For the last seven years, Oregon has been roiled to find solutions to secure additional housing. The price of new homes and rentals is steadily rising; renters have complained that the lack of adequate alternatives allows landlords to force them to pay higher rents and enter into agreements that heavily favor the landlord. Moreover, the effects of homelessness are manifest on the streets of many cities and suggest a breakdown in the social order. Housing has become a major, if not the major, political and social issue in the state for the last decade.

From the time she was House Speaker, Gov. Tina Kotek has been a driving force in responding to the so-called “housing crisis” in the form of legislation and state funding. Since 2019, Kotek has proposed, and the Oregon legislature has adopted, multiple solutions to relieve the situation of renters, to provide shelter for homeless persons and to increase the number of housing units, especially to low and moderate income Oregonians.

Let us consider each of these three areas.

Renters have seen benefits as the Legislature imposed statewide rent control, restricted the use of evictions, enacted tenant rights regarding security deposits, fees and the habitability of premises. These changes improve the situation of renters, despite concerns that they discourage construction of new rental units. The number of building permits for new multifamily units in Oregon, which range from basic to luxury housing, was about 5,000 in 2024 and 2025. These numbers are far short of the annual 36,000 new housing units the state declares as necessary. That deficit will not be filled by other forms of housing such as new single-family dwellings.

There are many reasons for these relatively low numbers, but they do show that investors are not lining up to build more units in Oregon.

Regarding homelessness, Gov. Kotek declared a housing emergency in 2023 and saw through legislation that mandated siting of homeless shelters despite local zoning restrictions and provided funding for their operation. Nevertheless, a recent federal report found that, while , approximately 27,200 people experienced homelessness in Oregon in January 2025, a 19 percent increase from the previous year and the second largest increase for any U.S. state.

Federal, state, and local funding for homelessness are likely to decrease as the numbers of homeless persons increase. This is discouraging news.

As to increasing the number of available housing units, it is here that the Oregon Legislature has been most active. Since 2019 Oregon requires that accessory dwelling units and duplexes be allowed in most urban areas and in larger cities that a suite of housing alternatives that increase density be allowed in single-family zones. It has established a statewide housing apparatus that keeps track of existing and proposed housing and allocates housing obligations on local governments to allow their fair share of the regional housing need.

These significant land use law changes were supplemented over the years by other measures designed to preempt local regulations as a means to encourage residential uses , especially those relating to low income or affordable housing. Local governments were admonished to use only “clear and objective standards” to regulate housing, to decide within certain time limits, that larger communities would provide a Housing Production Strategy to assure they were on target to meet their fair share of housing (with the state both assisting them and providing disincentives for failing to do so), allowing housing on certain commercial, public or religious land notwithstanding local zoning, requiring the use of up to 10 “adjustments” from various local zoning requirements in housing cases, encouraging use of Inclusionary Zoning” to give applicants who accommodate affordable housing increased density or other benefits, prohibiting or nullifying private covenants that would restrict certain housing, allowing “one-time” changes to urban growth boundaries and limit or eliminate local hearings or appeals in certain housing development cases. This partial list demonstrates legislative commitment to providing for housing development, a commitment that is, in terms of activity, far more detailed and extensive than that involved with landlord-tenant relations or providing shelters for the homeless.

The question is whether all this activity will produce results. Many of the land use measures are derived from changing state-local land use relationships in California, which does not have a statewide land use program comparable to Oregon’s half-century of experience with the Land Conservation and Development Commission, which has a stronger deference to local controls, and which is even more committed to overcome planning and zoning restrictions to accommodate housing. By waiting so long to do so, California’s efforts are meeting with local resistance and time consuming and expensive litigation which Oregon has largely avoided.

