For a seven-story, 134-unit multifamily project planned in North Portland, Ethos Development implemented a version of the city’s inclusionary housing requirements by offering three-bedroom apartments that are smaller than the one-bedrooms in the same building.

In Analog PDX, a 134-unit project planned for a North Portland site, the five rent-restricted, three-bedroom apartments will average 772 square feet. The building also would have four market-rate, one-bedroom apartments averaging 810 square feet.

The City Council hated the proposal.

In two meetings in late April, city commissioners grilled developer Paul Del Vecchio, founding principal of Portland’s Ethos Development, regarding the unusually small three-bedroom apartments. Commissioner Jo Ann Hardesty called them “outrageous and egregious” and said that they didn’t meet the “sniff test” of the city’s inclusionary housing program.

Commissioner Dan Ryan, who oversees the Bureau of Development Services, said the project doesn’t satisfy the city’s goals for providing affordable housing for Portland families.

“This just isn’t high-quality family low-income housing,” he said. “This project does fall short.”

In the end, only Hardesty voted against the project’s tax exemption, and it was approved. Del Vecchio said he’ll move toward obtaining building permits with the aim of breaking ground at 1871 N. Flint Ave. in August or September.

But Portland developers said they and their investors were spooked by the council’s last-minute dive into the minutia of bedroom sizes. For developers, elected politicians meddling in floor layouts after a project had been in the city’s land-use approval pipeline for almost two years was a near worst-case scenario.

“This event today made it all the way to Boston, San Francisco and L.A.,” said Sam Rodriguez, senior managing director for Mill Creek Residential Trust, one of the most prolific multifamily developers in Portland, during the City Council’s April 21 meeting. “I had three investors call me freaking out. ‘What’s going on? Are we going to have our projects approved or not?’”

Noel Johnson, a principal with local developer Cairn Pacific, said the 11th-hour opposition to Analog PDX has already done damage, causing investors to wonder whether the council will be “playing politics with the individual project in front of them.”

“That’s just the best way to shut off new investment just as people are maybe thinking about it,” Johnson said in an interview.

Johnson also testified before commissioners on behalf of Analog PDX.

The debate regarding Analog PDX was the latest twist in the saga of Portland’s inclusionary housing policy, which was enacted in 2016 to require developers of multifamily projects of 20 units or more in certain parts of the city to offer affordable units with restricted rents or pay a fee in lieu.

In exchange, developers may apply for the city’s Multiple-Unit Limited Tax Exemption (MULTE) program. MULTE gives developers a 10-year property-tax break. City councils are empowered by state law to approve MULTE exemptions, making them the last step in the process before developers apply for building permits. (The program has a rolling cap on the exemptions to ensure that tax revenue doesn’t a hit too large in any given budget year).

Developers fear commissioners will use their power to approve or deny MULTE exemptions as an opportunity to meddle in multifamily building projects late in the process – after they’ve been designed, engineered and approved by the Portland Design Commission or Bureau of Development Services staff.

“They’re basically suggesting the MULTE program is a discretionary checkpoint,” Del Vecchio said in an interview.

That is not something that was part of the inclusionary housing program when it was promulgated in 2016, Housing Bureau Director Shannon Callahan said.

“We had not contemplated when we drafted the original housing code a situation where an individual MULTE would be denied,” Callahan told commissioners. “But we did contemplate at some point we would reach the overall cap,” she said, referring to the agreement on tax exemptions with Multnomah County.

Hardesty’s and Ryan’s offices did not respond to interview requests. But in council meetings, the commissioners suggested Del Vecchio was doing an end-run around inclusionary housing rules.

“I just want to know if any of you would live in those bedrooms – a three-bedroom unit that is smaller than a studio,” Hardesty said.

Del Vecchio expressed frustration that he was hauled before commissioners to defend the project. He said the meeting cost him thousands of dollars to compensate his project team experts who testified – Allison Reynolds, a land-use attorney at Stoel Rives, and Carrie Strickland, founding principal of Works Progress Architecture.

Analog PDX meets inclusionary housing requirements via what is known as the reconfiguration option. Essentially, developers may provide an equivalent number of affordable bedrooms rather than units. Former Commissioner Steve Novick pushed for the option to encourage developers to build affordable family-size apartments rather than just studios or one-bedrooms.

“Our strategy to reconfigure to three bedrooms was a genuine attempt to provide what we believe to be the most needed affordable housing type,” Del Vecchio wrote to the City Council.

Ethos isn’t the only developer to propose small multi-bedroom apartments, Callahan said in an interview.

“We’ve been seeing some units that are smaller than a unit of lesser bedrooms,” she said. “It was one of the more extreme examples.”

The MULTE approval process has given the City Council a deep familiarity with the multifamily housing pipeline, Callahan said.

