Inclusionary Zoning in Oregon

[PDXDENSITY]

I know some of the history behind the ban against inclusionary zoning-- it's been illegal since 1999. We are the only state besides Texas to ban this type of zoning which would mandate low and middle income units as a percentage of all units in new construction.

I want to hear the thoughts of the forum on the topic. Any news about activism to change this law (which I think is against Metro's policy of equity). Also, thoughts on why it was put into place as a ban, and the potential benefits if it were overturned.

I've been hearing more noise lately about people starting to understand that we might need this to not completely price out everyone from our city-- I think inclusionary zoning will go a long way to fixing affordability problems.

[maccoinnich]

This is something I wrestle with. It seems like people bring it up on every internet thread as if it is some kind of magic law that solves all our housing problems. Well, how's its use working out in California?

I definitely feel that Portland's system for funding affordable housing isn't producing enough affordable housing. That said, inclusionary zoning can be seen as a tax on development, which is something we want more of, not less. I say this as someone who votes a solid Democratic ticket at every election, but I do realize that if you tax something, you get less of it. I really don't see why should place the burden of funding affordable housing on developers who are already providing new housing. If the net effect of inclusionary zoning winds up being the slowing down of development it would increase upwards pressure on the existing housing stock of the city, and ultimately hurt those who it is intended to help.

[PDXDENSITY]

Originally Posted by maccoinnich

This is something I wrestle with. It seems like people bring it up on every internet thread as if it is some kind of magic law that solves all our housing problems. Well, how's its use working out in California?

I definitely feel that Portland's system for funding affordable housing isn't producing enough affordable housing. That said, inclusionary zoning can be seen as a tax on development, which is something we want more of, not less. I say this as someone who votes a solid Democratic ticket at every election, but I do realize that if you tax something, you get less of it. I really don't see why should place the burden of funding affordable housing on developers who are already providing new housing. If the net effect of inclusionary zoning winds up being the slowing down of development it would increase upwards pressure on the existing housing stock of the city, and ultimately hurt those who it is intended to help.

I think inclusionary zoning is a necessary evil-- it is a tax on development, and there should be. They need to take responsibility for the communities they are pushing on us. I love density; I know we need more housing. I still think the balance will tip toward more affordability overall with less stagnation than you think.

Part of why California is a mess is because of other regulations on top of inclusionary zoning, like rent control in SF. Mumicipalities also opt out, which I dont think should be allowed in Oregon.

Overall, I think inclusionary zoning will balance the stock of housing and allow more low- middle income housing. As it stands, everything is either super low income or luxury- that is not something i want to continue. Is it not true some of the low income subsidies will also sunset with time? That would push more people out.

[2oh1]

We want more development, but we want Portlanders to be able to afford to live in what gets built. That word I used, Portlanders, is a tricky one. I live in a building downtown where rent for vacant units has risen from around $1,000 to around $1500 in the last 5 years. That's for a 1br that doesn't really have a bedroom (shotgun loft). That's! Nuts! And I've noticed that more and more of my neighbors are new out of state transplants and wealthy foreign students. I worry about Portlanders being priced out of Portland. But what's the solution? I have no idea. Even dumpy buildings downtown and in nearby neighborhoods are getting some crazy high rent.

The theory that new construction will bring down rent at older buildings no longer holds true in many neighborhoods here because that theory is based on the idea that people in the neighborhood will want to live in the new buildings, so the older buildings will be less desirable. But as the new construction brings new restaurants, pubs, shops and retail, it brings a new buzz that makes the overall neighborhood more desirable, thus bringing more people to the neighborhood, which drives up prices across the board. The new construction apartments and condos may come with crazy high prices to live there, but older buildings see substantial price increases too. All you have to do is look at inner SE to see what I mean. That neighborhood used to be cheap. New buildings are coming, but rents are already skyrocketing at the older buildings.

I don't know what the solution is, but I really want the city to do more wheeling and dealing to get affordable housing built. Wasn't there a thread a few months ago about how Seattle is doing a better job of giving incentives to developers in order to get affordable housing built? Years ago, Portland was doing more of that.

[maccoinnich]

Originally Posted by PDXDENSITY

I think inclusionary zoning is a necessary evil-- it is a tax on development, and there should be. They need to take responsibility for the communities they are pushing on us. I love density; I know we need more housing. I still think the balance will tip toward more affordability overall with less stagnation than you think.