But what has all this activity meant for housing? While it is too early to come to a definitive conclusion, the numbers are revealing. In the last three years, Oregon has not met half of the 36,000 residential dwelling permits it projects as needed. Over half of the residential building permits issued between 2014 and 2023 were for single family housing. The state permitted 14,621 units in 2024, down 33 percent from the 2021 peak of 21,916. Multifamily permits (5-plus units) dropped by over 50 percent from 2022 to 2024. Lower birthrates, slower population increases and higher household formations as younger people strike out on their own puts a strain on housing and households get smaller (they now average 1.9). With all this housing need, the market should be building more housing. Why is this not happening?

The reasons are many, starting with interest rates as public debt and the stock market attract capital, the increased cost of materials and labor, especially after the Iran war, the lack of construction labor availability following immigration sweeps, low income levels that do not compete with other similarly-sized urban areas across the county and a state public financing system that leaves local government infrastructure dependent on bonding (requiring a public vote to raise property taxes) or systems development charges (which raise the cost of housing).

What do not appear to be reasons are litigation (LUBA has almost no urban housing cases) or local delays (there are almost no cases in which local governments have violated state laws against delays). This suggests that what is not needed is more state preemption of local land use regulations. Cities are barely keeping up as it is.

What is needed is money to deal with heavy systems development charges and subsidies to low income and affordable housing. King Canute could not command the tides and the State of Oregon cannot produce more housing by mere fiat.

Edward J. Sullivan is a retired practitioner in land use and municipal law with more than 50 years of experience in these fields. Contact him at esulliva@gmail.com.

Carrie Richter is an attorney specializing in land use and municipal law at the law firm Bateman Seidel. Contact her at 503-972-9903 or at crichter@batemanseidel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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Three business partners who came together during the pandemic seek to transform the site of a shuttered Rite Aid store in Southeast Portland into a two-building multifamily development with at least 200 apartments.

The project at 2440 S.E. Cesar E. Chavez Blvd. comes from Seneca Development Co., which was founded in 2020 by industry veterans Michael Hamilton, Bryant Jaksic and Andy Schreck.

An early assistance request for the project’s first phase landed last week. Plans for the initial phase call for 120 apartments and ground-floor retail space.

A second phase would place 80-90 residential units in a building on an adjacent lot, also with ground-floor retail space.

The Seneca Development trio initially joined forces to build The Robert Apartments, a 55-unit building that was completed in Albina in 2022. After shepherding the project through construction and securing tenants, the developers began considering their next move. They turned their attention to the Richmond neighborhood, where a drug store had closed in 2023 at the highly trafficked corner of Southeast Division Street and Cesar E. Chavez Boulevard.

Seneca plans to close in August on the property, which is owned by a limited liability company linked to Tim Small of Portland.

The Division Street corridor has seen increased investment stretching from the Willamette River east to 52nd Avenue, a trend the Seneca partners noticed.

“We love the area,” said Hamilton, Seneca’s president. “All three of us are born-and-raised Portland natives. We like seeing the neighborhood improve. Housing is a huge need, so if we can develop quality housing that’s affordable for everyday Portlanders and contribute to the vitality of our city, that’s our goal.”

Seneca plans to construct the buildings in two phases. The first would be located at the Rite Aid site. The second would replace a surface parking lot north of Southeast Caruthers Street.

In compliance with the city’s inclusionary housing program, 10 percent of the units will be affordable for tenants making up to 60 percent of the area median income.

Both phases are being designed by Josef West of West Architects in Beaverton. Seneca will use its own in-house general contractor, Hamilton said. Lakeside Investment Group, based in Dallas, Oregon, is a partner in the project.

Seneca plans to break ground on the first phase in spring 2026, with completion expected in late 2027. The two phases will cost an estimated $50 million.

The project comes on the heels of another significant multifamily proposal in Southeast Portland. High Street Residential in March engaged in an initial design advice hearing for a 243-unit proposal in the Sellwood-Moreland neighborhood.

Portland has gained little multifamily housing in recent years, and Hamilton said the light pipeline provides an opening for new projects. Permit review times are growing swifter, interest rates have declined, and subcontractors are looking for work, Hamilton said.