“Council is able to see – because they have approval over the MULTE – at a very granular level what is being produced in the market,” she said.

Part of the push and pull between developers and commissioners is over the council’s goal to provide affordable housing for low-income families. Commissioners said such small three-bedroom units could be filled by groups of singles, and not families.

Del Vecchio said he has no control over who rents his apartments, and isn’t even allowed to ask because of Fair Housing rules.

“You’re just creating caricatures of people,” he said. “Who knows who’s going to move into anything? You just don’t.”

The inclusionary housing program has had a series of unintended consequences during the past five years. Among them: developers building many 19-unit apartment buildings to remain just below the threshold required to provide affordable units.

As a result of Analog PDX and other projects, the City Council instructed the Portland Housing Bureau to regulate bedroom sizes in inclusionary housing projects. New administrative rules, which became effective April 23, require reconfigured units to be larger than the average size of each of the unit types with fewer bedrooms.

The Housing Bureau will also issue a request for proposals, probably this summer, for a consultant to evaluate the city’s inclusionary housing program, Callahan said.

Meanwhile, Ethos Development is selling off its land holdings in Portland, Del Vecchio said. After Analog PDX is completed, Ethos will do no new multifamily projects in the city for the foreseeable future, he said.

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Native Land Development is replicating its multifamily model around Portland.

The latest project calls for an 85-foot-tall modular building at North Minnesota Avenue and North Jessup Street. The project, Minnesota Places, would offer approximately 90 residential units in an eight-story, 54,000-square-foot structure.

Minnesota Places underwent an initial design advice hearing Thursday with the Portland Design Commission. The project will later go through a Type II staff review. It will not return to the Design Commission unless a decision by Bureau of Development Services staff is appealed.

Native Land Development has been busy. The Lacey, Washington-based developer also recently proposed an 11-story, 89-unit modular multifamily building for a property south of Portland State University. Earlier this year, the firm constructed two small stick-built multifamily buildings (one with 30 units and another with 28) along Southeast Milwaukie Avenue in Sellwood.

Minnesota Places would rise in a neighborhood of mostly single-family homes west of Interstate 5. Developers have added larger projects, however, such as Nomad, a seven-story, 130-unit building from Ethos Development and Works Progress Architecture. Nomad is nearly completed, with delivery expected in November, Ethos founding principal Paul Del Vecchio said.

The neighborhood is designed for dense urban development, said Tim Heron, a BDS reviewer. Killingsworth Station, serving the MAX yellow line, is nearby at North Killingsworth Street and Interstate Avenue.

Minnesota Places is being designed by John Wright of Wright Architecture. The structure would consist largely of mass-pressed plywood. The ground floor would have a lobby, community rooms and loading area topped by seven stories of apartments with one, two or three bedrooms apiece. BDS valued the project at $8 million.

An entry courtyard would have a colonnade using mass plywood along with metal or cementitious stucco.

The project will bring affordable housing to the neighborhood, said Austin Turner, a development consultant working with Native Land Development. Information on the affordability level of the apartments was not immediately available.

Commissioners on Thursday were largely complimentary of the design, particularly the H-shape. Commissioner Brian McCarter said the shape “does a pretty nice job of taking a building this big and breaking it down to a more human scale.”

Concerns centered on the durability of the mass plywood material in Oregon rain. Commissioner Jessica Molinar said the exposed plywood on the colonnade could present maintenance issues.

“You’re in a losing battle,” she said. “So unless the owner is willing to commit to serious maintenance of this, another option would have a much greater chance of success.”

Commissioners also took issue with the height of the ground floor and the design scheme of numerous small, vertically oriented windows.

“I am really concerned about the window-to-wall ratio,” Molinar said. “I’m worried that it will feel really institutional and not residential.”

Wright said the windows could be made about 6 inches wider without significant plan changes.

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As the economic impacts of the coronavirus pandemic stretch into their sixth month, an increasing number of Portland’s locally owned restaurants and shops are closing locations permanently. In some instances, new tenants are moving into those spaces in some of the city’s hippest neighborhoods; however, other times those spaces are remaining vacant.

That’s putting pressure on landlords, who are broadly reluctant to evict tenants during a pandemic, when demand for space is low.

Restaurants in particular have been hit hard. Pok Pok Wing, Tasty n Alder, Blue Star Donuts, Abyssinian Kitchen and Stella Taco have closed locations permanently. Some others have survived by offering takeout and delivery. Indoor dining, while allowed under Gov. Kate Brown’s phase II order, has been less popular.

Brewpubs have begun to show signs of stress too: Base Camp Brewing and Grixsen Brewing closed in recent weeks.