To be clear, developers already pay Systems Development Charges to cover the impact of their development. These are not insignificant amounts of money either, and can add to 10% of the construction cost. As an example, I know that the Parker (an new building in the Pearl) had a $22 million construction cost, and paid $1.9 million in SDCs.

Which brings me round to the point that there's no way to build new houses and rent them at rates affordable to people earning 60% MFI (or whatever) without subsidy. New construction is expensive, and there's no way around that. The subsidy for affordable housing can come from wherever we choose. We could choose to allocate more General Fund money through the annual budget process. We could choose to change Oregon law so that assessed values of property reset at sale, and therefore increase revenue from property taxes. We could choose to tax PBR. But whatever we choose, we're taxing somebody. Inclusionary zoning is nothing other than a way of taxing people who live in newly built market rate housing. And I'm not convinced that's great policy.

Originally Posted by 2oh1

The theory that new construction will bring down rent at older buildings no longer holds true in many neighborhoods here because that theory is based on the idea that people in the neighborhood will want to live in the new buildings, so the older buildings will be less desirable. But as the new construction brings new restaurants, pubs, shops and retail, it brings a new buzz that makes the overall neighborhood more desirable, thus bringing more people to the neighborhood, which drives up prices across the board. The new construction apartments and condos may come with crazy high prices to live there, but older buildings see substantial price increases too. All you have to do is look at inner SE to see what I mean. That neighborhood used to be cheap. New buildings are coming, but rents are already skyrocketing at the older buildings.

I'm sorry, but you have the cause and effect the wrong way round here. Inner SE isn't more expensive because new buildings are being built there - new buildings are being there because are willing to pay a premium to live there. Despite the seeming boom in multifamily buildings, we're not even building enough units to keep up with population growth. As such, the pressure continues to build on Portland's more desirable neighborhoods.

We have in an America two perfect of great examples of supply and demand in the property market: Detroit and San Francisco. There is a huge supply of houses in Detroit, and little demand to live there. Consequently, housing is cheap. In San Francisco there's been a tech boom and almost no new housing stock added. Rents are skyrocketing.

If developers were able to magically conjure up demand we'd be seeing a development boom in Lents where the land is cheaper, the PDC subsidies flow freely, and there's a neighborhood association that's eager for some development.

[urbanlife]

Originally Posted by maccoinnich

To be clear, developers already pay Systems Development Charges to cover the impact of their development. These are not insignificant amounts of money either, and can add to 10% of the construction cost. As an example, I know that the Parker (an new building in the Pearl) had a $22 million construction cost, and paid $1.9 million in SDCs.

Which brings me round to the point that there's no way to build new houses and rent them at rates affordable to people earning 60% MFI (or whatever) without subsidy. New construction is expensive, and there's no way around that. The subsidy for affordable housing can come from wherever we choose. We could choose to allocate more General Fund money through the annual budget process. We could choose to change Oregon law so that assessed values of property reset at sale, and therefore increase revenue from property taxes. We could choose to tax PBR. But whatever we choose, we're taxing somebody. Inclusionary zoning is nothing other than a way of taxing people who live in newly built market rate housing. And I'm not convinced that's great policy.



I'm sorry, but you have the cause and effect the wrong way round here. Inner SE isn't more expensive because new buildings are being built there - new buildings are being there because are willing to pay a premium to live there. Despite the seeming boom in multifamily buildings, we're not even building enough units to keep up with population growth. As such, the pressure continues to build on Portland's more desirable neighborhoods.

We have in an America two perfect of great examples of supply and demand in the property market: Detroit and San Francisco. There is a huge supply of houses in Detroit, and little demand to live there. Consequently, housing is cheap. In San Francisco there's been a tech boom and almost no new housing stock added. Rents are skyrocketing.

If developers were able to magically conjure up demand we'd be seeing a development boom in Lents where the land is cheaper, the PDC subsidies flow freely, and there's a neighborhood association that's eager for some development.

That is true, also as you point out, demand isn't something that is across the board equal for a city, Portland could build 10K units in Gateway, but the cost of housing would still go up in downtown and Inner SE where there is still a much higher demand for housing and not enough units being built to handle the influx.