“Frankly, the last two and a half years, it has been very difficult to get a market-rate project off the ground,” he said. “There is a massive shortfall with projects being submitted to the city for permit. Review times are speeding up because the city isn’t looking at a bunch of stuff. We’re already seeing softening when it comes to labor pricing. Our hope is we can time it right when it comes to permits.”

Data paints a picture of a stable multifamily market. Vacancy rates in the Portland-metro area grew to 8.9 percent in the first quarter of 2025, up from 8.1 percent a year earlier, according to Kidder Mathews. Properties’ rent prices were essentially unchanged, declining less than 1 percent to $1,872.

Average sale prices hovered near $180,000 per unit, at a 6 percent capitalization rate.

Seneca owns several other developable properties around Portland that it plans to build on when market conditions improve, Hamilton said.

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A controversial proposal to modify zoning codes to address Portland’s housing crisis has triggered a surge of public opinion. More than 200 testimonies were received at the city’s Planning Commission hearing on Tuesday, with more than 20 individuals providing in-person and virtual testimonies.

The proposed housing production strategy, a key component of the Housing Regulatory Relief Project, includes a temporary five-year suspension of various zoning codes and development standards identified in a Bureau of Development Services (BDS) survey as the top obstacles to housing production. These changes encompass suspending requirements for ground-floor active use, eliminating eco-roof and bird-safe glazing standards, and reducing bike parking requirements.

The housing production strategy aims to address the urgent need for housing in a city requiring approximately 120,560 new housing units over the next two decades. This need is driven by Portland’s growth, vacancy rates, historical underproduction of housing units, and the demand for homes for the homeless.

Sandra Wood, the principal planner at the Bureau of Planning and Sustainability, said that for housing to be constructed in the present environment, development costs must decrease or rents must increase, likely requiring a combination of both. While the city cannot control the high interest rates causing financing challenges nationwide, the housing relief strategy aims to reduce costs by streamlining permitting approval timelines and simplifying code requirements.

“We understand that this is a piece of the puzzle,” Wood said. “Not the full puzzle, but it is a piece nonetheless.”

Public comments were predominantly in favor of easing housing production, with support from community members and building industry professionals. However, a substantial portion of the public opposed the proposed changes related to bike parking, eco-roofs, bird-safe glazing, ground-floor active use, height requirements and the suspension of elements in the design review and neighborhood contact process.

During Tuesday’s hearing, Portland Design Commissioner Chandra Robinson, speaking on behalf of the commission, expressed concern about the short timeframe for reviewing and studying the proposed changes, describing it as “short-sighted” and “irresponsible.” These changes are set to be presented to the Portland City Council during the Dec. 20 meeting. Robinson said that although the changes are temporary, their effects will be long-lasting, as buildings are designed to last for 50 years or more. She argued that removing ground-floor active use requirements would reduce the presence of eyes on the street, potentially leading to increased crime and vandalism. Robinson urged the Planning Commission to delay approval of the proposed changes to allow more time for public comments, saying that “It’s only going to benefit the city, and not have it continue down a downward spiral.”

In a letter to the Planning Commission, signed by all commissioners except Commissioner Sam Rodriguez, alternative proposals were put forward.

Chair of the Portland Landmark Commission, Andrew Smith, said that any near-term changes to regulations should focus on removing barriers and streamlining processes rather than introducing physical changes that “we will live with and likely regret for the next 50 or more years.”

Several members of the building industry expressed support for the housing relief proposal. Sarah Zahn, director of development for Security Properties, said that the challenges posed by high interest rates is making financing for projects scarce and challenging. While each proposed code change may constitute a small portion of project costs individually, their cumulative impact is significant.

Doug Burges, director of development at Greystar, said that these challenges are felt with a recently approved 381-unit tower project in the Pearl District. That, he said, “can’t be financed in today’s environment,” adding that a slight budget relief could go a long way in assisting the project, which also includes 31 units of inclusionary housing.