Stella Taco opened its second location, on Southeast Division Street, in 2016. After the original location closed last summer, the second location closed last month. Nearby, Whiskey Soda Lounge, a bar that was part of the Pok Pok empire, closed as well.

“The financial challenges facing Stella and the other businesses on Division Street are representative of the challenges faced by retailers,” said Stan Amy, a Portland investor who is part of the ownership group that owns Stella Taco’s former building at 3050 S.E. Division St.

Amy also has ownership interest in the commercial building on the southwest corner of Northeast 24th Avenue and Fremont Street that holds Garden Fever, Lucca and other businesses. At one point, the owners were collecting only 10 percent of the usual rent there because some tenants simply couldn’t pay. Amy said it doesn’t make sense to evict businesses for nonpayment during the COVID-19 crisis.

“It’s a matter of self-interest,” he said. “It is not in a landlord’s interest … and it’s certainly not in the interest of the community, to evict a viable business.”

Amy said he takes a long-term view of doing everything possible to keep tenants in place.

“The tenants are the cash-flow engine that makes all of the real estate work,” he said. “It’s absolutely in our interest as landlords and community members to have healthy neighborhood commerce, and therefore we need to take a long-term point of view, and that’s what we’ve advocated with our tenants.”

There are signs that restaurant spaces in Portland’s neighborhood commercial corridors remain desirable even as some eateries go out of business. Stella Taco’s former location on Division Street was soon leased by another taqueria, Tight Tacos. Across the street, Whiskey Soda Lounge’s former space is gaining a new business: Oma’s Takeaway by Gado Gado.

And Pok Pok Wing’s former location on Milwaukie Avenue is being prepared for a barbecue restaurant, The Oregonian reported.

If there’s a silver lining to the closures, it’s that the vacancies could open up opportunities for new businesses, real estate professionals said.

“I’m optimistic about the entrepreneurship and the opportunities that will exist for folks,” said Peter Andrews, executive vice president of brokerage at Melvin Mark.

Still, the churn seems to be increasing as the pandemic stretches on.

“What we know is our particularly retail tenants that need foot traffic are incredibly impacted,” Andrews said. “Landlords are doing what they can to keep them, and being proactive, but this is going so long.”

Ethos Development‘s food-cart tenants have done fairly well with takeout during the pandemic, according to Paul Del Vecchio, the firm’s founding principal.

“I wouldn’t say it’s awesome, but we’re treading water,” he said.

Brick-and-mortar restaurant space, Del Vecchio said, is “a really bad place to be right now” for landlords.

Some are questioning why the federal government isn’t doing more to help landlords. While unemployed workers were given an extra $600 a month, landlords have received no help with their mortgages.

Amy supports United for Relief, a campaign by local property owners, developers and lenders to encourage government relief for commercial mortgages.

“Federal inaction is going to tank the economic recovery – not just in the state but across the nation,” he said.

Amy said he’s fortunate to be able to work with tenants on rent.

“For every property owner who’s in a position to reduce or waive rent, there are dozens who do not have the ability to do so,” he said. “This is an economic ecosystem problem. … It’s really important that we have system-wide solutions, and the only people who can offer that is the government.”

As local businesses close, Amy said he’s concerned well-capitalized chains backed by Wall Street will move in.

“Yes, I think that the character of our community is at risk,” he said.

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Works Progress Architecture has more work to do before its design for a multifamily building in North Portland can gain approval, design commissioners said.

The Portland Design Commission heard an appeal from the firm on Thursday; a proposal for a five-story, 73-unit building was denied previously. The project, called “,” is being led by Ethos Development LLC. The proposal for property at 5626 to 5632 N. Montana Ave., in the Overlook neighborhood, is scheduled to return before the commission on Aug. 20.

“The proposal continues to fall short of guidelines,” Commission Chairwoman Julie Livingston said, referring to design guidelines for public realm and quality and permanence.

Works Progress Architecture asked for an exception to allow for oriel window projections – a signature element for the firm – despite objections from the Portland Bureau of Transportation. A staff report also raised concerns about window louvers that were “not well integrated into the overall design” and the use of “fiber cement panels and fiber cement shingles” at ground level.

Facing a likely adverse vote, Works Progress Architecture asked the commissioners not to vote, but to instead hold the record open until the August meeting.

Frustration surfaced both for the project team and city officials. Carrie Strickland, founding principal of Works Progress Architecture, urged the Bureau of Development Services to “have an interactive process with us this time around so we’re not wasting everybody’s time and money.”

Conversations with the BDS need to happen before project drawings are submitted, said Benjamin Nielsen, a senior planner with the bureau.

“I need that interaction to happen up front and not at the end,” he said.

Livingston acknowledged that the design review process is more challenging now.

“It’s a clunky process and it’s been made clunkier by the fact that we’re all remote,” she said. “This has gotten exponentially harder.”

