(To read more on the multifamily market, click here.)

PORTLAND, OR-The Portland Development Commission, the city’s urban renewal agency today will hear preliminary ideas for a revised tax exemption program for new urban multifamily developments that include an affordable housing component. A six-month moratorium on applications for the existing programs went into effect in mid-October; the city council extended it through July earlier this month.

The moratorium was instituted two months after the city council went against PDC and planning commission recommendations and denied an application for a 10-year property tax waiver by Trammell Crow Residential. The company wanted the break for a 22-story, 319-unit project that would have been the first apartment building in the South Waterfront, where thousands of mostly for-sale units are planned. It was the first time the Council had ever denied such an application that met the minimum requirement that 15% of the units be affordable to people making less than 80% of median income.

TCR’s abatement was shot down 3-2 by councilmen Sam Adams and Randy Leonard, who said the project didn’t deliver enough social benefit, and councilman Dan Saltzman, who said the affordable units—studios and one-bedroom units–didn’t reflect the mix of units in the building as a whole and should include larger units for families. The income-restricted units were to average 514 sf in size and rent for an average of $870 per month plus utilities. According to the rules, the rent and utilities must not exceed 30% of a renter’s gross monthly income.

Mayor Tom Potter and Councilman Erik Sten voted in favor of the abatement, saying TCR followed the rules established to be eligible for the benefit. Sten told GlobeSt.com at the time that while he doesn’t think it would be a tragedy if the South Waterfront’s residential component consists of only high-end condominiums and 100% affordable apartment projects, he would prefer to see apartment buildings with a mix of incomes such as TCR’s proposal.

“The situation in Portland right now is tax revenues are pretty scarce so people are putting a real tough eye on anything that limits possible tax collections,” he said. “But (the denial of TCR’s project) is somewhat penny-wise and pound-foolish; we will not be getting more condominiums that pay taxes by not supporting this, we will get fewer apartments, and I think that’s not a good step for us.”

The moratorium directed the city’s Bureau of Planning in consultation with the Portland Development Commission, City Council offices, and community stakeholders to review the policy goals of the program, the fiscal impact of the program, and the list of public benefits, and then present recommendations to the Council within 180 days. Preliminary ideas for a new program will be reviewed this week by PDC commissioners. A tentative timeline shows the new program rules being approved by the end of June.

As with the existing programs, a new program would target high-density residential development where it would support the public transit system (i.e. around light rail stations) and where the City wants to accommodate new population growth such as centers, main streets and transit corridors. The increased emphasis relative to the existing programs will be in affordability, and could include a range of affordability options for rental units (like the current transit-oriented development program) and a lower maximum price for homeownership units.

Ideas currently being bandied about for the program as a whole include eliminating the New Multiple Unit Housing program that TCC applied under. Instead, it would expand the Transit-Oriented-Development tax break program to cover areas around light rail and streetcar stops, regional and town centers, and other transit-oriented areas. The streetcar will serve the South Waterfront area.

As for affordability, one idea calls for a requirement that 10% of affordable units in the central city be offered at or below 30% of area median family income; 20% at or below 60% MFI; and 30% at or below 80% MFI. In addition, as Saltzman wanted, affordable units may be required to mirror the building-wide unit mix.

TCR’s application met the requirements of the existing tax abatement program by offering to make 15% of the units affordable to people making 80% of the area MFI. TCR said the tax break is needed to make a reasonable return on its investment in an unproven rental market.

The day before the council voted on the moratorium, TCR submitted a new tax waiver application that it believes meets Saltzman’s request. The new request calls for a seven-year property tax waiver in exchange for 10% of the units–including eight two-bedroom units–being made affordable to people making less than 80% of median income. The council must act on the application by the end of April.

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