The proposed amendments to reduce bike parking from 1.5 spaces per unit to 1 for developments in and near downtown, and from 1.1 spaces per unit to 0.7 for those farther out, faced significant opposition from the public. However, members of the building industry noted that they consistently observe that more than half of bike parking rooms remain unused. Ernesto Fonseca, CEO of Hacienda CDC, shared that in a recent project, approximately eight additional studio units could have been constructed if bike parking requirements were reduced. Gus Baum, director of development at Security Properties, said that roughly 770 bike stalls were required for a development along Sandy Boulevard, equivalent to approximately 15,000 square feet of space.

“Far in excess of what will be used for any current or future resident,” Baum added.

In a cost study of the proposed changes, it was estimated that a bike room for a typical 64-unit multifamily development (approximately 1,950 square feet) would cost $509,000, equivalent to about 2.6 percent of the construction costs, or $7,953 per unit.

Following the extensive public comments, commissioners requested the addition of an extra day of hearings to allow for further deliberation on proposed amendments to the current proposal. Chair Commissioner Mary O’Meara indicated her lack of support for eliminating the eco-roof and bird-safe glazing requirements, which received the most public opposition. She said she does not see how removing these requirements would contribute to easing housing production. Additionally, an amendment could be considered to restrict the temporary removal of ground-floor active use requirements to affordable housing developments, where it has been a development obstacle.

The next Planning Commission hearing has been scheduled for 12:30 p.m. on Nov. 7.

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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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Tiffany Sweitzer has built in Portland more than 2,000 housing units, including the luxury Cosmopolitan condos in the Pearl District.

But now Sweitzer’s development company, Hoyt Street Properties, will not build more condos in Portland’s Central City, she said, unless changes are made to the city’s inclusionary housing program.

“With the latest inclusionary zoning constraints, we will probably sell our remaining land or build office (space) instead,” she said.

A year after inclusionary housing rules took effect, they are being reviewed by the Portland Housing Bureau. The rules for condos are the first part of a comprehensive reassessment of inclusionary housing, which took effect Feb. 1, 2017.

“We’ll look at what changes are needed to make sure the inclusionary housing program is effective, because the more units that are built, the more inclusionary units we get,” said Matthew Tschabold, policy and equity manager for the Housing Bureau.

Mayor Ted Wheeler has made building affordable housing a priority during his administration to address Portland’s self-declared housing crisis. In December, he shook up the Housing Bureau, replacing Director Kurt Creager with Shannon Callahan, a city policy analyst who is serving as interim director.

The inclusionary housing program has dramatically affected the multifamily pipeline. Developers rushed to submit applications for projects before the effective date, putting 19,000 units into the pipeline. But the amount of work for architects who design multifamily projects has since dwindled.

Among rental proposals, 23 projects totaling 1,083 units have moved into the permitting process. Of those, 730 units come from the private sector, with the Housing Bureau responsible for the rest.

The flow of condo projects has already slowed to a trickle. Since Feb. 1, 2017, only one application for a condo project – totaling 15 units – has been submitted for land-use approval, according to the Housing Bureau.

The condo rule changes are expected to take effect March 20. Prior to that, the Housing Bureau will take public comment at a Feb. 21 staff hearing.

The draft changes outlined by the Housing Bureau set restrictions on the resale of inclusionary housing condos. The bureau is given first right of refusal on purchasing units. Refinancing is tied to the restricted resale value of a unit set by the Housing Bureau.

Other rules require condos be maintained as a primary residence, be purchased by a first-time homebuyer and not be operated for purposes such as vacation rentals. Cash purchases of inclusionary housing condos would be barred. And units must be maintained under affordability rules even if they are converted from condos to apartments or vice versa.

Taken together, the rules would spook lenders, making financing for condominium projects difficult, Sweitzer said.

“It looks like condo construction is stopped in its tracks – and it will be with us,” she said. “We will be done under rules like these with building condos.”

Sweitzer said she was disappointed she was not asked to weigh in on the draft rules.

