Portland developers are working feverishly to get ahead of inclusionary zoning regulations the City Council is expected to adopt this fall.

The state law that lifts a ban on municipal requirements for affordable housing creates an incentive for developers to move quickly: Any project for which a permit application has been granted will be grandfathered in.

For developers, that means entering the planning process this summer or early fall will save them from the headaches of wrestling with regulations whose shape remains uncertain. It also means the early birds won’t have to include units that produce lower revenue amid pressure to provide housing for lower-income Portlanders.

The Bureau of Development Services is working to avoid a logjam later this year, spokesman Ross Caron said. The agency plans to hire 23 more staffers to deal with the expected rush of applications on top of an already busy development pipeline.

“Over the next several months, as we hire and train new staff, we should be able to manage any increase in workload created by the inclusionary zoning changes,” Caron said in an email.

As city officials move toward enacting inclusionary zoning by the end of the year, developers are working to get ahead of it.

Cairn Pacific plans to apply this summer for permits to redevelop the George Morlan Plumbing building, at 2222 N.W. Raleigh St., as part of a dramatic makeover of the Slabtown neighborhood. But the developer doesn’t expect to begin construction this fall.

“We’re going to go through entitlements this summer while we have certainty on what the code is,” Cairn Pacific principal Tom DiChiara said.

In effect, Cairn Pacific stands to rack up predevelopment costs for a project that won’t go vertical anytime soon.

DiChiara and other developers fear that if the inclusionary zoning regulations are heavy-handed, profitability will suffer. If that happens, fewer projects will get built, and housing supply will remain restricted, according to developers.

“It’s a margin business,” DiChiara said. “Despite the economy, margins are thinner than they have been. If some of the worst predictions come through, it will have a pretty chilling effect on development.”

The key to addressing Portland’s housing emergency is to keep building to meet demand, DiChiara said.

“Supply is the answer to affordability in Portland,” he said.

The impending regulations add an unknown variable to projects at a time of increasing costs for land and properties. That has some developers pushing projects up and others waiting.

“Nobody knows what’s going to happen,” said Sam Rodriguez, senior managing director at Mill Creek Residential Trust. ”Everybody’s either accelerating their projects to get them in before, or not going into projects before they know what it is. There probably will be a slowdown in the pipeline until there’s more information.”

City officials said they’re working with industry experts and analysts to ensure the regulations don’t halt housing development.

“We need to make sure that however inclusionary zoning works, the market works,” said Shannon Callahan, housing policy director for Portland Commissioner Dan Saltzman. “We want these units to actually get built.”

The city has hired David Rosen and Associates of New Haven, Connecticut, and local firm ECONorthwest, to analyze the economic effects of various affordable housing regulations. The goal is to make sure the regulations don’t put the brakes on development, Callahan said.

The Portland Housing Bureau and Saltzman are considering how to shape the regulations, in consultation with the economic firms and a panel of 13 local developers, architects and public officials convened by Saltzman.

The inclusionary zoning panel includes prominent developers such as Dike Dame of Williams & Dame and Gregory Goodman of Downtown Development Group. It also includes representatives of the Portland Housing Bureau and various nonprofits. Architects are on the panel too, including Nolan Lienhart, director of planning and urban design at ZGF Architects.

“We’re essentially using them as a sounding board,” Callahan said.

The committee is hearing from developers to keep it simple.

“Overarchingly, folks would say the simpler it is for the development community to understand, the better,” Callahan said.

The inclusionary zoning regulations are likely to be placed in the city’s zoning code, Callahan said. The Planning and Sustainability Commission is slated to consider the zoning changes in early September. The City Council would then ultimately decide whether to approve them.

Meanwhile, the City Council on Thursday was set to consider enacting a construction excise tax that would fund future affordable housing projects.

Saltzman lobbied the state Legislature to pass the bill allowing for municipalities to regulate inclusionary zoning and create an excise tax; Gov. Kate Brown signed it into law in March. Saltzman is championing the regulations on the City Council.

“He definitely wants to take advantage of the opportunity to bring inclusionary zoning to Portland as soon as we can, and we expect to have that done by the end of the year,” Callahan said.

The state law lays out the boundaries for inclusionary zoning in Portland. Any new rules would apply only to projects of at least 20 units. No more than 20 percent of units can be required to be rented or sold as affordable housing, tied to 80 percent of the area median income.

Developers are also keenly interested in what incentives Portland will offer. The state law requires cities to offer developers at least one from a menu of incentives to compensate for including affordable units.

These incentives can include full or partial property tax exemptions, fee waivers, density allowances, expedited permitting and additional height. Also, developers may pay a fee in lieu of building affordable units.

Dennis Allen, managing director of Holland Partner Group, said he would like to see the city of Portland offer property tax waivers. Holland was able to greatly increase the density of its Orenco Station project in Hillsboro after earning a “vertical housing” tax exemption, he said.

The tax break enabled Holland to build more expensive structured parking instead of surface parking. That freed up space for additional housing units.

“What really happened is we were able to do a more dense product,” Allen said. “We tripled the units that we were doing there.”

Local governments recoup the property tax revenue later, Allen said.

“After that tax break expires, the city of Hillsboro will have triple the amount of property tax revenue,” he said. “It’s kind of like found money. They could take that incremental revenue and use that to fund affordable housing.”

Saltzman’s committee is looking at the experiences of other cities that have enacted inclusionary zoning regulations. Allen said inclusionary zoning has proved to be only modestly successful elsewhere.

“If you study the cities that have mandatory inclusionary zoning, there really aren’t any of them that have built more than a couple of hundred units a year,” he said. “We need to do better. A couple of hundred units a year isn’t sufficient. We need a couple of thousand units.”

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