Also, when new construction happens, that is costly and a developer doesn't want to lose money on that development, so the rents are going to be much higher than the old housing stock that is available in that neighborhood.

Not everyone can afford to live downtown and the way Portland use to be doesn't mean it should always stay that way. I personally loved it living downtown during my single years, but now I am older and married, I prefer a much more quiet neighborhood like Sellwood. I think it is time for many Portlanders to start looking at the neighborhoods that are beyond downtown and enjoy more of what Portland has to offer outside of our CBD.

[PDXDENSITY]

Originally Posted by urbanlife

That is true, also as you point out, demand isn't something that is across the board equal for a city, Portland could build 10K units in Gateway, but the cost of housing would still go up in downtown and Inner SE where there is still a much higher demand for housing and not enough units being built to handle the influx.

Also, when new construction happens, that is costly and a developer doesn't want to lose money on that development, so the rents are going to be much higher than the old housing stock that is available in that neighborhood.

Not everyone can afford to live downtown and the way Portland use to be doesn't mean it should always stay that way. I personally loved it living downtown during my single years, but now I am older and married, I prefer a much more quiet neighborhood like Sellwood. I think it is time for many Portlanders to start looking at the neighborhoods that are beyond downtown and enjoy more of what Portland has to offer outside of our CBD.

All of our metro area will need to get dense in one way or another to support the influx of people who will want to move here. We must not move the urban growth boundary to suit suburban densities; I stand firm with that because it protects farm and wilderness. We are also likely going to have climate change refugees coming here this century. Not to mention a destabilizing Mexico leads to an influx of immigrants as well.

I think all neighborhoods should be complete communities. That means not excluding any class.

[urbanlife]

Originally Posted by PDXDENSITY

All of our metro area will need to get dense in one way or another to support the influx of people who will want to move here. We must not move the urban growth boundary to suit suburban densities; I stand firm with that because it protects farm and wilderness. We are also likely going to have climate change refugees coming here this century. Not to mention a destabilizing Mexico leads to an influx of immigrants as well.

I think all neighborhoods should be complete communities. That means not excluding any class.

I agree, I tend to prefer not moving the UGB, where it is currently set still has plenty of room for lots of new growth to happen.

[2oh1]

Originally Posted by maccoinnich

I'm sorry, but you have the cause and effect the wrong way round here. Inner SE isn't more expensive because new buildings are being built there - new buildings are being there because are willing to pay a premium to live there.

It definitely goes both ways. In fact, it begins just as you said. Developers wouldn't be there if there weren't at the very least a potential demand. But I was talking about the snowball rolling downhill effect that happens as the new buildings open.

First, there's demand for housing.
Next, new housing arrives along with new restaurants, pubs, shopping and entertainment.
That leads to the neighborhood being the new buzz, which drives up even more demand not just for the new housing, but for the old housing too.

I'm not against development at all. I want it. I'm just worried that Portlanders are being priced out of downtown and nearby neighborhoods. Residents of inner SE are in for a major shock over the next few years as rents skyrocket - not just in the newly built buildings, but the older ones too. I worry about that.

[2oh1]

Originally Posted by PDXDENSITY

I think all neighborhoods should be complete communities. That means not excluding any class.

Originally Posted by urbanlife

I agree, I tend to prefer not moving the UGB, where it is currently set still has plenty of room for lots of new growth to happen.

I strongly agree with you both.

[2oh1]

Originally Posted by urbanlife

Not everyone can afford to live downtown and the way Portland use to be doesn't mean it should always stay that way. I personally loved it living downtown during my single years, but now I am older and married, I prefer a much more quiet neighborhood like Sellwood. I think it is time for many Portlanders to start looking at the neighborhoods that are beyond downtown and enjoy more of what Portland has to offer outside of our CBD.

Not only do I disagree with that, I take offense at that.

YOU enjoy a quieter neighborhood? Find it, move there and be happy. But to suggest anyone else should move out of downtown just because you prefer the quiet is ignorant. I prefer the hustle and bustle of an active city. I prefer being at the center of mass transit rather than being outward along a bus line or two. I prefer being in the heart of the city. But I'm not suggesting you or anyone else should give up the quiet lifestyle you prefer.

