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More than 18 months after inclusionary housing took effect in Portland, the first project to bring affordable housing to market under the policy may offer only a single affordable three-bedroom apartment.

Affordable units have been slow to come to market in Portland as for-profit developers navigate the inclusionary housing process. Not one has been built yet, according to stakeholders and city documents.

Developments that include 362 inclusionary units have received permits or are close to receiving permits, according to a Portland Housing Bureau report dated Sept. 26. Since inclusionary housing took effect Feb. 1, 2017, 8,578 units in buildings of 20 or more units have entered the city’s permitting pipeline.

Yet the permitting data offers an incomplete picture 鈥� it does not reflect how many projects actually get built. Developers may withdraw or delay construction for any number of reasons, and commonly do so.

Urban Asset Advisors could be the first developer to bring inclusionary housing units to market. The Portland firm, according to its president, Tim O’Brien, has two projects that should have building permits in the coming weeks.

In the case of Multnomah Station, a 39-unit apartment building in Southwest Portland, the inclusionary housing requirement will likely be satisfied with a single three-bedroom apartment, O’Brien said.

The rules, adopted by the City Council at the height of Portland’s housing crisis, give developers the option of providing 8 percent of units affordable at 60 percent of the Portland area’s median family income or providing 10 percent of units affordable at 80 percent of median family income or paying a substantial fee-in-lieu to the Housing Bureau to fund affordable housing.

A provision that was introduced by former Commissioner Steve Novick to allow developers to convert the requirement to an equivalent number of bedrooms rather than units also comes into play. That provision allows Urban Asset Advisors to satisfy the requirement at Multnomah Station with a lone three-bedroom unit.

Similarly, at Artisan on Division, a 54-unit project planned at 3249 S.E. Division St., the requirement for 8 percent affordable units becomes four bedrooms. That will likely be met by a three-bedroom unit and a studio unit, O’Brien said.

The 8 percent option makes projects more workable, he said.

鈥淔or us, it worked better because it’s a smaller percentage (of units),鈥� he said.

The Housing Bureau is encouraging developers to choose the 8 percent option, said Matthew Tschabold, the bureau’s interim assistant director.

鈥淲e calibrated the program so the 60 percent option would be attractive as a voluntary option because there’s a great need for affordable housing at that income level,鈥� he said.

The Housing Bureau’s data shows a majority of inclusionary units that have been identified are at the 60 percent income level.

A number of projects that have recently moved into design review come from large, out-of-state developers such as Security Properties of Seattle, Fairfield Residential of San Diego and Greystar Real Estate Partners, based in Charleston, S.C.

The long-term effects of inclusionary housing on the multifamily market remain to be seen. Developers rushed to beat the deadline when the affordable housing requirements took effect, creating a massive overhang of projects vested according to pre-inclusionary housing rules. Once 19,000 units, that backlog has fallen to a little more than 8,000 units 鈥� still a massive number.

Developers are 鈥渘ot sure if their projects are going to move forward鈥� because of broader market conditions, Tschabold said.

Higher construction costs and rising interest rates have made profitability difficult for multifamily projects. In some submarkets, rent growth has softened and even gone backward.

Urban Asset Advisors is not looking to begin new multifamily projects, O’Brien said.

鈥淲e’re not buying land right now 鈥� not even looking,鈥� he said. 鈥淭he winds of change are against new housing production, in addition to (inclusionary zoning).鈥�

O’Brien predicted it’s only a matter of time before another housing crunch hits Portland as developers refrain from building multifamily projects that are subject to inclusionary housing requirements.

鈥淲ithout a doubt,鈥� he said. 鈥淚 think it’s 24 months from now. I think it’s pretty apparent.鈥�

Noel Johnson, principal with developer Cairn Pacific, said inclusionary housing caused a deep pullback in multifamily development.

鈥淚t has had a bigger impact than the global financial crisis,鈥� he said.

Tschabold said it’s too early to draw conclusions on inclusionary housing’s effects on multifamily construction.

鈥淲e’re watching it closely, but at this point we think it’s still too soon to tell,鈥� he said.

Even the shallow ranks of developers still willing to build multifamily housing face delays. Since inclusionary housing took effect, developers have had to negotiate system development charge waivers and agreements for affordable units for each project.

鈥淚t added probably three months onto our permit cycle,鈥� O’Brien said, adding that he hopes to have permits for Multnomah Station and Artisan on Division in about 30 days.

Developers have had to negotiate inclusionary housing agreements with the city attorney’s office, the Housing Bureau and individual city commissioners, Johnson said.

鈥淵ou have a bottleneck that is unfathomable,鈥� he said. 鈥淭he city is processing, in a highly negotiated way, every project in Portland.鈥�

The city is working to standardize the process for meeting inclusionary housing requirements, Tschabold said. A number of proposed technical changes will be presented to the City Council in December for approval. They’re a mix of suggestions from city staff and others to make the rules 鈥渁 little bit more robust, albeit more objective and clear,鈥� Tschabold said.

The Housing Bureau is also delaying a scheduled ramp-up that would cause affordable housing requirements to rise to 10 percent of units at 60 percent of median family income or 20 percent of units at 80 percent of median family income.

The Housing Bureau is open to making changes to the program, Tschabold said.

鈥淲e’re continuing to monitor it and make adjustments, and if folks have suggestions to make the program work better, we’re always open to hearing that feedback and assessing what adjustments can move forward,鈥� he said.

Mayor Ted Wheeler, speaking at an Oct. 16 housing event, said inclusionary housing 鈥渟eems to be showing good progress.鈥�

鈥淚f it needs trueing up or refinement, I’m committed to trueing up and refining as necessary,鈥� he said.

The looming slowdown of post-inclusionary housing multifamily projects may not be felt in the housing market for years, Johnson said.

鈥淚 am worried,鈥� he said.

Tweaking the program now may not help much, he added.

鈥淚t’s awkward for all of us,鈥� he said, 鈥渂ecause at this point, the damage is done.鈥�

Editor’s note:聽 This story has been updated to reflect the correct address of the Artisan on Division project.