A $41.9 million construction permit was issued recently by the Portland Bureau of Development Services for work at the Pop Blocks.

Splash Apartments will be an eight-story, 219-unit development at 875 N.E. 27th Ave., in the Kerns neighborhood. Two wings, in a perpendicular layout, will be connected via seven sky-bridges – one each for floors 2-8. At ground level, there will be 13,000 square feet of retail space and approximately 200 parking spaces. Forty-four apartments will be reserved for residents at 60 percent (or less) of the area median income.

Seattle-based Security Properties is the developer and owner of Splash Apartments. Mithun‘s Seattle office is handling design. The development will rise on a 61,000-square-foot parcel that also holds the prominent, 59-year-old, bowstring-truss Pavilion Building. It will be restored and become mixed-use space; a separate, $2 million permit for work there was issued in late August. The site also will gain a woonerf (a Dutch-style multimodal street) as an extension of Northeast Pacific Street.

The Pop Blocks (formerly “Pepsi Blocks”) development planned for five acres was approved by the Portland Design Commission in December 2018. Five distinct parcels were granted increases in allowable building height from 55 feet to 120 feet and floor area ratio from 3.0 to 5.0.

The contractor for Splash Apartments is R&H Construction. A construction start date will be announced soon, a Security Properties representative stated. Work is expected to finish in the first quarter of 2024.

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A Seattle real estate firm has acquired two major Portland-area multifamily properties, the company announced Monday.

Security Properties has purchased The Ardea, a 323-unit South Waterfront tower; and The Windward, a 200-unit mixed-use property in Lake Oswego. Also included in the deal was a 415-unit development in Denver called The Metro.

The off-market transaction was made alongside an affiliate of Rockwood Capital.

The Ardea and The Metro were owned by Multi-Employer Property Trust, a real-estate equity fund of BentallGreenOak, an international investment company based in New York City. The Windward was a joint venture of MEPT and Portland’s PHK Development.

Davis Vaughn, senior director for Security Properties, stated in a news release that the deals were among the most exciting acquisitions in the company’s 50-year history. Vaughn stated that The Windward was the premier suburban asset in the entire Portland metropolitan statistical area, and The Ardea was acquired for significantly below replacement cost.

The purchase price for the three building, 938-unit portfolio was not disclosed.

The Ardea was developed by Gerding Edlen. The Portland developer sold the building after its completion in 2008 to MEPT for $145 million, or $448,916 per unit, according to Yardi Matrix. The most recent transaction was not available from the Multnomah County Assessor.

The Windward was a notable project for downtown Lake Oswego, adding about 36,500 square feet of retail space along with the apartments. The project, designed by ZGF Architects, won first place in the multifamily project category in the 91��Ƶ’s Top Projects 2019 awards event.

The purchase price for The Windward was not disclosed and was not available from the Clackamas County Assessor. MEPT joined PHK Development in 2015 to develop the $103 million property, according to a news release from Security Properties.

Security Properties has become a major player in Portland as co-developer of the Press Blocks in Goose Hollow and Pepsi Blocks along Northeast Sandy Boulevard.

The newly acquired properties will be managed by affiliate Security Properties Residential.

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Multifamily production fell 5.2 percent in Portland in 2019 as developers reacted to rising costs and a flood of project deliveries by pulling back.

The Bureau of Development Services issued permits for projects comprising 4,634 multifamily units last year. That was down from 4,887 permitted units in 2018.

“I think it’s going to slow down even more,” said Sam Rodriguez, senior managing director at Mill Creek Residential Trust, a major multifamily developer in the city. “The deals have gotten thinner. Cost has gone up. Construction costs are escalating across the board at about 5 percent a year, and then rents have flattened. And there’s still concessions in the market.”

Multifamily housing production has fallen far from 2017’s high mark of 5,993 units permitted. That year, developers racing to get ahead of inclusionary housing requirements pushed projects across the finish line at a clip that was an astonishing 44.4 percent gain from the prior year.

That boom in housing production continues to echo, with new buildings stabilizing slowly and competition for tenants holding the lid on rents.

