A ‘new normal’ for multifamily projects – DJC Oregon

A new proposal in Northwest Portland shows how developers are getting increasingly creative to avoid Portland’s inclusionary housing thresholds.

Cairn Pacific is proposing six buildings, each with approximately 18 apartment units. With that arrangement, the developer can build about 108 units, with none required to be offered to low-income renters.

Portland’s inclusionary housing rules exempt buildings with fewer than 20 units. For larger buildings, developers must provide a proportional amount of apartments at rents affordable to people who earn less than either 60 percent or 80 percent of the Portland area’s median income or pay a fee in lieu.

Noel Johnson, a principal at Cairn Pacific, said the proposed project would not be built if it had to include affordable units, which bring in less revenue for the developer.

“The reality is basically no projects pencil with inclusionary zoning,” he said.

Other developers have moved forward with projects that fall just below the 20-unit threshold. A 19-unit building is under construction at 4130 S.E. Division St. That building is from a limited liability company that lists Anita Chan as manager. It was designed by Baysinger Partners Architecture.

In a September 2018 report, the Portland Housing Bureau said the pace of constructing buildings with fewer than 20 units was in line with recent years. In 2017, 13 percent of building permits were for structures with fewer than 20 units, according to the Housing Bureau.

“This proportion is consistent with what has been occurring since 2012 as Portland emerged from the recession,” the report stated.

Still, 2017 saw the most such buildings constructed since 2012. Data for 2018 were not immediately available.

Gerard Mildner, a Portland State University real estate professor, said it’s not surprising developers are finding a way around inclusionary housing rules.

“Folks are really scratching their heads over this, and if it takes a lot of 18-unit buildings, they’ll do it,” he said. “I think a more likely reaction is to go to the suburbs.”

The 20-unit threshold is embedded in the 2016 state law that permitted municipalities – with Portland foremost in mind – to enact inclusionary housing ordinances. The law says inclusionary zoning rules “may apply only to multifamily structures containing at least 20 housing units.” Developers have responded by building multiple structures of fewer than 20 units on the same site.

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Chuck Slothower | DJC Oregon | June 6, 2019