I hate the idea that people who work downtown can't afford to live there unless they're wealthy. Downtown is filled with restaurants, pubs, shops, bookstores, the library, etc etc etc. I think people should be able to afford to live near where they work. I'm certainly not saying they should all be able to afford luxury condos, but it just seems crass to me to allow the heart of the city to evolve into a playground for the rich.

[urbanlife]

Originally Posted by 2oh1

Not only do I disagree with that, I take offense at that.

YOU enjoy a quieter neighborhood? Find it, move there and be happy. But to suggest anyone else should move out of downtown just because you prefer the quiet is ignorant. I prefer the hustle and bustle of an active city. I prefer being at the center of mass transit rather than being outward along a bus line or two. I prefer being in the heart of the city. But I'm not suggesting you or anyone else should give up the quiet lifestyle you prefer.

I hate the idea that people who work downtown can't afford to live there unless they're wealthy. Downtown is filled with restaurants, pubs, shops, bookstores, the library, etc etc etc. I think people should be able to afford to live near where they work. I'm certainly not saying they should all be able to afford luxury condos, but it just seems crass to me to allow the heart of the city to evolve into a playground for the rich.

I wasn't saying one should move to the quieter neighborhoods if they can't afford downtown, I am simply saying there are bustling neighborhoods outside of downtown that have the lower rents.

I get wanting to live downtown, I spent much of my bachelor years living just off the PSU campus in the south end of downtown. During that time, downtown was my neighborhood. Even to this day, when I am downtown I feel like I am back in my old hood.

I was lucky when I lived there because I scored a studio apartment that I could afford by myself and my dog for $600 and stayed there for the entire time I lived downtown, and my landlord wasn't one for raising the rents until people moved out. Granted now that same studio probably rents for about $900-1000. Obviously downtown is getting more expensive, something that happens with any city as they become more attractive, and the way I got to live in the city might not be how future people get to live in this city for the same income level, that is just the way cities function and change. That is what I meant about possibly looking outside of downtown for that bustling neighborhood because there are a number of them that are really starting to bustle.

I will say this about the whole pushing Portlanders out thing, when I first moved to the city for years most of my friends were people who weren't from here. I would say about 1-2 out of every 5 friends were born and raised in Oregon and/or Portland. Most of my friends moved here from all over the country and even world in some cases, but we all had one thing in common, we were all Portlanders in the sense that we all considered Portland to be our home. The out of towners that are moving here today are not much different than I was when I first moved here, and they too can consider themselves to be Portlanders as much as I did.

[2oh1]

Originally Posted by urbanlife

I wasn't saying one should move to the quieter neighborhoods if they can't afford...

Actually, that is precisely what you said - though I'm pretty sure you didn't really mean it.

Originally Posted by urbanlife

now I am older and married, I prefer a much more quiet neighborhood like Sellwood. I think it is time for many Portlanders to start looking at the neighborhoods that are beyond downtown and enjoy more of what Portland has to offer outside of our CBD.

So, even though their home is in the CBID, they should start looking to leave. I know you didn't mean to be harsh, but that's pretty harsh.

Anyway... all I'm saying is that rent is getting scary. It's climbing far faster than inflation. It seemed like there was a crazy swing upward in rent between 2005 and 2009, and the recession never brought rent down at all - which sucks but is understandable. We'd reached a new normal. Now that the recession is over, rent is climbing skyward again. I wish I had solutions to offer up, but I don't.

Here's an interesting article on this very topic, posted on KGW two days ago:

Minimum wage needed to rent in Portland: $31 an hour

The real estate site Zillow said a single person living alone would need to make $61,680 a year to spend 30 percent of that salary on Portland's median rent, which is $1,542.

[urbanlife]

Originally Posted by 2oh1

Actually, that is precisely what you said - though I'm pretty sure you didn't really mean it.



So, even though their home is in the CBID, they should start looking to leave. I know you didn't mean to be harsh, but that's pretty harsh.

Anyway... all I'm saying is that rent is getting scary. It's climbing far faster than inflation. It seemed like there was a crazy swing upward in rent between 2005 and 2009, and the recession never brought rent down at all - which sucks but is understandable. We'd reached a new normal. Now that the recession is over, rent is climbing skyward again. I wish I had solutions to offer up, but I don't.

