The push by the city of Portland to enact an inclusionary zoning ordinance appears to be barreling ahead even as the panel of experts convened by Commissioner Dan Saltzman questions some of the underpinnings of the plan.

At a meeting on Tuesday, the panel of developers, affordable housing advocates and others debated the details of land cost assumptions, the realities of building affordable housing in the Central City versus outlying areas of Portland and whether developers will simply pay fees rather than actually build affordable rental units.

Consultants hired by the Portland Housing Bureau said inclusionary zoning would be most feasible in two scenarios: 20 percent of a building’s units restricted to people earning 80 percent of median family income, or 10 percent or a building’s units restricted to people earning 60 percent of median family income.

“It certainly does seem feasible to us to put together a program that does include units and incentives and still have development in the city of Portland,” said Matthew Tschabold, a consultant with David Paul Rosen and Associates.

Eric Cress, principal at Urban Development + Partners, said it may be easier to support projects that include affordable units at 80 percent of median family income.

“Forget what developers think – it’s investors running the show,” he said. “Most investors think mixing 60 percent in is more risky than mixing 80 percent.”

Under the state law passed in March, cities cannot require deeper affordability than 20 percent of units at 80 percent of median family income. But Tschabold said the consultants are working on crafting incentives for deeper affordability that developers could opt for voluntarily.

Developers could also pay a yet-to-be-determined fee in lieu of including affordable units in their developments.

City officials are moving rapidly toward enacting the inclusionary zoning policy. Developers have warned that if the city doesn’t provide adequate incentives, projects will grind to a halt.

Saltzman is expected to release his recommendations for the policy in early September, and then the Bureau of Planning and Sustainability is set to issue a proposed draft of the zoning code on Sept. 19.

After hearings before the Planning and Sustainability Commission, the City Council is expected to consider the recommendations in December.

At Tuesday’s meeting, some panelists wondered aloud how much influence the so-called “panel of experts” can have on the policy.

Panelist Greg Goodman, whose Downtown Development Group is among Portland’s most prominent property owners and developers, asked directly if the recommendations would be put up for a vote by the panel.

Shannon Callahan, policy director for Saltzman, said the group was not formed to vote on the zoning code.

“I don’t know that we’re expecting this group to endorse it,” she said. “We want your advice and expertise.”

Lisa Bates, a Portland State University associate professor of urban studies and planning, said she understands that the panel’s role is advisory.

“I’m comfortable not voting,” she said.

Vivian Satterfield, deputy director at OPAL Environmental Justice Oregon, a Portland-based civil rights advocacy group, asked when the panel would consider racial and social integration, along with the city’s track record in delivering affordable housing. Tschabold replied that the September and October meetings would be appropriate forums.

The panel’s next meeting is scheduled for Sept. 13.

Portland’s inclusionary zoning efforts drawing attention

While Portland charges ahead toward enacting an inclusionary zoning policy, other Oregon cities are watching – and waiting.

The state law passed by the Legislature in March that allowed Portland to create a zoning code requiring multifamily developers to build affordable units also permits other municipalities to do the same.

Yet Portland is far ahead of other cities in considering an inclusionary zoning regime. A spokesman for the League of Oregon Cities said no other city has moved toward enacting inclusionary zoning requirements.

Planners for other cities are watching to learn from Portland’s experience.

“At the staff level, there’s quite a few conversations about what the legislation means and what Portland’s doing,” said Robin Hostick, planning director for the city of Eugene.

Planning staffers have not received direction from the Eugene City Council to begin an inclusionary zoning process, he said.

Eugene has its own affordable housing challenges, paired with lower wages than Portland workers earn on average, Hostick said.

“The housing affordability issue is huge in Eugene, just like it is in Portland,” he said.

Portland officials were better prepared to go forward, Hostick said.

“That legislation is really hot off the press,” he said. “They were ready to go from basically day one.”

Eugene has a program similar to Portland’s MULTE (Multiple-Unit Limited Tax Exemption) program that awards developers property tax breaks in exchange for affordable units. In Eugene the program is called MUPTE (Multi-Unit Property Tax Exemption).

In Beaverton, city officials published a draft Housing Action Program in June. The city has not yet moved forward on inclusionary zoning.

