The Metro Council on Thursday passed a resolution that directs staff to create a Housing Production Accelerator Fund through which $5 million from Metro’s Construction Excise Tax (CET) will be used to accelerate housing production. The program will be designed to provide technical assistance, local staffing capacity, and predevelopment support.

Current estimates show that Portland still needs 27,000 more homes to support its existing population and 151,000 more to keep up with forecasted population growth over the next 20 years, a Metro staff report states.

In a work session last month, the Metro Council supported the $5 million investment of CET reserves to accelerate housing production in the region. Funding will be made available to regional partners.

Also last month, the council adopted the regional housing coordination strategy for collaborative work with cities and counties. The accelerator fund will help advance five strategies: funding pre-development activities necessary to unlock public properties and others whose owners are interested in developing affordable housing but lack the expertise required, expanding resources available for brownfield assessment and exploring grant opportunities for small-scale remediation that leads to middle housing and multifamily housing development, assisting cities and counties with approved housing production strategies, offering technical assistance to support planning and implementation of housing production and affordability and choice, and exploring regional land bank strategies.

Metro staff will design the grant and technical assistance programs, hold listening sessions to get feedback on program design and effectiveness of strategies, and increase management capacity.

“We also want to avoid predetermining funding allocations across the five actions,” said Hau Hagedorn, community investment manager for Metro. “Instead, we intend to offer technical assistance on a first come, first served basis to move funds quickly to projects ready for development and award grants to jurisdictions that are ready to move projects forward that are aligned with the actions.”

Allocation of funds is expected to take about three to five years, but the goal is to do so as soon as possible, said Malu Wilkinson, planning, development and research deputy director for Metro.

Councilor Mary Nolan said that time frame is not as urgent as she believes it should be for a $5 million investment. She also asked about measurements for success. As the program is designed, Hagedorn said, staff will inform the council what is expected to be accomplished this year and beyond.

“As we work more with our partners around the region to define this so it is most useful for them, we will be defining those metrics that we can bring back to you to talk about how successful and how much impact this $5 million will have,” Wilkinson added.

The resolution passed by a 6-1 margin, with Nolan voting no. Staff will return before the council to provide an update on program specifics.

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The Portland City Council passed 1 percent taxes on new commercial and residential development to help pay for affordable housing.

The council voted 5-0 to make Portland the first Oregon city to pass a construction excise tax since the state Legislature last session struck down a provision banning them.

“The lack of affordable housing is the greatest crisis facing our city right now, and the current market conditions are only increasing the crisis,” said Commissioner Dan Saltzman, sponsor of the tax, at Wednesday’s regular meeting. “I want to be clear that this construction excise tax is a tax on new development that ensures that growth pays for growth.”

Commissioner Steve Novick said he supported the ordinance with a reservation.

“As a stand-alone proposal I think this construction excise tax is well-calibrated, and the need for affordable housing is great,” he said. “However, I think that we do need to take a look comprehensively at all of the fees and taxes that we have on development. These costs do add up, and more and more fees will eventually tip the scales against a new development.”

As a companion policy to the tax, the council is considering whether to ask voters in November to support a $248 million bond to fund affordable housing.

Under the new law, developers of residential and commercial improvements in Portland will pay a tax of 1 percent of the value of their improvement.

A number of development types are exempt from the ordinance. They include affordable housing units, public and private school improvements, religious and agricultural facilities, some nonprofit facilities, and all improvements valued less than $100,000.

The tax was enabled by a package of affordable housing bills passed in the most recent legislative session. For 17 years, Oregon previously had a ban on construction excise taxes.

Over the past five years, the tax would have raised an annual average of $8.1 million ($5.4 million from residential development; $2.7 million from commercial), according to the Bureau of Development Services.

Four percent of total revenue will go to the BDS to cover administrative costs. The remainder will go to the Housing Bureau, which will administer affordable housing production and preservation programs.

Revenue from the residential tax will be split – 35 percent will go to affordable housing programs in Portland, 50 percent will go to developer incentives and 15 percent will go to the state.

One-hundred percent of revenue from the commercial tax will go to affordable housing programs.

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Portland city councilors indicated on Thursday they will support a proposed construction excise tax when it goes to final vote next week.