While lower, 2019’s housing production rate was in line with the years prior to 2017.

The Bureau of Development Services does not regularly publish permit data totals. The city agency released the numbers in response to a 91��Ƶ public records request.

The multifamily market has bifurcated since inclusionary housing requirements took effect on Feb. 1, 2017, according to developers and permits. More small multifamily projects are moving ahead with fewer than the 20 units that trigger inclusionary housing requirements. Weekly permit intakes released by BDS are replete with 19-unit building proposals.

Other projects that are moving ahead tend to be large: full-block or superblock developments such as Security Properties‘ Pepsi Blocks and Press Blocks projects, and NBP Capital‘s RiverPlace development. Conspicuously missing are the midsize projects that characterized multifamily development before 2017.

“It’s a pretty difficult environment,” said Gus Baum, director of development for Security Properties. “Construction pricing continues to be unpredictable, but high.”

Within weeks, Security Properties is planning to seek permits for Pepsi Blocks’ first phase, Baum said. The first phase includes an approximately 200-unit multifamily building and construction of a woonerf, a shared street through the property at Northeast Sandy Boulevard and 25th Avenue.

Security Properties is phasing the project to allow the bulk of market-rate units to hit the market later.

“The Pepsi Blocks, because it’s a planned development, we’ll hopefully do a greater than minimum share of affordable units in the first phase,” Baum said.

Funding for affordable housing is washing over the housing market in the wake of the city’s $258.4 million housing bond and Metro‘s $652.8 million bond.

“There’s a lot of money for affordable projects because of the bonds, and that’s taking away resources for market-rate projects,” Baum said.

For now, flat rents and steadily escalating costs give little reason to expect a turnaround in Portland multifamily development, developers said.

“It’s still a pretty soft market to be delivering product,” said Chris Nelson, co-founder of Capstone Partners, a Portland-based developer.

After years of steep increases, rents in Portland have flatlined, making multifamily development less enticing. Average rent for a two-bedroom Portland apartment was down 0.1 percent in February compared to a year ago to $1,330, according to an Apartment List report.

Rents nationally grew 1.7 percent during the same period, led by Phoenix (3.5 percent), Austin, Texas, (3.4 percent) and Charlotte, North Carolina (2.5), Apartment List reported.

Developers have reacted by diversifying their portfolios by product type and geography. Capstone is one developer that has looked to the suburbs, building a multifamily project in downtown Tigard.

Tigard and Beaverton have worked to attract developers including Capstone and Rembold Properties to bring urban-style projects to the suburbs.

“It’s been a strategic focus of those municipalities to activate their urban cores, and part of that is bringing households to the urban cores,” Nelson said.

Otherwise, Capstone has largely stepped back from multifamily development, instead building industrial facilities for Amazon and other users, and some office spaces.

Policymakers and developers are evaluating the city’s inclusionary housing policy. In the past three years, the city has permitted or is in process to permit at least 601 units from 91 projects. The City Council softened certain requirements, but developers have called for further changes.

Other regulations have added costs, developers said. A requirement for bird-safe window glazing in the Central City has dented project pro formas. For one Mill Creek project, the cost for the window package almost doubled, from $500,000 to $900,000, because of bird-safe glazing, Rodriguez said.

“Things like that are just making it more difficult,” he said.

Portland multifamily permits

Apartments/condominiums in projects with three or more units

2019: 4,634

2018: 4,887

2017: 5,993

2016: 4,149

2015: 4,582

2014: 4,344

2013: 2,763

2012: 1,835

2011: 900

2010: 638

Source: Bureau of Development Services

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Though the Great Recession ended slightly more than a decade ago, Portland’s Goose Hollow neighborhood hasn’t since experienced much growth … until now.

Two buildings that until 2015 were used for printing The Oregonian newspaper on a daily basis are being replaced by a new mixed-use complex. The Press Blocks development will feature office, residential and retail space in three new buildings on one and a half blocks.

Lease Crutcher Lewis is constructing the first one – Canvas at Press Blocks – on a half-block directly east of Providence Park. The mixed-use building will feature ground-floor retail space, seven stories of Class A office space and ninth-floor amenity space; the designer is GBD Architects.

