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The Portland City Council last week approved an ordinance to triple the cap on tax breaks that developers can claim for affordable housing projects, from $1 million to $3 million per year.

The ordinance also took away the previous competitive nature of inducements for affordable housing projects, replacing an application system to apply for the tax credits with a first-come, first-served approach.

Under the new ordinance, developers will be exempt from property taxes for 10 years, said Dory Van Bockel, program manager for the Portland Housing Bureau.

Problems with having developers compete for affordable housing tax credits was a catalyst for reviewing the program.

鈥淲ith the competitive process, the program was very unpredictable and didn’t fit with (developers’) timelines,鈥� Van Bockel said.

The city expects the cap should add about 200 more affordable housing units per year in Portland, she added.

The city and county are covering most of the additional $2 million added to the tax break cap, Van Bockel said, but 鈥渁 very small percentage鈥� will come from the budget for county schools.

The tax credits won’t kick in until a project is built. The city will still be able to collect other taxes from developers

鈥淭axes will still be payable on the land value and any commercial components,鈥� she said. 鈥淥nly the residential units 鈥� both market (rate) and affordable 鈥� will be exempt for the 10-year period.鈥�

In order to qualify for the tax breaks, a developer’s project must have 20 percent of its units earmarked as affordable housing for households earning up to between 60 percent and 80 percent of the median family income, based on rents for similar units in the area.

Construction plans for projects qualifying for the tax breaks must include strategies for promoting construction contracting for minority- and women-owned firms and emerging small businesses.

Developers will be required to pay an application fee to cover administrative costs associated with paperwork, Van Bockel said.

Once a project is completed, its rents will be locked in for the 10-year duration of the developer’s tax break. After that, units can switch to market rate, but building owners must give a 240-day notice to the city and 180 days of notice to tenants prior to implementing any increase, Van Bockel said.

The city will know well in advance when the 10 years are up because property owners must also report to the city annually on tenant incomes and affordable unit rental rates.

The sale of any of the qualifying properties will be deed-restricted to include the affordable housing provisions, she said. Property owners who want to opt out of the affordable provisions before the 10-year period will be charged a hefty penalty, Van Bockel said.

Although the City Council approved the tax exemption program on an emergency basis, it must still be approved by Multnomah County before it takes effect.

Van Bockel said she doesn’t expect the County to make any changes because Commissioner Dan Saltzman, who introduced the ordinance, has been working closely with Multnomah County Chair Deborah Kafoury.

鈥淪he has indicated her support,鈥� Van Bockel said. 鈥淚’m not sure when it will be on the (county) agenda, but I expect it to be soon.鈥