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Developers are warming to changes made to a Portland Housing Bureau program intended to encourage inclusion of affordable housing in multifamily projects.

After earlier versions of the Multiple-Unit Limited Tax Exemption (MULTE) program foundered, the Housing Bureau loosened several restrictions and sweetened the pot. As a result, developers are taking a second look.

Combined, two projects planned for the Boise neighborhood and one slated for Goose Hollow will bring 55 rent-restricted units online under MULTE. The owners will receive property tax subsidies totaling $1.2 million a year for 10 years, according to the Housing Bureau.

Marathon Acquisition & Development is behind the Boise neighborhood projects. The Goose Hollow project is a partnership between Nevada-based Molasky Group and Trinity 3 Investment of Portland.

Plans for a project by Killian Pacific at Southeast Ninth Avenue and Belmont Street call for 20 affordable units in the 100-unit development through MULTE. A Killian Pacific executive could not be reached for comment.

Building owners, in exchange for 10 years of tax relief, agree to rent restrictions on 20 percent of units.

Significant tax exemptions are the carrot for building owners. The Housing Bureau gave estimates for one typical project in which the owner would save $354,000 in the first year, and more than $3.2 million over 10 years.

The MULTE program aims to alleviate Portland’s acute lack of affordable housing. The tax exemptions are only available for projects in certain zones in the city.

The Housing Bureau last year revamped MULTE after it initially drew little interest from developers. They said the program came with too many strings attached, and offered too little incentive for too much unpredictability.

鈥淚t simply wasn’t getting used for new development,鈥� said Ed McNamara of Turtle Island Development. McNamara is applying for an extension of his property-tax exemptions under MULTE for the Sitka Apartments at 1115 N.W. Northrup St.

The provisions made it difficult for projects pursuing MULTE to attract financing.

鈥淚t was enough that lenders and investors shied away,鈥� said Dory Van Bockel, Portland’s housing program coordinator.

The Housing Bureau listened.

The agency responded by raising the annual cap on the tax exemptions from $1 million to $3 million, and replacing a competitive application process 鈥� developers hated waiting to see if they’d won 鈥� with project evaluations at time of submission. The Housing Bureau also switched to a rolling application timeline, eliminating deadlines that left developers waiting to break ground.

Finally, the Housing Bureau lifted a rule that capped the return on market-rate units at 10 percent. If performance exceeded that rate under the old rules, building owners could have been required to designate more affordable units, extend the program period or pay back taxes.

As a result of the changes, five projects are approved for tax exemptions under MULTE, and Van Bockel reports she’s had more pre-application meetings and expressions of interest from developers.

Housing advocates have also taken notice.

鈥淲e agree with the direction they went with on this program to encourage more private developers to take advantage of the program,鈥� said Ruth Adkins, policy director for Oregon Opportunity Network, a statewide association of affordable housing nonprofits and other groups.

In only a few months at the end of 2014, the Housing Bureau approved $1.9 million of its annual $3 million cap for property tax exemptions under MULTE. While the cap resets for 2016 applications, the pace of approvals raises the possibility the Housing Bureau could run out of exemptions to hand out.

Housing Bureau and city officials have left the door open to ask the City Council to raise the $3 million cap on tax exemptions offered through the program. City Commissioner Dan Saltzman said that could happen, but it depends on how willing Portland and Multnomah County officials are to forgo tax revenue. The property tax exemption applies to all property taxes paid to the county assessor.

鈥淥bviously, that’s a balancing act with the city and county with the forgone revenue,鈥� Saltzman said. 鈥淏oth governments are doing quite well, but there’s always a flash point whenever you’re talking about forgone revenues 鈥� money we could have had.鈥�

Saltzman said he supports raising the cap.

鈥淚’d like to see the program go even larger,鈥� he said.

Most of the MULTE areas are high-traffic corridors or have MAX light rail stops. Rents are determined by a percentage of the median family income. As a result, the rent-restricted units are much cheaper, by $921 a month on average for one project.

Builders must apply to participate in the MULTE program before a building permit is issued. The program carries a $1,000 application fee, with $16,000 due upon approval.

While 20 percent of units must be affordable, building owners have the option of keeping the same units designated affordable, or having 鈥渇loating鈥� designations that can transfer to different units as tenants move in and out. If tenants exceed the income limits, developers have a six-month window to get a new tenant or designate another unit as affordable.

The building owner also must report annually tenants’ incomes and rental rates for the duration of the 10-year tax exemption.

If participants wish to exit the program early, the Housing Bureau levies a penalty equal to 20 percent of the exemption’s value multiplied by the years remaining on the 10-year exemption period.

If you go:

What: MULTE information meeting

When: Feb. 19, noon

Where: Portland Bureau of Development Services, 1900 S.W. Fourth Ave.