“This project means a lot to the neighborhood,” said Mike Sager, senior project manager for general contractor Lease Crutcher Lewis. “Goose Hollow is a forgotten part of the downtown area. And there’s a homeless situation here, and that contributed to what was previously undesirable real estate. This is the first big development to gentrify the area, and when they went through design review and pulled permits it was the first (post-recession) project in this area.”

The full-block portion of the development on a block east of Canvas will include a 23-story, 250-foot-tall residential tower and a three-story building with office and retail space. Those buildings are being designed by Seattle-based Mithun. Urban Renaissance Group, which is developing the project in partnership with Security Properties, will manage the entire complex upon completion.

Work on Canvas began in August 2018 with what Sager called the “super technical” demolition of the building at 817 S.W. 17th Ave. It stored rolls of newsprint, ink and other supplies used by The Oregonian.

“There were 60-foot-tall, clear spans inside the building,” Sager said. “60-foot-tall, freestanding concrete panels made up the walls, and they were tied to concrete, double-T roof panels that held each other up.”

To safely demolish the building, a temporary support structure was constructed to hold up the walls while the roof was removed. Then the temporary structure was dismantled and the walls dropped inside.

A below-grade tunnel used for moving materials and supplies between the two old buildings is being used during construction of Canvas. The tunnel will remain and connect parking areas.

“Across the street was the press building originally and on this side it was used for paper roll and ink storage for the printing operation,” Sager said. “They’d deliver stuff and store it in this building and drop it down onto robots on an underground tunnel on 17th (Avenue) and then over to the other building.”

Canvas is being constructed with post-tensioned concrete decks and reinforced concrete support columns. The exterior will predominantly be pre-cast concrete panels made by ARCIS Technology. The panels have deep window boxes that don’t articulate but provide a deep return leg to add texture and depth to the exterior. It’s a look intended to resemble the previous buildings.

“They wanted to honor the original building,” Sager said.

Lease Crutcher Lewis is using 3-D modeling extensively for this project. The contractor is using a robotic tool station to lay out building components as needed.

“In the last five years that’s been cutting-edge, and some people are doing more of that,” Sager said. “We’ve been doing it for a long time, and basically we take the design team’s model and take it over at a certain point. Then we re-detail the concrete and generate our own drawings, extract points from the embeds and export it all to the robotic layout equipment so our crews can efficiently lay out the building.”

Completion of Canvas is expected in late spring 2020. The construction schedule for the 23-story residential tower and the three-story office building will be determined once financing is secured.

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The Portland Design Commission on Thursday declined to hold a vote on a land-use permit for the Pepsi Blocks development’s first phase because of unresolved issues with the Portland Bureau of Transportation. From a design perspective, commissioners favored plans; however, staff advised them to push back a vote until PBOT approves a loading zone and woonerf – a shared street designed primarily for pedestrians.

Located at 2505 N.E. Pacific St., near the Sandy Boulevard corridor, the development would arise on land that previously was long occupied by a Pepsi bottling plant. While most of the existing facilities will be destroyed, an iconic bow-truss structure at the entrance will be preserved; it is to become one or two restaurants.

A Seattle-based team has been working on the Pepsi Blocks for some time now, with owner Security Properties bringing in Mithun to design the 230,000-square-foot expanse of mixed-use buildings and KPFF Consulting Engineers handling the civil engineering duties. The project received its first design advice hearing in May, when it was met with mostly positive reception from the commission.

The first phase of the project involves construction of an eight-story, 87-foot-tall building with 219 residential units and 15,000 square feet of retail space. The first phase also includes two levels of below-grade parking, a landscaped public plaza with art and the woonerf.

Two problems are primarily keeping the project from moving forward. First, the applicants requested an adjustment to loading zone requirements. A main loading zone is required on-site, but the owners requested to place it off-site on an adjacent right-of-way.

Another issue is the woonerf. The city of Portland has only a few examples of precedent for the feature, which is a somewhat new trend adopted from Europe. Since many of the city’s codes predate the woonerf’s use in Portland, the designation is currently for a public street, which makes it liable for several other strict codes.

