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City exploring new taxes on demolition, developers to fund affordable housing

TRIBUNE PHOTO: JIM REDDEN - Mayor Charlie Hales may propose a tax on housing demolitions, as a way to slow demolitions and raise money for affordable housing. A wave of demolitions has eliminated many smaller homes in favor of large homes built in their places. A tax on home demolitions? A new fee on development?

Those are some of the leading funding schemes under consideration at City Hall to address Portland’s affordable housing crisis. Also on the short list: a special property tax levy, a big bond measure and even a tax on restaurants.

Mayor Charlie Hales is considering a new tax on home demolitions, which could dissuade people from knocking down existing homes or raise a few million dollars a year to replace the lost affordable housing.

City Commissioner Dan Saltzman, who oversees the Portland Housing Bureau, says he’s working on a new “linkage fee,” which would amount to a new levy on developments that benefit from zone changes or public investments.

And city and county leaders are batting around major property tax levy or bond measures, Saltzman says.

Each funding idea could be a heavy lift politically and would only supply a piece of the funding solution. But affordable housing advocates say many funding strategies used elsewhere around the country are banned in Oregon, leaving a relatively narrow range of funding options.

“We’re looking toward (any) opportunity — whenever, wherever — as soon as it presents itself,” says Jes Larson, director of the Welcome Home coalition.

The coalition formed last year to advance funding measures to address the Portland area’s affordable housing crisis, and has quickly grown to include 105 nonprofits and other organizations.

"We have a shortage of 40,000 units in the Metro region for low-income families," Larson says.

That includes 23,845 people in Multnomah County, 12,505 in Washington County and 4,370 in Clackamas County.

Welcome Home says it would take $50 million a year for 20 years to house Multnomah residents who earn half the area’s median income or less.

That may not bring much relief to people with higher but still modest incomes who are facing double-digit rent hikes and no-cause evictions, but it could house the city’s homeless population.

After a thorough survey of what other communities are doing in the U.S. and even abroad, Welcome Home found that many common strategies used elsewhere are barred in Oregon.

The Oregon Legislature, pressed by the homebuilders lobby, barred cities from passing inclusionary zoning, which requires developers to include a mix of rental units for different income groups. Measure 79, a 2012 initiative measure bankrolled by Realtors, barred new fees on the sale of real estate, real estate document fees, and real estate speculation taxes.

That left the coalition with what it figures are the four most viable strategies to pursue, Larson says: a developer linkage or impact fee; a property tax levy; a general obligation bond measure; and a dining tax.

In addition, the coalition is supporting plans by others to tax demolitions and increase urban renewal funds dedicated to housing, she says.

Saltzman also is pursuing a “density bonus” plan, whereby developers would be granted the right to add a few stories to their buildings in exchange for constructing some affordable apartments or paying a fee in lieu of that.

Among the new schemes under contention, the biggest revenue generator would be an outright bond measure or a property tax levy, such as those used to pay for county library services in past years.

“Seattle’s been doing this since the 1980s,” Larson says, with levies passed in 1986, 1995, 2002 and 2009.

Seattle raises $20 million a year from its current affordable housing levy, which costs property owners an average of $65 a year, according to Welcome Home. Seattle plans to ask voters next year to approve a $40 million-a-year levy, Larson says.

Saltzman says there are some discussions at the city and county levels about putting a levy before voters. He’s also heard talk of a bond measure of up to $150 million.

“I wouldn’t say there’s any final conclusion” about what the city and/or county would put forward or if they will, Saltzman says. “You’d have to get voters’ support."

Dave Austin, spokesman for County Chair Deborah Kafoury, did not return a phone call seeking more information.

Larson wasn’t familiar with any talk of a bond measure or its status, though Welcome Home would welcome such a proposal or a property tax levy.

The linkage fee appears to be more viable now, in part because it could be authorized via City Council vote.

Saltzman says his office is “studying” the linkage fee, which is being used by Boston to raise $18 million a year.

Seattle, Denver, Sacramento and San Jose also are moving to adopt linkage fees, Larson says. “It’s become a pretty popular strategy,” she says, but Portland is “far behind” its peer cities in considering it.

Larson expects Saltzman to bring a proposal to City Council next month to fund a “nexus study,” which could take a year. That would define what types of developments could be assessed a fee, based on a certain amount of money per square foot, when the city finds a connection, or nexus, between zone changes or public investments that helped raise property values.

The demolition tax initiative is coming from the mayor’s office, Saltzman says.

Hales was not available to discuss the demolition tax before the Tribune deadline, but may address it Tuesday night at the first meeting of his demolition task force.

“I don’t know it’s going to generate all that much money for affordable housing,” Saltzman says.

However, it could prove politically popular given the backlash against a wave of knockdowns of perfectly good smaller homes so developers can put up bigger homes.

There is nothing in the works locally to enact a restaurant tax, Larson says. Welcome Home expects the restaurant lobby would force a referendum on any tax passed locally, which could make it tough politically. But two Oregon cities Ashland and Yachats, have dining taxes, Larson says.

Miami and Dade County, Florida raise about $20 million a year from their dining tax. As a result, Larson says, “They’ve reduced homelessness from about 8,000 people to 800 people.”

Steve Law can be reached at 503-546-5139 or This email address is being protected from spambots. You need JavaScript enabled to view it., or Twitter at twitter.com/SteveLawTrib

Ways to get to $50 million a year:

• Linkage or impact fee: Boston raises $18 million/year

• Demolition tax: at $10,000/home, it could raise $3 million a year

• Expanding the urban renewal “housing set aside” from 30 percent of tax-increment financing to 50 percent: $8.3 million/year for 10 years

• Granting developers the right to build higher buildings in exchange for affordable housing contributions: Estimated to raise $6 million to $10 million a year.

• General obligation bond: Perhaps $150 million

• Property tax serial levy: Seattle raises $20 million a year

• Restaurant tax: Miami/Dade County raises $20 million a year

Ideas not viable right now:

• Inclusionary zoning: Local measures banned by Oregon Legislature in 1999; an attempt to lift the ban was unsuccessful in the 2015 legislative session.

• Local fee on sale of real estate (transfer tax): Banned by Measure 79, passed by Oregon voters in 2012 

• Local real estate document fee: Banned by Measure 79; Washington County's existing fee allowed to stand

• Real estate speculation tax: Banned by Measure 79. 

• Hotel/motel tax: Not practical, since state law requires 70 percent of the proceeds to be dedicated to tourism promotion.

Steve Law can be reached at 503-546-5139 or This email address is being protected from spambots. You need JavaScript enabled to view it., or Twitter at twitter.com/SteveLawTrib