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Portland’s commercial landlords are quietly working individually with tenants to reduce or delay lease payments during the coronavirus pandemic.

Landlords are prioritizing efforts to keep mom-and-pop tenants afloat while their doors are closed. On Monday, Gov. Kate Brown ordered most types of retail businesses to close. Even those businesses that are permitted to remain open – restaurants, for example, can provide to-go service – face a steep decline in revenue.

Guerrilla Development owner Kevin Cavenaugh wrote a letter to the company’s 32 restaurant and retail tenants forgiving April rent. The recipients of the March 17 note included operators of restaurants, bars and hair salons.

“It was a pretty easy decision,” Cavenaugh said.

Many of Guerrilla Development’s tenants are on leases of five, six or seven years.

“Guerrilla’s a long-term-hold company and a relationship company,” Cavenaugh said. “I care about you paying me rent a year from now, not two months from now.”

Beam Development is also working with its retail tenants who depend on a steady flow of foot traffic, including Water Avenue Coffee, Bunk Sandwiches, Danwei Canting and others. Beam relies heavily on local businesses that rent relatively small spaces.

“We’re sensitive to the health and survival of our tenants,” said Brad Malsin, Beam’s founder and principal. “We’re going to arrive shortly at a relief package for them.”

Other commercial landlords are taking similar steps, hoping to act as a buffer to ensure tenants can endure the shutdown. In doing so, landlords said they’re acting both out of selfless virtue and selfish business interests. Without tenants, landlords don’t make money. And in a sudden, precipitous economic decline, it may be more prudent to ride out the crisis with existing tenants rather than evict nonpaying ones as they might in more normal times – particularly with demand from prospective tenants likely to be next to nonexistent for weeks or months to come.

“It’s the right thing to be doing to give tenants relief, whether it’s commercial or residential,” said Paul Del Vecchio, founding principal of Ethos Development. “We’re going to be the buffer, and we’re prepared to be. We’ve proactively cut rent and told our businesses to pay their employees first. We want them to come out the other side.”

Ethos owns the Barley Pod food-cart pod on Northeast Halsey Street and other commercial spaces. Ethos has cut rent for April, and will address May when it comes closer, Del Vecchio said.

“We’re working with people,” he said. “There’s not a lot of slack in the economy, even when it was running well. So it doesn’t take much (to disrupt it).”

Del Vecchio and Josh Bean, an Ethos principal, went to their investors to discuss cutting rent for retail tenants. They didn’t hesitate.

“We reached out to our investors and all talked about it, and we decided it was better to lean into this proactively,” Del Vecchio said.

Some building owners are providing relief for tenants but did not want to be identified, fearing backlash from lenders, investors or less-vulnerable tenants who are not getting a break. A large-scale Portland landlord, who was not willing to be identified, said he is cutting rent in half for his mom-and-pop commercial tenants for the next three months, then amortizing the rent on the back end with no interest. He still expects corporate tenants to pay their usual rent.

Retail tenants are first in line for help. Office tenants often are locked into longer leases and are typically less vulnerable to a short-term downturn.

Brown’s  is discussing a potential moratorium on commercial evictions due to inability to pay. State agencies including Oregon Housing and Community Services and the Department of Consumer and Business Services are also pursuing relief options, according to the governor’s office.

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A team proposing a single-family subdivision in Northeast Portland is set to meet with Bureau of Development Services staff on Wednesday in a .

Applicant Ethos Development is seeking to subdivide a 3.81-acre undeveloped parcel slightly south of Northeast Killingsworth Street stretching between Northeast 74th and 77th avenues in the Cully neighborhood. The tomahawk-shaped property abuts Sacajawea Park. Pyco LLC owns the property as well as an adjacent 13.41-acre industrial parcel to the east.

The proposal as submitted to the BDS calls for a Type III land division to allow construction of between 23 and 28 single-family residences on individual lots. Drawings from WDY Structural and Civil Engineers show that Northeast 75th Avenue, which currently ends at Northeast Roselawn Street, would be extended south through the Pyco property and connect with Northeast Alberta Street as part of the development. Additionally, Northeast Sumner Street would be extended through the Pyco property east to west between Northeast 74th and 75th avenues to create additional access.

in a number of states; in Oregon, it has targeted Portland. Construction of the Bridgetown, a 50-unit apartment complex in the Beaumont-Wilshire neighborhood, finished in 2017. Work on the Margot, a 20-unit building on the western edge of the Richmond neighborhood, wrapped up this past fall.

Other projects in the works here include: Nomad, a 130-unit apartment building in the Overlook neighborhood; the Dean River, a 72-unit apartment building in the Brooklyn neighborhood; and Fernhill Crossing, a 19-unit complex in the Cully neighborhood.

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