Developed and built through a pandemic, new regulatory obstacles and a swift and severe economic downturn, Greystar‘s Sawbuck is nearing completion with 182 apartment units in Goose Hollow.

Crews are finishing apartments, installing mailboxes and laying brick on the podium patio deck in anticipation of residents. Apartments are available for preleasing. The eight-story building is on track to apply for a temporary certificate of occupancy in mid-to-late July, said Doug Burges, Greystar’s director of development for the region.

Sawbuck will also be one of the first large multifamily projects to offer inclusionary zoning units required by the city of Portland.

“We proved it by getting this project to go that we can attract investment at this scale and deliver affordable units,” Burges said.

Sawbuck, 1725 S.W. Salmon St., takes its place in an increasingly dense Goose Hollow. Providence Park is across the street on Eighteenth Avenue. On the building’s south side, across Salmon Street, is the massive under-construction edifice of Lincoln High School. Nearby, other office, commercial and residential projects are in various stages of development and construction, while others have stalled.

Portland’s multifamily market has been buffeted by the Covid-19 pandemic, increased regulations such as inclusionary zoning that make projects less profitable and perceptions about the city’s out-of-control homelessness and sometimes-violent protests. Sawbuck is one of a handful of sizable multifamily buildings that are due to be completed this year.

Sawbuck’s completion is more like an echo of past economic conditions than a sign of current market robustness, said Noel Johnson, principal with developer Cairn Pacific, who is not involved in the project.

“This project, and there are a few others that are still yet to finish, are examples of the market which is a distant memory at this point,” Johnson said. “That doesn’t take anything away from the project – we’re lucky to have new housing units – but it doesn’t say anything about today’s market.”

Sawbuck was backed financially by a major insurance company and received a construction loan from City National Bank.

Greystar is interested in building more projects in the city of Portland, Burges said. “We want to do business in the city of Portland because we believe in the long-term,” he said. “We know the challenges, but I think things are going in a positive direction.”

Greystar, which is based in Charleston, S.C., opted to meet its affordable housing obligations by providing 10 percent of units affordable at the level of 60 percent of area median income. The developer also used an option to provide an equivalent number of bedrooms rather than units. The result is 10 two-bedroom units offered at restricted rents.

In return for the inclusionary units, Greystar receives a 100 percent property tax abatement on all residential units for 10 years. Burges said the tax break “barely makes it work” financially to build the project.

Sawbuck was designed by SERA Architects and built by Hoffman Construction serving as general contractor. (Hoffman is also taking the lead at Lincoln High next door, making Goose Hollow a nexus of activity for the local contractor).

Construction continued despite the pandemic. When positive COVID-19 tests arose, crews were quarantined while others continued working, Burges said. “Hoffman did a very good job of dealing with it,” he said.

Construction and design were complicated by the subterranean presence of Tanner Creek, located about 40 feet below ground. Crews replaced a brick aqueduct dating from the early 20th century with structural steel. The building essentially straddles the creek, with no structural elements placed atop the waterway.

The creek also made it impossible to build a conventional below-grade parking garage. Sawbuck instead uses mechanized stackers for which steel was imported from China. The stackers can accommodate 86 vehicles.

Greystar purchased the property, a former parking lot, from TriMet for $6.5 million in 2019, according to public records.

Burges said Greystar was attracted by Portland’s market fundamentals and some perks of the Goose Hollow site: It’s on the MAX line and surrounded by long-term institutional properties including Providence Park, the Multnomah Athletic Club, Lincoln High and Zion Lutheran Church.

“It was not easy,” Burges said. “But it’s a project that’s built right. It’s attractive. And if you’re going to be among these institutions, you better build something to last.”

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More than 18 months after inclusionary housing took effect in Portland, the first project to bring affordable housing to market under the policy may offer only a single affordable three-bedroom apartment.

Affordable units have been slow to come to market in Portland as for-profit developers navigate the inclusionary housing process. Not one has been built yet, according to stakeholders and city documents.

Developments that include 362 inclusionary units have received permits or are close to receiving permits, according to a Portland Housing Bureau report dated Sept. 26. Since inclusionary housing took effect Feb. 1, 2017, 8,578 units in buildings of 20 or more units have entered the city’s permitting pipeline.

