Contractors at an industry summit looking for an analysis of the state of play in Oregon politics were greeted by a graphic showing the margins of victory by the state’s Democratic governors during the past several elections.

The most recent: Gov. Kate Brown, re-elected by a 16.3 percent margin in 2018.

For members of Associated General Contractors’ Oregon-Columbia chapter, the annual meeting Friday served as a call to play defense on issues affecting the building industry. With newly strengthened Democratic majorities in both chambers of the Legislature, and Brown enjoying a post-election bounce, political insiders expect the 2019 session to bring broad changes in policy.

“We already lost in November on the political battle,” said John Rakowitz, a lobbyist and spokesman for the AGC in Oregon and Southwest Washington. “We’re going to have to win the policy argument.”

To that end, AGC will focus on core issues affecting its members, he said.

One particular concern is the sanctity of the state’s Highway Fund. There’s some concern a cap-and-trade bill would divert dollars from traditional highway and infrastructure projects, Rakowitz said.

“I think cap and trade will begin to loosen the bolts holding that in place – that is our greatest fear,” he said.

Rakowitz said he had not seen the bill’s text – a situation he described as “incredibly frustrating.” He also raised the possibility that cap-and-trade legislation could lead to higher gas prices, which would raise contractors’ costs.

Another concern for the construction industry is a bill that would limit employers’ ability to discipline employees for marijuana use. That poses problems for safety-sensitive industries like construction, Rakowitz said. It’s also unclear how such rules would apply to federal projects that require a drug-free workforce, he said.

Another change being considered in Salem would reduce the state’s prevailing wage regions from 15 to five, Rakowitz said. That could mean union-level wages would essentially set the rate for labor costs, he said.

AGC members were also concerned about a bid to strengthen family medical leave that could leave employers’ on the hook for weeks of family illnesses.

There were some positives for the building industry. Jodi Hack, CEO of the Oregon Home Builders Association, spoke in favor of efforts to encourage “missing middle” housing such as duplexes and triplexes.

“One of our top priorities is to reduce local barriers,” she said.

House Speaker Tina Kotek has unveiled legislation, House Bill 2001, that would significantly weaken the dominance of single-family zoning in Oregon cities. It would require local governments to allow middle housing types in single-family zones.

Industry officials did express some concern that the bill to loosen single-family zoning could affect efforts to expand Oregon’s urban growth boundaries by changing how lots are counted. Without changes to the bill, “unfortunately we’re going to have to come out against a bill that we — actually, there are parts of it we kind of like,” Hack said.

Rakowitz said he doesn’t expect to see major movement this session toward a new Interstate 5 bridge across the Columbia River. Conversations are ongoing, but Oregon Democrats are likely to be busy with other policy priorities, he said.

Editor’s note: Jodi Hack’s quote “unfortunately we’re going to have to come out against a bill that we – actually, there are parts of it we kind of like” was misstated originally. It has been changed to reflect the exact wording used.

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After years of gently encouraging developers to build affordable housing units, municipalities such as the city of Portland will soon have a chance to wield a much bigger stick.

A newly enacted state law enables local governments, beginning June 3, to require multifamily developers to include affordable housing in sizable projects – a regulatory approach known as inclusionary zoning. It does not apply to projects already in the pipeline.

There’s little doubt Portland will be in the vanguard of inclusionary zoning in Oregon. Commissioner Dan Saltzman said the city has already engaged a consultant to shape an inclusionary zoning ordinance.

“The chances are 100 percent the council will go forward and implement the solution as permitted by the Legislature,” he said.

What that means for developers remains to be seen, industry officials said. If Portland passes restrictive inclusionary zoning rules, it could stop projects cold. But developers said they could work with reasonable regulations.

“You have to make it such that it makes sense, because the alternative is you don’t build anything,” said Sam Rodriguez, senior managing director of Mill Creek Residential Trust.

The city will form a committee to oversee the consultant’s work, Saltzman said. The committee will include members of the development community.