Beaverton officials project that by 2035 the city will need 7,045 additional rental units priced at $620 or less per month – affordable to renters spending 30 percent or less of their income on housing.

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In a fifth-floor conference room at the Portland Housing Bureau‘s downtown headquarters on Tuesday, Dike Dame gazed at a packet of papers.

Near the end of a three-hour meeting with consultants hired to analyze the economic effects of possible inclusionary zoning regulations, the principal at Williams & Dame Development wanted to make a point.

“We’re not going to know if this works until it’s out there and we’re trying to implement it,” he said to the consultants sitting across from him. “If we mandate a whole bunch of things that aren’t going to work in the real world, nothing’s going to happen.”

That’s the rub for the Inclusionary Housing Panel of Experts, a committee of developers, architects and affordable housing advocates convened by Commissioner Dan Saltzman. The committee’s charge is to evaluate possible inclusionary zoning regulations, and to recommend a set that provides affordable housing without discouraging development.

Developers have warned city officials that their business runs on tight margins, and more expensive regulations could slow multifamily development – the opposite of what’s needed to ease Portland’s housing emergency.

During a monthly meeting on Tuesday, the group waded into the details of data modeling meant to determine whether inclusionary zoning regulations will be too costly. In some cases, developers on the committee pushed consultants from David Paul Rosen & Associates to accept higher estimates for predevelopment costs.

Greg Goodman, co-president of Downtown Development Group, said the Premier Press building in the Pearl District sold for $660 per square foot – well above the consultants’ upper-end estimate of acquisition costs. And Mill Creek Residential Trust paid more than $600 per square foot for a Pearl District block where it proposes to build Modera Davis, a mixed-use building with 150 residential units.

Goodman said the consultants’ estimates of less than $300 per square foot “grossly understates the downtown core values.”

Downtown Development Group has spent $2 million on predevelopment for a downtown proposal, Goodman said. And that’s just to get to the point where the developer can submit a completed planning application to the Bureau of Development Services.

“It’s real money before you know if it’s a go or no go,” he said.

Goodman urged the consultants to take into account transportation demand management, a Portland Bureau of Transportation program that is under development. The program could levy hefty fees on developers in the Central City, he said.

Dame told the consultants that the figures need to take into account floor-to-area ratio.

“Without understanding the FAR, these numbers are irrelevant,” he said.

Dame also urged the consultants to use a real-life case study in their modeling to test how regulations would affect a development.

The looming regulations are leading developers to move quickly on predevelopment. Any project for which a permit application has been made will be grandfathered in, meaning developers who apply before inclusionary housing regulations take effect won’t have to accept less profitable rent-restricted units and uncertain rules.

The Bureau of Development Services is working to hire 23 additional employees to process the expected wave of permit applications, on top of an already heavy workload.

Staffers at the Bureau of Planning and Sustainability are working on how to structure the inclusionary zoning code, the consultants said.

The Oregon Legislature in March passed a law opening the door for inclusionary zoning at the urging of Portland leaders seeking a solution to the city’s lack of affordable housing.

The city of Portland soon hired David Paul Rosen & Associates, a consulting firm based in Oakland, California, and local group ECONorthwest to analyze the potential economic effects of inclusionary zoning regulations.

“We’re trying to steer a course that doesn’t sink development and provides a reasonable community benefit,” said David Rosen, principal of the consulting firm.

The new law allows cities to require multifamily projects of at least 20 units to include 20 percent affordable units, available to renters or buyers at 80 percent of the area median income. Developers must be offered an option to pay a fee in lieu of building affordable units. And the law requires municipalities to offer a range of incentives, something Portland’s inclusionary zoning committee is expected to delve into at future meetings.

The group will hold a meeting in July and another in August. The consultants said recommendations will be forwarded to Saltzman’s office in early September, and the City Council could consider them in late November.

Some other committee members expressed frustration that they had little to contribute to the discussion on financial modeling. Lisa Bates, a Portland State University urban studies and planning professor, repeatedly asked the consultants when she could weigh in on affordable housing policy.

The developers continued to push the consultants to consider hidden costs.

“This stuff either pencils or it doesn’t,” Dame said.

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