Yet the permitting data offers an incomplete picture – it does not reflect how many projects actually get built. Developers may withdraw or delay construction for any number of reasons, and commonly do so.

Urban Asset Advisors could be the first developer to bring inclusionary housing units to market. The Portland firm, according to its president, Tim O’Brien, has two projects that should have building permits in the coming weeks.

In the case of Multnomah Station, a 39-unit apartment building in Southwest Portland, the inclusionary housing requirement will likely be satisfied with a single three-bedroom apartment, O’Brien said.

The rules, adopted by the City Council at the height of Portland’s housing crisis, give developers the option of providing 8 percent of units affordable at 60 percent of the Portland area’s median family income or providing 10 percent of units affordable at 80 percent of median family income or paying a substantial fee-in-lieu to the Housing Bureau to fund affordable housing.

A provision that was introduced by former Commissioner Steve Novick to allow developers to convert the requirement to an equivalent number of bedrooms rather than units also comes into play. That provision allows Urban Asset Advisors to satisfy the requirement at Multnomah Station with a lone three-bedroom unit.

Similarly, at Artisan on Division, a 54-unit project planned at 3249 S.E. Division St., the requirement for 8 percent affordable units becomes four bedrooms. That will likely be met by a three-bedroom unit and a studio unit, O’Brien said.

The 8 percent option makes projects more workable, he said.

“For us, it worked better because it’s a smaller percentage (of units),” he said.

The Housing Bureau is encouraging developers to choose the 8 percent option, said Matthew Tschabold, the bureau’s interim assistant director.

“We calibrated the program so the 60 percent option would be attractive as a voluntary option because there’s a great need for affordable housing at that income level,” he said.

The Housing Bureau’s data shows a majority of inclusionary units that have been identified are at the 60 percent income level.

A number of projects that have recently moved into design review come from large, out-of-state developers such as Security Properties of Seattle, Fairfield Residential of San Diego and Greystar Real Estate Partners, based in Charleston, S.C.

The long-term effects of inclusionary housing on the multifamily market remain to be seen. Developers rushed to beat the deadline when the affordable housing requirements took effect, creating a massive overhang of projects vested according to pre-inclusionary housing rules. Once 19,000 units, that backlog has fallen to a little more than 8,000 units – still a massive number.

Developers are “not sure if their projects are going to move forward” because of broader market conditions, Tschabold said.

Higher construction costs and rising interest rates have made profitability difficult for multifamily projects. In some submarkets, rent growth has softened and even gone backward.

Urban Asset Advisors is not looking to begin new multifamily projects, O’Brien said.

“We’re not buying land right now – not even looking,” he said. “The winds of change are against new housing production, in addition to (inclusionary zoning).”

O’Brien predicted it’s only a matter of time before another housing crunch hits Portland as developers refrain from building multifamily projects that are subject to inclusionary housing requirements.

“Without a doubt,” he said. “I think it’s 24 months from now. I think it’s pretty apparent.”

Noel Johnson, principal with developer Cairn Pacific, said inclusionary housing caused a deep pullback in multifamily development.

“It has had a bigger impact than the global financial crisis,” he said.

Tschabold said it’s too early to draw conclusions on inclusionary housing’s effects on multifamily construction.

“We’re watching it closely, but at this point we think it’s still too soon to tell,” he said.

Even the shallow ranks of developers still willing to build multifamily housing face delays. Since inclusionary housing took effect, developers have had to negotiate system development charge waivers and agreements for affordable units for each project.

“It added probably three months onto our permit cycle,” O’Brien said, adding that he hopes to have permits for Multnomah Station and Artisan on Division in about 30 days.

Developers have had to negotiate inclusionary housing agreements with the city attorney’s office, the Housing Bureau and individual city commissioners, Johnson said.

“You have a bottleneck that is unfathomable,” he said. “The city is processing, in a highly negotiated way, every project in Portland.”

The city is working to standardize the process for meeting inclusionary housing requirements, Tschabold said. A number of proposed technical changes will be presented to the City Council in December for approval. They’re a mix of suggestions from city staff and others to make the rules “a little bit more robust, albeit more objective and clear,” Tschabold said.