The applicants are trying to change its designation to an “on-site vehicle area.” That more accurately represents the woonerf’s purpose because it is designed primarily for pedestrians, but there must be vehicle access in case of an emergency.

PBOT has not yet approved these adjustments, and because of that, the Design Commission cannot vote unless it issues a denial, which would greatly delay construction. For this reason, commissioners opted not to vote, and instead rescheduled a future land use review. Then they used the time allotted to talk more about the actual design guidelines.

The Pepsi Blocks’ design was universally lauded. Special praise was given to the project’s integration within the neighborhood, as commissioners said it would create a lively and pedestrian-friendly environment that Sandy Boulevard hasn’t seen in a long time – perhaps ever.

“Public realm is where this thing is quite exceptional,” Commissioner Don Vallaster said. “It gives more back to the city than any project we’ve seen in a really long time.”

Commissioner Brian McCarter said the project sets a very high bar for the potential future of Sandy Boulevard, and Commissioner Jessica Molinar said she wished the project was built already. A few minor criticisms were directed at project aspects such as window tint and certain colors, but commissioners said they would not hesitate to approve the project following resolution of its more pressing issues.

“This is a great thing for the city of Portland,” Design Commission Chairwoman Julie Livingston said. “This is going to be a really great addition to the neighborhood.”

Pepsi Blocks plans will return before the Portland Design Commission for a land-use review on Sept. 19.

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Redevelopment of the former PepsiCo bottling plant in Northeast Portland inched closer to fruition Thursday, when the first part of the project went before the Portland Design Commission for advice. The development, led by Seattle firm Security Properties, was approved as a whole by the commission in December, but each step of the building process will undergo its own design review process.

The first phase of the project, in the site’s southeast corner, will involve constructing the first mixed-use building, redesigning the iconic arched-roof Pepsi pavilion for restaurant or retail space and constructing an outdoor plaza that extends southeast to Sandy Boulevard. The initial construction will also involve creation of the woonerf, a Dutch-inspired one-way shared street that will run between buildings for pedestrians, cyclists and slow-moving cars.

Seattle-based Mithun is the architect and landscape architect for the project. Commissioners carefully deliberated on the various details of the development’s first phase, and were overall excited about the plan, and criticism was mostly given to some of the more particular details.

Commissioner Jessica Molinar expressed concerns about the scale of the development, with the residential towers expected to come in at 87 feet tall. At such a contrast to the surrounding area, it might not blend well into the neighborhood, she said.

Molinar was also skeptical of the proposed plaza, which she said might be too far away from the main intersection at Sandy Boulevard to attract other residents of the area. Commissioner Samuel Rodriguez likewise said plans for the plaza need to be more developed, but said he understood that it was in preliminary stages and would be more thoroughly planned later.

The plaza was otherwise acclaimed for its planned structural and water features, which will go beyond aesthetics and help drown out noise from Interstate 84 nearby.

Another major point of consideration was the mixed-use building itself. While housing about 200 residential units, it will also feature retail spaces at ground level. Several commissioners said they were unconvinced that a work/life balance could be maintained in such a space.

A final suggestion was made to move the location of a loading space currently planned along the woonerf. Commissioners suggested that large trucks moving into such a place would distract from the public realm.

The commission praised plans for materials and manufacturing details.

The mixed-use building will be made up of two distinct towers, which will form a large “L” shape. One each residential floor the towers will be connected by an open-air bridge. The facades of the towers will contrast as they face toward the pavilion and plaza, with one to be made of metal and the other a stucco/cementitious material.

Balconies will not protrude from the building but will instead be recessed, allowing residents to enjoy the outside while being free from inclement weather.

The Pepsi Blocks development team is expected to seek a land use review by September, with construction to commence as soon as possible following approval.

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As multifamily development catches on along Sandy Boulevard in Northeast Portland, one big upcoming project shows the auto-centric corridor’s past is coming along for a ride to the future.

