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The Portland Housing Bureau may lean toward an acquisition strategy for spending the remaining uncommitted dollars from the city’s $258.4 million affordable housing bond, the bureau’s director said.

To date, the city has purchased or committed to acquiring 263 affordable housing units and building 384 new ones, or 647 units in total. Mayor Ted Wheeler has set a goal of preserving or building 1,300 affordable housing units with the bond money by 2023.

The November 2016 ballot measure gave the Housing Bureau flexibility to either purchase existing housing to serve as affordable units, or build new housing. The bureau is working to strike a balance between building new units and preserving existing ones, Bureau Director Shannon Callahan said.

鈥淔rom the very early creation of the concept of the bond, both were important concepts,鈥� she said.

Yet unless an Oregon constitutional amendment passes in November, the Housing Bureau is likely to move toward purchasing units rather than building, Callahan said.

The amendment, Measure 102 on the November ballot, would allow public agencies to fund affordable housing construction in partnership with nongovernmental for-profit and nonprofit developers. Housing advocates say the measure would leverage public bond dollars to create more affordable housing.

Callahan acknowledged high construction costs are part of the reason for the acquisition strategy. Yet it raises the prospect that after the bond runs out, the city will have created only a few hundred new units. Acquisitions are in keeping with the housing bond’s goals, Callahan said.

鈥淥ur mantra with the bond wasn’t we necessarily need more housing; we need more affordable housing,鈥� she said. 鈥淲e were really clear with what we intended to do.鈥�

Private groups are fighting many of the same forces.

鈥淚t’s getting to be more expensive to build new than it is to preserve what we already have,鈥� said Anthony Petchel, director of philanthropy and communications for REACH Community Development, a private nonprofit group.

Construction costs are difficult to lock in more than a couple of months in advance, while financing must be arranged for much longer terms, Petchel said.

鈥淭he biggest challenge is right now, especially on the construction cost side 鈥� that needle is constantly moving,鈥� he said.

The Housing Bureau has issued bonds from the 2016 measure only once, to purchase the Ellington Apartments. The bureau is waiting for the results of the constitutional amendment before moving forward on any other bond issuances, Callahan said. The bureau has used interim financing instead. The Housing Bureau to date has committed bond funds to:

• purchase the Ellington Apartments for $47 million in February 2017, preserving 263 units;
• purchase a newly built 51-unit apartment complex at 10506 E. Burnside St. for $14.3 million (The Housing Bureau counts this project as new construction, even though it was built by a private developer as market-rate housing. Instead, the Housing Bureau will offer subsidized rents and use the property to house families transitioning out of homelessness);
• purchase a parcel at Southeast 30th Avenue and Powell Boulevard for $3.72 million to accommodate new construction with up to 200 housing units;
• purchase a property at 5827 N.E. Prescott St., in the Cully neighborhood, for $500,000 to accommodate new construction with at least 50 units; and
• purchase the Westwind Apartments at 333 N.W. Sixth Ave.聽for $3 million. The existing 70-unit building will likely be demolished, Callahan said. The bureau is considering construction of a six-story replacement with a similar number of units 鈥� at an estimated cost of $21 million.

鈥淭he building envelope will change,鈥� Callahan said. 鈥淥ur initial thoughts are we would do a five-over-one there with the same number of units with supportive services and service delivery space.鈥�

As the Housing Bureau looks to acquire buildings, it will focus on properties with family-size apartments of two bedrooms or more, Callahan said.

Metro will also face the task of striking a balance between preserving and building affordable housing if voters approve a $652.8 million regional bond measure in November. The ballot language would provide the regional agency and local partners with flexibility to build affordable units, purchase existing ones, buy land for affordable housing or prevent displacement.

Metro’s aim is to create or preserve 3,900 housing units with the money.

鈥淲e wanted to leave some flexibility for the local partners who are going to be doing most of the implementation,鈥� Metro spokesman Craig Beebe said. 鈥淭hey can look at what the situation is in their communities.鈥�

Buying instead of building could help provide more units for the money, said Gerard Mildner, a Portland State University associate professor of real estate finance.

鈥淚t’s more efficient to buy existing units than build new, because it’s a better fit for the housing that low-income households need,鈥� he said.

Housing production from the two bond measures would not be enough to make any dent in housing affordability, he said.

鈥淣either effort is likely to produce very many units,鈥� he said.

Mildner said it would be better policy to simply give low-income individuals money or vouchers to pursue the housing that best fits their needs. He argued the bond measures would provide housing for a few thousand low-income people, while doing nothing for many others who need housing.

鈥淚t’s a bit of a lottery for the poor,鈥� he said.