The Housing Bureau is also delaying a scheduled ramp-up that would cause affordable housing requirements to rise to 10 percent of units at 60 percent of median family income or 20 percent of units at 80 percent of median family income.

The Housing Bureau is open to making changes to the program, Tschabold said.

“We’re continuing to monitor it and make adjustments, and if folks have suggestions to make the program work better, we’re always open to hearing that feedback and assessing what adjustments can move forward,” he said.

Mayor Ted Wheeler, speaking at an Oct. 16 housing event, said inclusionary housing “seems to be showing good progress.”

“If it needs trueing up or refinement, I’m committed to trueing up and refining as necessary,” he said.

The looming slowdown of post-inclusionary housing multifamily projects may not be felt in the housing market for years, Johnson said.

“I am worried,” he said.

Tweaking the program now may not help much, he added.

“It’s awkward for all of us,” he said, “because at this point, the damage is done.”

Editor’s note:  This story has been updated to reflect the correct address of the Artisan on Division project.

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Goose Hollow will soon gain another major new building.

The Portland Design Commission on Thursday approved SERA Architects‘ design for an eight-story mixed-use building with 182 apartments and ground-floor retail space.

The building from Greystar Real Estate Partners, based in Charleston, S.C., will top out slightly below 85 feet. Located at 1715 S.W. Salmon St., the building will form a gateway with the rebuilt Lincoln High School bridging the West Hills and downtown.

Goose Hollow is seeing an explosion of projects, including the Press Blocks, the Providence Park expansion, a seven-story mixed-use building at 1440 S.W. Taylor and others.

The Greystar project had a relatively smooth trip through Type III design review. Commissioners voted 5-1 to approve the design. Tad Savinar voted against it; Andrew Clarke was absent.

SERA principal Kurt Schultz presented the design, which calls for a structure that hinges on a curved corner at Southwest Salmon Street and 18th Avenue; it’s reminiscent of the Flatiron building in New York City. Portland has other examples of this architectural style, including the McMenamins Crystal Hotel in the West End.

The corner will likely feature a ground-floor restaurant with some outdoor dining, a bench and stairs. Design commissioners indicated they would allow SERA to do away with a sculptural map of Tanner Creek’s historic course that met with a cool reception.

“I’d ditch it,” Commissioner Don Vallaster said. “It’s not doing anything.”

Chairwoman Julie Livingston agreed.

“On balance, you’re still meeting guidelines,” she said.

The retail space will have high ceilings – up to 20 feet in some spots, fronted by glazing. A curb extension will allow pedestrians to more easily cross the street to or from Lincoln High.

Savinar said the corner design was not successful. “Personally I think the corner falls down as a gathering space or even a well-functioning public space,” he said.

The project had previously been through two design advice meetings. The building evolved with cleaner lines and fewer balconies, although some were restored before design review. In the end, the building ended up with seven balconies per floor, with some inset and some projecting off of the building.

The Goose Hollow Foothills League did not object to the building. Jerry Powell, planning co-chairman, said the building was in line with what had long been envisioned for the property.

The project’s evolution was noticeable, Commissioner Zari Santner said.

“I have really witnessed the impact of the design advice requests on the outcome,” she said.

Livingston added, “The revisions have really pushed the coherency of the building forward in a strong way.”

Savinar thanked the developer for choosing brick rather than an inexpensive metal cladding.

The project was proposed after the city’s inclusionary housing policy took effect. Kristen Keipert, senior development manager for Greystar’s Portland office, said the project will comply with inclusionary housing rules, but Greystar has not settled on which option it will choose. Greystar is discussing the options with the Portland Housing Bureau, she said.

The developer could opt to provide 20 percent of units affordable at the level of 80 percent of area median income, or 10 percent of units at 60 percent of area median income, or pay a substantial fee to the Housing Bureau.

The project also will have mechanized internal vehicle parking and 278 long-term bicycle parking spaces.

Construction is set to begin in summer 2019, when Tanner Creek runs at its lowest level, Schultz said. Work will start by lining and rehabilitating the creek.

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