A massive four-story Lexus dealership is planned for Northeast 31st Avenue and Sandy Boulevard. The project won unanimous approval from the Portland Design Commission last week.

The building’s ground floor will have a vehicle showroom and a coffee shop, the second and third floors will have auto inventory display and the fourth floor will have room for employee parking. One story below ground will provide space for a service garage and back-of-the-house functions.

The project comes from Holman Automotive, a national group based in New Jersey with 37 dealerships in eight states. The company previously acquired Kuni Lexus of Portland, Kuni BMW in Beaverton and Kuni Auto Center, also in Beaverton.

The Lexus dealership is intended to serve customers in the Portland-metro area’s northern portion, said Michael Graves, founding partner of The Gravity Co., a design-build firm specializing in auto dealership design that is working for Holman Automotive. The Sandy Boulevard dealership design is a collaboration of The Gravity Co. and Mackenzie, a Portland architecture firm that served as architect of record.

“We drove the conceptual design and they did the day-to-day coordination of the design efforts,” Graves said. “The original design concept we did, got … approved by Lexus, and then we worked with Mackenzie to get to a permittable, designed project.”

The forthcoming Lexus building comes at the same time as hundreds of multifamily units are in development nearby. Security Properties‘ Pepsi Blocks project will have from 485 to 1,297 housing units, while NBP Capital‘s Sunshine Dairy site is envisioned as home to 300 to 350 apartments, according to an early assistance application filed with the Bureau of Development Services.

Sandy Boulevard has a long history as an auto corridor, where Portland residents would buy cars and have them serviced. The Lexus property once hosted a Pontiac dealership. More recently, it was a Comcast office. Holman Automotive purchased the 1.6-acre site for $6 million in 2016, according to Multnomah County records.

“You want to pick a spot where it’s complementary of the zoning and the historical nature,” Graves said.

The building will be highly visible not only on Sandy Boulevard but also to drivers on Interstate 84. The interstate curves behind the wedge-shaped property, which presented designers with some challenges, Graves said.

“That site is both vertically and horizontally challenged, but it laid out really well when we started working with the utilitarian functions of a dealership,” he said.

Mackenzie referred questions to The Gravity Co. The Kerns Neighborhood Association did not respond to an e-mail message seeking comment.

The building frontage will create a linear look along Sandy Boulevard, in keeping with the Design Commission’s wishes. The coffee shop will operate at extended hours, independent of the dealership.

Subject to the permitting process, Graves said the project team hopes to begin demolition of the existing building in May or June and start construction in September.

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The long-awaited redevelopment of Northeast Sandy Boulevard took a major step forward on Thursday.

The Portland Design Commission voted 5-0 to approve Security Properties‘ plans to transform a former PepsiCo bottling plant off of Sandy Boulevard. Those plans call for turning the 4.7-acre superblock into a dense collection of mixed-use space that leans heavily residential.

The developer is considering building anywhere from 485 to 1,297 housing units, said Dorothy Faris, a principal with Seattle design firm Mithun. That would include 39 to 195 affordable units, depending on affordability level and how many units are built overall.

“It’s a dense project; let’s not kid ourselves,” Commissioner Sam Rodriguez said. “I think that’s what we’re looking for as a city.”

Projects such as The Zipper from Guerrilla Development now appear to have presaged the gentrification of the Northeast Portland corridor, which formerly was lined with auto repair shops and dealerships.

The planned development is the first to receive approval under the city’s 2035 Comprehensive Plan rules for major sites. In exchange for bonus heights of up to 120 feet, the developer agreed to provide affordable housing and set aside major portions of the superblock for open space.

Security Properties executives said they plan to preserve the existing Pepsi Pavilion, which was built in 1962. A group of architects had lobbied for its preservation.

The pavilion will likely have a retail tenant, said John Marasco, Security Properties’ chief development officer. One possibility being discussed is the proposed James Beard Public Market, which has been searching for a home in Portland for a few years.

“We would love to resurrect those conversations,” Marasco said.

James Beard Public Market Executive Director Fred Granum, in an interview with the 91��Ƶ, said he has had no discussions to date regarding the Pepsi Blocks site.