Saltzman said developers will have an opportunity to be heard.

“We’re aware of their concerns,” he said.

The new law – Senate Bill 1533 – lifts a previous statewide ban on inclusionary zoning rules. Local governments can now require up to 20 percent of units in a project be affordable. The definition of affordable is broad – 80 percent or more of the median income for the county in which the project is built. And the law exempts single-family homes and multifamily projects of fewer than 20 units.

The law also requires municipalities to offer developers the option of paying a fee in lieu of including affordable units.

For developers, the particulars of inclusionary zoning rules will prove crucial.

“If the city is cognizant of the details, it could be an incredibly helpful program,” Rodriguez said. “The risk is if the city is stingy, or decides to provide a very small incentive, it could just stop a lot of projects, which in essence is going to make housing more expensive overall.”

Portland’s move toward inclusionary zoning comes against a backdrop of increasing concerns about housing affordability. The city of Portland is in the midst of a self-declared housing emergency.

In hopes of accelerating affordable housing construction, the City Council recently approved a streamlined design review process for multifamily projects that include affordable units.

Public officials complain developers have focused on building more-profitable luxury housing to the detriment of the city’s affordable housing stock.

The average monthly rent for new housing units in Portland last year was $1,954, or $23,448 per year, according to information presented by the Portland Housing Bureau to a legislative committee. Renters would have to earn $78,160 annually to afford the average rent, according to federal guidelines.

Portland has some of the nation’s fastest-rising rents. Average one-bedroom rents jumped 14 percent to $1,303 in March, according to Abodo, an apartment-search firm.

Developers generally acknowledge the need for more affordable-housing stock in Portland.

“Rightly so, the pressure to find solutions to help make housing more affordable is a key consideration for our city right now,” said Noel Johnson, vice president of Killian Pacific.

Yet developers fear poorly wrought regulations could slow or halt projects by making them economically unworkable, or interfere with financing.

“It could lead to a significant slowdown in how housing is produced,” Johnson said. “That’s what the skeptics expect, and unfortunately there is plenty of history to suggest that might happen. The optimists, and I’m one of them, hope the policy can be constructive.”

Christian Garner, chief investment officer of San Diego-based M.G. Properties Group, which recently completed the $57.85 million purchase of a 283-unit complex in the Gateway District, said the solution to the affordable housing shortage is to let builders do their jobs.

“If you let the builders build, they will build,” he said. “They’ll probably overbuild and due to that supply, prices will come down.”

Affordable housing is a burgeoning issue in fast-growing, attractive cities across the nation. New York’s City Council passed inclusionary zoning this week after years of debate.

New York City’s rules set more aggressive targets than is allowable under Oregon’s new law. Developers have a menu of options to choose from; one requires 30 percent of units be set aside for renters at 80 percent of area median income. Another “deep affordability” option requires 20 percent of units to be set aside at 40 percent of area median income.

In California, regulations meant to encourage affordable housing haven’t worked, Garner said.

“In California, they’ve tried all kinds of approaches to this,” he said. “They all have unintended consequences, and at the end of the day, they don’t really solve the problem.”

Jon Chandler, chief executive of the Oregon Home Builders Association, said the new law could have been much more stringent.

“Actually, I thought it turned out pretty well, especially compared to what it could have been,” he said.

The new law requires cities and counties that pass inclusionary zoning ordinances to offer developers at least one of a menu of incentives, including whole fee waivers or partial reductions, whole or partial waivers of system development or impact fees or finance-based incentives.

The law also lays out some additional incentives that cities or counties may offer. These include density adjustments, expedited permitting and modification of height, floor area or other site-specific requirements.

Rodriguez said incentives could be crucial to the success of inclusionary zoning in Portland.

“If there’s no incentive, very few if any developers will develop affordable housing,” he said. “If there’s no incentive, it’s just not going to happen. It’s not enough for the city to put a program together without understanding who the user is to make the program successful.”

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