“I’ve built over 2,000 housing units, and I have not talked to the city of Portland, the Housing Bureau or anyone else working on the rules, which is just incredible,” she said.

The draft rules revisions allow for more flexibility, Tschabold said. For example, if a condo owner is unable to sell for 12 months within the program guidelines, the income restrictions on sales would be loosened. A buyer with 100 percent of Portland’s median family income could purchase a condo set aside for buyers at 60 percent of median family income, and a buyer with 120 percent of median family income could purchase a unit set aside for buyers at 80 percent of median family income.

“We’ll do whatever we can to help facilitate linking a buyer and seller,” Tschabold said.

Even after inclusionary housing rules took effect, the Housing Bureau permitted approximately 5,000 units – about the annual average in recent years, Tschabold said.

A forthcoming report from the Bureau of Planning and Sustainability analyzing inclusionary housing’s first year is expected to add fuel to the debate.

The Housing Bureau has been working with Oregon LOCUS, a trade group for developers, to devise incentives for developers who applied before inclusionary housing rules took effect to opt into providing affordable units. Mike Kingsella, executive director of Oregon LOCUS, did not return messages seeking comment.

The incentives will look similar to the Housing Bureau’s old Multiple-Unit Limited Tax Exemption (MULTE) program, Tschabold said, offering tax breaks in return for affordable units.

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The city of Portland is considering offering developers up to $50 million in tax breaks to include affordable housing in their multifamily properties.

The tax breaks are targeted at the flood of projects that were submitted to the city’s Bureau of Development Services ahead of the Feb. 1 effective date for inclusionary housing rules. Projects submitted before that date do not have to include affordably priced apartments.

This accumulation of projects submitted under the city’s old rules means it could be two to three years before Portland sees any meaningful affordable housing supply.

City officials estimate there are 19,000 housing units vested according to the old rules. If those projects had been submitted after the inclusionary housing deadline, they could theoretically yield 3,000 to 4,000 affordable units.

Details of the voluntary inclusionary housing incentives are still in flux. Housing Bureau Director Kurt Creager is considering a tax break capped at $5 million annually for the program, totaling $50 million during a 10-year period.

“This proposal would essentially grant a 10-year property tax exemption to any developer who will opt into inclusionary housing,” said Matthew Tschabold, policy and equity manager for the Portland Housing Bureau, at an Aug. 1 Housing Advisory Committee meeting.

Projects with 20 or more units submitted between Jan. 1, 2016, and Jan. 31, 2017, would be eligible for the tax breaks.

Some advisors said the property tax exemptions are at best premature, as the inclusionary housing policy is only six months old.

”I just hate to see you give up $50 million,” said Dike Dame, a Portland developer who serves on the Housing Advisory Committee.

The backlog of permits will eventually work itself out, Dame said. “These people are not going to sit on these permits forever,” he said. “We’re barely in the beginning of the game here.”

Tschabold cautioned against jumping to conclusions. I do think it’s too soon to tell,” he said at the committee meeting.

Affordable housing incentives will depend on a six-month review of inclusionary housing’s implementation being conducted by the Bureau of Planning and Sustainability, Tschabold said.

City staffers are also wrestling with how many of the 19,000 housing units vested before Feb. 1 will actually get built, and how many were placeholders filed by developers seeking to vest under the old rules.

“Some of these are just shell applications – let’s be honest,” Tschabold said.

As they formulate the tax incentives, city staffers have been in touch with developers to gauge what might work. Developers say the incentives will only prove valuable if they’re more lucrative than a market-rate project built according to the city’s old rules.

“We think that the effort is certainly interesting, and we continue to work with the city on that basis and provide feedback,” said Mike Kingsella, executive director of Oregon Locus, a developers’ association. “We think that our focus needs to be on the opt-in framework being better than the alternative, and that might mean taking a look at the duration of the affordable (requirement).”

Kingsella said the city should reconsider the 99-year duration of affordable units, which makes lenders and investors uncomfortable. Kingsella has advocated for the inclusionary housing program to look more like the city’s Multiple-Unit Limited Tax Exemption (MULTE) program, in which the duration of the affordability requirement and tax exemption matched.