The Pepsi Blocks encompasses five buildable parcels and the existing pavilion building. The tallest buildings are planned alongside Interstate 84, with heights stepping down to Sandy Boulevard.

Open space will weave throughout the development. Security Properties won permission to devote only 12.13 percent of the development to publicly accessible open space; the city’s standard is 15 percent. Open space will be provided by an 8,648-square-foot plaza, a 13,673-square-foot park, a 2,135-square-foot park, a pedestrian path and a woonerf-style street that will extend Pacific Street through the development.

Commissioner Zari Santner praised the project team’s “very thoughtful organization of public spaces.”

“They work well and really will contribute to the vibrancy of this development,” she said.

Santner expressed some concern that the building architecture could be too uniformly boxy.

“The massing is perfect; it’s fine,” she said. “But variety is lacking.”

Many of the buildings will have ground-floor retail space, particularly facing the woonerf. Parking will be provided in underground garages; no surface parking is proposed.

Commissioners attached conditions of approval relating to phasing. Certain building permits will be tied to simultaneous construction of the public spaces. Any change in the project’s phasing would require review by Bureau of Development Services staff.

Development will begin along Sandy Boulevard in the property’s southeast corner and move in a counterclockwise direction. The tallest residential buildings may have to wait for market conditions to improve, the developers said.

Thursday’s approval did not cover individual building designs; they will undergo separate review hearings. The project team will move forward with further design work immediately, Marasco said.

The Pepsi Blocks should serve as a model for future planned development sites, design commissioners said.

“This proposal establishes a really high bar for the master plan areas identified by the 2035 plan,” Chairwoman Julie Livingston said. “It goes further than that – it establishes a new high bar for superblock development. It’s really well done.”

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Demolition of a building formerly used by The Oregonian newspaper is under way in Portland’s Goose Hollow neighborhood. In its place will rise a mixed-use building, Canvas at Press Blocks, with 8,000 square feet of ground-floor retail space, seven stories of office space and a ninth-floor tenant amenity space. The building is one of three being constructed as part of the Press Blocks redevelopment; also planned are a 23-story residential tower and a three-story office-and-retail building one block east.

Staton Companies is demolishing the 175,000-square-foot building, located at 817 S.W. 17th Ave., for general contractor Lease Crutcher Lewis. The structure formerly held large newsprint rolls, which were moved through the building by a large gantry crane and transported by tunnel to the full-block printing space on the adjacent block to the east.

The warehouse was constructed of double-T precast wall and roof panels, some of which are being supported through the demolition sequence by shoring braces installed by Omega Morgan; it’s performing welding work and crane assistance for Staton. The building’s concrete wall panels are being saw-cut at the top, after which the remaining gantry crane rail is cut and the loose panel is laid down on the ground and crushed on site. The removal of roof panels involves demolishing the concrete webs on either side of the double-T panel beams, and then cutting the beams to allow them to drop.

Demolition work is about halfway complete. The building will be taken down to grade by December, at which point shoring pile and deep foundation subcontractors will install temporary shoring so the site can be excavated for a single level of below-grade parking. The contractor estimates coming out of the ground around March 2019, then taking about 10 months to build the eight floors of post-tensioned concrete. A ninth-floor with amenity space, a terrace and mechanical penthouse will be constructed using structural steel. Substantial completion of the project is slated for mid-2020.

The site’s constraints – TriMet MAX lines to the west and the north, a bus line to the east, and occupied buildings on the block’s southern half – will require the project team to carefully orchestrate deliveries of materials.

“It’s about as just-in-time construction as it gets,” said Mike Sager, senior project manager with Lease Crutcher Lewis. “It basically comes off a truck and goes in the building. It’s all about logistics on this one.”

The Press Blocks project is being conducted in partnership between Security Properties and Urban Renaissance Group, which previously acquired and redeveloped The Oregonian’s headquarters building at 1320 S.W. Broadway. Invesco Real Estate is serving as an investment partner. GBD Architects designed the Canvas at Press Blocks building. Mithun is the architect of the two buildings on the full-block site, which does not yet have an anticipated construction start date.

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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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