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Dennis Sackhoff, like other multifamily builders in Portland, is adapting to inclusionary housing rules with a measure of creativity.

City rules, which took effect Feb. 1, 2017, require developers of multifamily buildings with 20 or more units to provide a portion of affordable units (ranging from 8 percent to 20 percent) or pay a fee-in-lieu. Sackhoff’s company, Urban Development Group, has three qualifying projects under way in the Sellwood-Moreland neighborhood in Southeast Portland.

The Sackhoff triangle includes the Yukon Flats, a completed four-story, 54-unit building on Milwaukie Avenue near hip brunch restaurants and a food-cart pod. The building’s apartments are for lease. An Yukon Flats units at rates of $1,175 for a studio and $1,350 for a one-bedroom unit.

Still under construction is a 91-unit building, also four stories, at Southeast 17th Avenue and Tenino Street, next to a sushi restaurant and near a new CVS pharmacy. The project is coming out of the ground, with first-floor framing in place.

Both Yukon Flats and the 91-unit building will have only market-rate apartments. The reason that works is because a third planned building, at 1645 S.E. Nehalem St., will include a greater-than-required ratio of affordable units via an off-site transfer. However, while the lot at that address is fenced off, no work has begun.

Sackhoff’s strategy will mean 145 market-rate units will be ready for lease before any rent-restricted affordable units become available. The delay in affordable housing construction meets the Portland Housing Bureau‘s rules, an agency spokeswoman stated.

The arrangement meets the procedures for an off-site transfer, Housing Bureau spokeswoman Martha Calhoon stated.

鈥淯nder the off-site transfer option, receiving sites are required to meet reasonable equivalency standards, and must be located either within a half-mile of the sending site or in an area with the same opportunity score (or higher) as the sending site,鈥� Calhoon wrote in an email. 鈥淥pportunity scores are based on the services and amenities in an area so, yes, we would say that off-site transfers like the (Sackhoff projects) are accomplishing the program goals of creating more affordable housing in walkable neighborhoods near active transportation, employment centers, open spaces, high-quality schools, and various other amenities that enhance quality of life for residents.鈥�

Sackhoff did not respond to requests for comment through David Mullens, project manager for Urban Development Group.

The number of rent-restricted affordable units that will be built at the Nehalem Street property may be in flux. Previously, the proposal was for 58 total units in four stories. Then on March 3 the developer submitted a new permit application to add a fifth floor, which would expand the project to 75 total units.

Of those original 58 units, 31 were required to be affordable to renters earning no more than 60 percent of area median income and nine units were to be affordable to renters at no more than 80 percent of area median income. The remaining 18 units would be market-rate.

With the developer’s request to add 17 units, the Housing Bureau may require a percentage of those to be affordable. The construction type would change to III-B 鈥� potentially a brick or block base with a wooden roof.

The Housing Bureau plans to conduct a market analysis to recalibrate inclusionary housing’s off-site program options to 鈥渋ncrease flexibility and utilization,鈥� according to the bureau’s inclusionary housing website.

A different approach

Another developer active in Sellwood-Moreland is trying an entirely different approach. Native Land Development has two multifamily projects under construction in the neighborhood: one with 28 units at 5434 S.E. Milwaukie Ave. and the other with 30 units at 5605 S.E. Milwaukie Ave.

The two projects are 100 percent affordable. All 58 units are studio apartments dedicated to inclusionary housing. Rents are $924.

The 30-unit building, while modest in size, will have the most inclusionary housing units of any building in Portland, according to a Housing Bureau tally.

鈥淭here is a lot of hype on it being super difficult to build with (inclusionary housing), but it depends on your style, how you run and your stakeholders,鈥� said Austin Turner, a Portland development consultant who is working with Native Land.

The developer has received more than 100 rental applications for the 28 units at the first project, Turner said.

The projects are made possible via a series of public subsidies. Among them: system-development charge waivers and a 10-year property-tax exemption.

Native Land also found contractors willing to compromise on price.

鈥淲e asked people to take discounted rates to make it happen,鈥� said Rowen Rystadt, a project manager with Native Land.

The projects were designed by Ralph Tahran, a Lake Oswego architect who was a co-founder of Otak Inc.

鈥淚 think everyone is working toward the right goal, which is increased density in these areas,鈥� Rystadt said.

Native Land Development started in Centralia, Washington, with a focus on building affordable housing on American Indian reservations, Rystadt said. The company is led by Leah Wells-Swanson of West Linn.

Fee-in-lieu

Another inclusionary housing option allows developers to pay a fee into the Housing Bureau’s inclusionary housing fund instead of building affordable units. Developers for projects that vested before inclusionary housing took effect can also opt in to inclusionary housing to receive bonus floor-area ratio, which allows larger buildings to be built.

So far, developers of 10 properties have paid fees in lieu totaling $410,698, according to the Housing Bureau. Each opted in to inclusionary housing voluntarily to receive bonus FAR, Calhoon stated. The largest payment to date 鈥� $175,810 鈥� came on behalf of a five-story, 88-unit hostel project at East Burnside Street and Southeast 16th^听 Avenue.

To date, no project team has opted to pay the fee-in-lieu instead of providing units, Calhoon stated. But developer BPM Real Estate Group is expected to do so for the 35-story mixed-use tower now under construction on Block 216 in downtown.

The fee-in-lieu payment will be triggered by issuance of a commercial building permit. Based on prior information provided by the project team, the fee for Block 216 is expected to be approximately $7 million to $8 million, stated Ken Ray, a Bureau of Development Services spokesman.