“Ultimately, for a market participant, the decision is going to be based on does the project look better by opting in,” he said.

The tax breaks would require City Council approval.

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Urban Asset Advisors is studying the feasibility of two mixed-use projects that could test Portland’s inclusionary zoning rules.

The development firm is proposing a four-story apartment building with ground-floor retail space and parking at 7661 Southwest Capitol Highway in Multnomah Village. The structure of a retired gas station sits on the property.

The building could include 40 to 50 apartments. It would meet community design standards.

Urban Asset Advisors is also considering a second project at Southeast 33rd Avenue and Division Street, where the company is building the 30-unit Division 33 Flats. The developer has not yet closed on the property for the second project.

Whether the proposed projects get built depends on the city’s interpretation of inclusionary zoning rules, said Tim O’Brien, president of Urban Asset Advisors.

“We’re going to see how the city’s interpreting that,” he said.

Both proposed projects are in early development stages, O’Brien said.

“We’re doing much earlier than normal assistance meetings,” he said. “We’re really right now in the feasibility stage on the Division one and the Multnomah one depending on how the city responds in the early assistance meetings.”

City rules require developers of buildings with 20 or more units in mixed-use zones to include affordable units. Developers may designate 15 percent of the units affordable at 80 percent of median family income, or 8 percent of units affordable at 60 percent of median family income. They may also pay a fee in lieu of providing affordable units.

If Urban Asset Advisors’ projects go forward, they would be among the first under the city’s inclusionary zoning mandate, which took effect for new applications beginning Feb. 1.

New development applications for multifamily projects have all but halted in Portland since inclusionary zoning took effect. Some developers have complained the affordability requirements make it difficult to finance or profit from multifamily construction.

The Multnomah Village project is likely to elicit opposition from the neighborhood association. The group raised objections to Urban Asset Advisors’ current project in the neighborhood, the 70-unit Multnomah Village Apartments.

“We don’t want to stop development,” said Martie Sucec, chairwoman of the Multnomah Neighborhood Association. “We certainly don’t want to stop housing. But they’re allowed – in fact, encouraged – not to have enough parking.”

Sucec said she doesn’t want Multnomah Village to go the route of Portland’s Division Street and Alberta Street corridors.

“They kind of destroyed the neighborhoods,” she said.

O’Brien grew up in Multnomah Village.

“I’m very connected to the neighborhood there,” he said. “It’s a great location. It’s got a great vibe and there’s just not a lot of apartments over there.”

Multnomah Village Apartments is on track to be complete by Thanksgiving, O’Brien said. Urban Asset Advisors has signed deals for tenants Little Big Burger, Spielman Bagels and a credit union to occupy the ground-floor space.

The project was designed by SERA Architects. Bremik Construction is serving as general contractor.

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The Portland City Council voted unanimously Wednesday to enact an inclusionary housing ordinance that will force developers of sizable apartment projects to include affordable units or pay a hefty fee.

The ordinance will take effect on Feb. 1, 2017.

Portland is the first city in Oregon to pass such an ordinance. Until this year, state law pre-empted efforts to establish such policies.

Projects submitted before Feb. 1 will not be subject to the new rules, and developers have responded by rushing to submit applications for multifamily projects. The development pipeline now totals approximately 14,000 units – roughly triple the usual amount, according to city officials.

The effects of the inclusionary housing policy may not be evident right away – many developers may wait two to three years to build projects that include affordable units.

Supporters say Portland faces a housing crisis that needs to be addressed, and inclusionary housing will ensure construction of affordable units throughout the city – not just in lower-income neighborhoods.

“I believe Portland will be better for the inclusive community we are creating with this policy,” Commissioner Dan Saltzman said Wednesday.

Commissioner Nick Fish said the policy “gives us a mechanism for ensuring affordable homes are dispersed throughout high-opportunity areas in our community.”