Much of the discussion at the council meeting involved specifics about the tax: how the money will be spent, whether developers of brownfield property would be taxed and whether multifamily property would be classified as commercial or residential.

The tax as currently devised would assess developers of residential and commercial properties 1 percent of total assessed value. It would generate between $47 million and $57 million by 2035, according to Kurt Creager, director of the Portland Housing Bureau.

Under a plan proposed by Commissioner Dan Saltzman, 100 percent of that revenue would go toward efforts to build more affordable housing for families earning 60 percent of the area’s median family income. Previously, a different plan proposed by Mayor Charlie Hales called for the proceeds to also go to police and programs fighting homelessness.

Supporters of affordable housing who crowded into City Hall on Thursday waved papers that read, “Dear City Hall, Do the Right Thing on CET – Keep it 100,” to encourage councilors to not divide the tax’s revenue among other budget areas.

“I think this is a momentous day,” Commissioner Nick Fish said. “My sense now is there is strong support up here on dedicating the full 100 percent.”

The tax was enabled by a new state law that came out of the 2016 legislative session. The package, which struck down a 17-year ban on inclusionary zoning, also included a law allowing construction excise taxes.

The proposed Portland construction tax was supported by everyone who testified at the Thursday meeting, including developer and Portland Housing Advisory Commission member Dike Dame.

Fish said he had gotten some letters from some trade associations opposing the tax.

“What is your reaction to some of this pushback?” he asked Dame.

Dame responded that he “wasn’t interested in listening to people gripe – this is something we have to do.”

“We all live here,” he said. “We all have an obligation to help our community be a good place to raise a family, and if we are going to push people out because they can’t afford to live in the same city they work, then we’re not really doing that.”

Commissioner Amanda Fritz returned repeatedly to the question of whether multifamily developments – traditionally classified as residential properties, could be considered commercial in this instance. Fritz said doing so would potentially send $778,000 per year to the city, rather than the state.

According to the city’s comprehensive plan, which the council approved earlier in the week, Portland has 13,500 affordable units, with 1,500 in production. There’s a shortage of 24,000 affordable units, and 10,000 more will be needed by 2035.

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Portland Commissioner Dan Saltzman on Wednesday presented his plan to tax new development to raise money for affordable housing.

It’s the first such tax proposal since the Oregon Legislature in March struck down a ban on construction excise taxes in a package of bills intended to give local governments more options for affordable housing initiatives.

The proposed fees on new residential and commercial construction would raise approximately $8 million annually. The tax amount would be set at 1 percent of permit valuation, meaning an average new 3,844-square-foot single-family residence would be taxed $3,636. A new 42,610-square-foot commercial building would be taxed $60,000.

A number of costly system development charges, some greater than $500,000 for large projects, are already applied by the Portland Bureau of Development Services. A frequent criticism by developers and project owners is that whatever they’re taxed ultimately is paid by buildings’ eventual occupants.

Saltzman testified in Salem in favor of the reforms during the recent legislative session.

“I think their point has truth to it,” he told the 91��Ƶ. “But I think we need a diversified source of funds in order to stimulate more affordable housing production. And that is just not happening in the private sector right now.”

A representative of Saltzman’s office said the proposal was vetted this month by a panel of experts, including several developers. Mike Salsgiver, head of the Associated General Contractors’ Oregon-Columbia chapter, said it would have been nice if Saltzman had consulted with members of the construction industry.

“We would have appreciated some outreach,” he said. “On the other hand, the most important issue for us is what it would do to the cost of projects … In an era when the city of Portland is expecting to realize a $26 million surplus, it seems to me the last thing it should be doing is looking to tax businesses more.”

Under the new state law, there are a number of restrictions on how the excise tax revenue must be spent, though Saltzman’s proposed tax would go entirely to affordable housing, with a small amount going to the BDS.

Under state law, a number of construction types would be exempt, including affordable housing, public improvements and improvements to private schools, hospitals, religious facilities and agricultural buildings. Under Saltzman’s plan, the city of Portland would in addition exempt accessory dwellings for two years and improvements valued less than $100,000.

A hearing on the tax proposal before the Portland City Council will take place June 16. The public is invited by Saltzman’s office to submit to it comments by phone, email or in writing.

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