing: $32 million. The compromise also will bring $20 million in new housing money to be spent when the city acquires the U.S. Postal Service distribution center in Northwest Portland; $7.5 million in the Lents area; $5 million in the South Waterfront area; and $2 million more in the Gateway area.

Several neighborhood leaders in Lents and Gateway opposed the agreement, arguing the city doesn’t need to subsidize more affordable housing in those East Portland communities because most of the existing housing stock is considered affordable. They preferred the money stay with the Portland Development Commission to spur more commercial development.

Mayor Hales promised the communities will be consulted as to the best use of the new housing funds.

Most of the people filling the City Council chambers heartily supported the council’s action.

“You’re obviously responding to the crisis the community is really feeling,” testified Diane Linn, executive director of Proud Ground, which acquires land for affordable housing.

The second action Wednesday could prove much more significant in the long run, if it goes forward as planned. The council, in another 5-0 vote, approved a “nexus” study, which will lay the groundwork for the city to adopt a new “linkage fee” on development. For example, when a new development is built due to a zone change, creating more demand for housing, the city might levy a surtax on property taxes on the new development, to help pay for housing.

Several other cities are already deploying linkage fees, which Saltzman on Wednesday called a “developer impact fee.”

Kurt Creager, Portland Housing Bureau director, said a new hotel, for example, might create new jobs that pay $9 to $15 an hour. The hotel might be taxed more to help those workers land affordable housing. The nexus study might evaluate the market feasibility of the fee, so that it isn't set so high that the hotel wouldn't be built.

Boston, Sacramento, San Diego, San Francisco and San Jose have linkage fees, and Seattle is considering one, Creager said.

Those cities are raising $5 million to $30 million a year from such linkage fees, said Matthew Tschabold, an equity and policy manager at the Portland Housing Bureau.

Urban renewal districts take up less than 15 percent of the city, and the housing set aside money can only be used in some of those districts. The linkage fee proceeds would be used in the rest of the city, Creager said.

He hopes the nexus study will be completed by April, so the linkage fee, or developer impact fee, could go into effect next July.

The business community will first get a chance to weigh in on the idea.

Though the City Council still needs to approve the actual linkage fee, Wednesday’s unanimous vote signals the council’s intent to adopt one.

“This really is a historic day for affordable housing in Portland,” Saltzman said.

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