Saltzman in November softened his proposal to require developers of projects in mixed-use zones to include 15 percent of apartments affordable at 80 percent of median family income, or 8 percent of units affordable at 60 percent of median family income. Beginning in 2019, the requirements rise to 20 percent and 10 percent of total units, respectively.

Developers have warned for months that an inclusionary housing policy threatens to halt multifamily development in Portland. They say large banks and other investors will invest in projects where the return is highest – which may no longer be in Portland.

Housing advocates and city officials have battled over the incentives – including tax breaks and density bonuses – intended to provide an offset to developers.

Developments that include affordable units also will not be subject to parking minimums. The policy also allows developers to pay a fee in lieu of building affordable units, or build units off-site, but city officials say their preference is for developers to build affordable units on-site.

The affordability requirements apply only to multifamily buildings of 20 units or more. The threshold has given rise to concern that developers will respond by building 19-unit apartment buildings in East Portland neighborhoods.

“If in six months or a year we see development on the Eastside is (consistently) 19 units or smaller, I will join our colleagues in bringing (the policy) back and taking another look,” Fish said.

Greg Goodman, co-president of Downtown Development Group and a member of the experts panel that examined inclusionary housing, said the law would affect rental rates in general.

“All they’re doing is pushing rents up,” he said in an interview. “Things won’t get built until rents get high enough to offset the rents on the affordable units.”

Saltzman acknowledged that the policy may need to be revisited as the market responds.

“This may need to be tuned,” he said. “It may not be working perfectly in the marketplace, but the council will have the opportunity to do that.”

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Portland’s City Council is on the verge of enacting an inclusionary housing policy that some developers warn could bring apartment construction to a halt in Portland.

On Wednesday, the City Council quickly approved a raft of amendments. One allows developers who build affordable units to forgo constructing parking that would otherwise be required. Another changes the affordability requirement from units to bedrooms, encouraging developers to build some family-size apartments.

A final vote will be held Dec. 21.

During a special session on Tuesday, developers, tenant advocates and nonprofit housing executives filled council chambers for more than three hours of testimony.

The inclusionary housing policy has been controversial as developers have repeatedly warned that affordable housing requirements could make their projects unattractive to investors, leaving plans on the shelf and projects unbuilt.

City officials have forged ahead with the program, saying it’s a necessary tool to address Portland’s housing emergency. A parade of tenant advocates testified Tuesday, saying rising rents are forcing low-income residents out of Portland or onto the streets.

One man, John Molby, said he was spending 90 percent of his income on rent before he lost his apartment. Now he sleeps on the streets and cleans up in bathrooms at Fred Meyer stores.

Developers have pushed, with some success, to soften the inclusionary housing policy first proposed by Commissioner Dan Saltzman and the Portland Housing Bureau. It now includes a two-year ramp-up period with lower inclusion rates in 2017 and 2018 before the program fully kicks in at the beginning of 2019.

For some developers, the changes were not enough.

“We stand here today getting ready to start an artificial housing recession started by a well-meaning but flawed policy,” said Tom DiChiara, a principal at developer Cairn Pacific.

DiChiara responded to some public testimony that developers could afford to take a hit to their profitability. If the margins don’t work, financing will dry up and projects won’t get built at all.

“It’s not a matter of making less,” he said.
Joe Cortright, a local economist and analyst for City Observatory, warned investment could flee to other markets.

“Developers have options, and investors have options,” he said. “If the profit isn’t high enough, they will go elsewhere.”

According to the policy, apartment projects would be required to initially provide 15 percent of their units at levels affordable at 80 percent of the Portland area’s median family income, rising to 20 percent of units by 2019.

A “deeper affordability” option calls for 8 percent of units affordable at 60 percent of median family income, rising to 10 percent of units by 2019.

Developers may also pay a fee in lieu of actually building the units – a requirement of the state law that paved the way for Portland’s policy – but city officials want to encourage developers to build affordable housing themselves.