Here's an interesting article on this very topic, posted on KGW two days ago:

Minimum wage needed to rent in Portland: $31 an hour

I was referring to myself when I moved out of downtown for a quieter neighborhood, but the point I was making is that there are lots of amazing neighborhoods outside of downtown. With that said, I am also not saying anyone downtown should move out of downtown if they don't want to.

Rents in Portland stalled during the recession, but the reason why they didn't go down is because the during the condo boom from 2005 to 2009 there were so many condo conversions that took apartments off the market. Combine that with people losing their houses during the recession and needing to move back to renting kept the vacancy rate in rentals extremely low.

Now that things are starting to look up for Portland and the vacancy rate in rentals is still extremely low, the rents in Portland are going up again. This is all to be expected.

However, one doesn't need to make $31/hr to rent in Portland, the proof of that only requires on to go to padmapper, put in $0-1500 and see how many apartments pop up. Portland has plenty of stock in apartments all throughout, even in downtown and northwest, that are under $1500. We still have a ways to go before people making below $30/hr are priced out of downtown or the city.

Portland is getting more expensive, but there will always be a way for people to make it work for them.

[PDXDENSITY]

With the back and forth here, I'm still fairly convinced inclusionary zoning would be a net benefit for affordability in Portland. The demand to live here will still spur development, and we need a pressure valve to not create income exclusive enclaves in our city center and surrounding neighborhoods.

[maccoinnich]

Originally Posted by 2oh1

Anyway... all I'm saying is that rent is getting scary. It's climbing far faster than inflation. It seemed like there was a crazy swing upward in rent between 2005 and 2009, and the recession never brought rent down at all - which sucks but is understandable. We'd reached a new normal. Now that the recession is over, rent is climbing skyward again. I wish I had solutions to offer up, but I don't.

Why didn't rents fall during the recession? Because demand for apartments was increasing, not decreasing. Even during the boom years of the 2000s, Portland never built as many multifamily units as it did in the mid 1990s. This is taken from a report [PDF] written this Spring:

A Brief History

How did our apartment vacancy rates drop so low in recent years? In the not so distance past, during Fall 2009, Multifamily NW reported a 5.9% vacancy rate for the Portland Metro area. Around this same time, the economy started its nosedive. Unemployment jumped, home foreclosures spiked, and any type of construction financing, commercial or residential, was difficult if not impossible.

However, Portland remained a popular destination and our population grew by around 75,000 from 2009 to 2012. These people needed a place to live, along with the scores of those that lost their homes to foreclosure or unemployment. All of these factors combined would have a positive effect on apartments, and set the stage for our current apartment construction boom.

Supply and Demand: 2009-2012

Given the recent single-family crash, many were not eager to become homeowners and demand for apartments was on the rise. Using conservative estimates, we will assume an average household size of 2.40 persons, and a home ownership rate of around 65 percent. Using these assumptions, growth of 75,000 people translates in to demand for roughly apartment 11,000 units. And this figure does not account for demand from those who left the single-family market and entered the rental market, or demolition.

While there was demand for at least 11,000 new units from 2009 to 2012, permits were issued for 7,400 new units in the Portland Metro area. Thus, the Portland Metro area was short by at least 3,600 new units over this time period. By Fall 2013, vacancy rates had dropped to just over 3.0%.

Inventory and Vacancy

Based on information provided by the 2010 US Census and with ad- justment for apartment permits in more recent years, the Portland Metro area has around 270,000 multi-family units. Using the 3.5% apartment vacancy rate from the Spring 2014 Multifamily NW re- port, we have around 9,500 vacant units. If one assumes that a market in balance will show a 5.0% vacancy rate, then there is a current short- age of 4,000 units.

[PDXDENSITY]

Originally Posted by maccoinnich

there is a current short- age of 4,000 units.

Which is being filled on the high end, but middle and lower income are tending to be ignored. Portland does an ok, but lately impotent, job at subsidizing low income. However, a lot of people in the middle are squeezed out, and wait lists for low income housing are years long.

[dubu]

i think gladstone, oregon city and west linn need a big downtown. theres a bunch of citys with second downtowns and there doing good

[urbanlife]

Originally Posted by dabom

i think gladstone, oregon city and west linn need a big downtown. theres a bunch of citys with second downtowns and there doing good

With the new MAX line, I am expecting a lot of future development in downtown Milwaukie.

[dubu]

no one's going to go to milwaukie from downtown though. i doubt it