Portland Housing Bureau Director Kurt Creager said the fee-in-lieu option would delay construction of affordable units by three to five years, and place the bureau in competition with private developers for valuable land.

“Receiving the fee is not in the city’s best interests,” he said. “It’s much more efficacious and efficient to tap the hydraulics of the private market.”

The policy also offers developers a number of subsidies that include exemptions from property tax and construction-excise tax and density bonuses.

Developers, through a new Oregon chapter of the trade group Locus, offered competing economic analyses to those put forward by the city’s consultants, David Paul Rosen & Associates and ECONorthwest.

Most of the developers who testified Tuesday said they were not opposed to building affordable housing, but they cautioned that the policy must be crafted carefully to avoid a housing slowdown.

“Locus is trying – a lot of developers are trying – to not be the party of no, and be the party of OK, but let’s tune it up,” Cairn Pacific principal Noel Johnson said.

The policy is not properly calibrated, Johnson said.

“This is a red-flag moment,” he said.

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In response to pressure brought by developers, Commissioner Dan Saltzman has modified his inclusionary zoning recommendations for Portland so that fewer affordable units would be required for projects in the program’s first two years.

Saltzman’s program now would require developers of buildings in mixed-use zones with 20 or more units to include 15 percent of the units affordable at 80 percent of median family income, or 8 percent of units affordable at 60 percent of median family income.

The move is the latest by Saltzman to fine-tune inclusionary zoning ahead of adoption, which is anticipated by the City Council in January. A new local chapter of the developers’ group LOCUS has advocated for a lighter hand in mandates for affordable units.

Saltzman released his revised recommendations on Tuesday as the City Council held a work session on the inclusionary zoning policy. A public hearing is set for Dec. 8.

The targets won’t apply to projects in the Central City, where a separate set of requirements and incentives apply.

Saltzman urged his fellow commissioners to move forward, saying there will be opportunities to tinker with inclusionary zoning policy in the years ahead.

“This is an art, not a science,” he said. “The best way to figure out whether we’ve got it calibrated right is to go ahead and do it.”

But others, including consultant David Rosen, argue that a two-year ramp-up is at best unnecessary.

“The issue of ramp-up is a political issue, not an economic issue,” he said, noting that land prices tend to adjust quickly in light of new regulations.

Rosen added that a ramp-up period could add to market confusion.

“To continually change the rules would inject a lot of risk and uncertainty into the marketplace,” he said.

Developers have already reacted to looming inclusionary zoning regulations by rushing to submit permit applications. The city now has approximately 14,000 multifamily units in the development pipeline – about triple the normal amount, Housing Bureau Director Kurt Creager said.

Developers are even submitting applications for projects they don’t plan to build for years.

“They have themselves created their own ramp-up period,” Creager said.

Developers may opt to pay a fee in lieu of building affordable units, but city officials and housing advocates said they want to structure the fee to encourage construction of affordable units on site.

Creager said allowing developers to pay a fee in lieu of building affordable units could delay construction of units by two to three years.

“There’s a value to time, and that’s lost if we don’t build units on site,” said Margaret Tallmadge, a member of the Planning and Sustainability Commission.

Saltzman is proposing a menu of incentives to entice developers. These include property tax and construction excise tax exemptions, fee waivers and density bonuses. Many of the incentives were required by the state law that lifted the ban on inclusionary zoning policies.

Inclusionary zoning is part of a raft of measures, including the $258 million affordable housing bond approved by voters in November, meant to address Portland’s self-declared housing emergency. Portland officials lobbied the Oregon Legislature to lift a state prohibition on requiring affordable housing; the Legislature obliged in March.

At that point, the city had already hired David Paul Rosen & Associates to analyze inclusionary zoning policies nationwide and to make recommendations.

Saltzman in April convened a panel of 13 experts consisting of developers, housing advocates and others. The inclusionary zoning policy met a mixed reception from the Planning and Sustainability Commission, which recommended adoption contingent on a list of conditions.

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