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Oregon House likely to pass bill to preserve income-diverse neighborhoods

Posted by on April 14th, 2015 at 9:26 am

SE Division street scene - photo by Michael Andersen

SE Division Street: rapid infill but rapid price hikes.
(Photo: M.Andersen/BikePortland)

Oregon seems to be nearing a series of party-line votes that would remove its statewide ban on inclusionary zoning.

IZ, as it’s sometimes known, is a type of zoning used in many U.S. cities that requires developers in certain areas to offer some housing units at below-market prices, usually to people with middle or low incomes.

House Bill 2564 is scheduled to hit the state House floor today, personally carried by House Speaker Tina Kotek (D-North Portland). After a party-line committee vote last week, a leading backer predicted Monday that the bill will pass the state House on another party-line vote, with every Democrat in favor and every Republican opposed.

“It’s a privilege to be able to build in the city. They benefit from a lot of public investments.”
— Jon Ostar, OPAL Environmental Justice Oregon

Because the bill seems likely to pass with or without moderate Republicans’ votes, said Jon Ostar of OPAL Environmental Justice Oregon, “all they’d be doing is exposing themselves to the homebuilders’ wrath” if they voted against it.

Backers of HB 2564, who include the Bicycle Transportation Alliance among other transportation, urbanism and equity advocates, say it’s a needed tool for preserving income diversity in high-demand neighborhoods like central Portland. Opponents, led by the state’s homebuilders’ association, say private developers shouldn’t bear the costs of keeping neighborhoods income-diverse.

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We wrote about inclusionary zoning in 2013, as the coalition was forming to get it through the legislature, and again last winter when advocates gathered to support it in Salem.

“Everyone should have the opportunity, at least, to live in communities where there’s transportation choices, but our current pattern of development hasn’t given us that,” Ostar’s colleague Vivian Satterfield told us in February.

changes on NW Marshall-1

Thanks to IZ-style agreements, the Pearl District
has more income diversity than many fast-growing
areas, but less than its developers pledged.
(Photo: J.Maus/BikePortland)

Ostar said Monday that the bill likely to pass the House today will do so thanks to an amendment brokered by Kotek that would set a maximum of 30 percent below-market units per project, or the equivalent. He said this “went a long way to shoring up some moderate Ds.”

Ostar said his group’s biggest objection to the change is that its language “undercuts the principle that development is a privilege, not a right.”

“We’re trying to shift people’s mindsets away from the idea that developers have a right to build things,” Ostar said. “It’s a privilege to be able to build in the city. They benefit from a lot of public investments.”

If successful, the bill will move to the state Senate.

“I anticipate having some pretty heated battles in the Senate as I think the homebuilders try to make those conditions a lot more specific in terms of delivering benefits to developers,” Ostar predicted.

Update 3 pm: The bill did indeed pass the house, 34-25, on a nearly party-line vote. Brian Clem (D-Salem) voted against the bill.

Correction 6:15 pm: An earlier version of this post omitted Clem’s vote against the bill.

Read more of our 2015 Legislative Session coverage.

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9watts
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9watts

“private developers shouldn’t bear the costs of keeping neighborhoods income-diverse.”

Gag.

q`Tzal
Guest
q`Tzal

Yes, they should be allowed to loot and pillage the livability of our cities to pad their profit margin.
/s

dan
Guest
dan

LOL, indeed. I’m sure that if the private developers were to abandon their efforts to shoulder this onerous burden, non-profits would be more than happy to step in.

Chris I
Guest
Chris I

Are there any non-profits building multi-story apartment developments in Portland at this time?

maccoinnich
Guest

Off the top of my head, both Glisan Commons Phase II (by REACH CDC) in Gateway and the Abigail (by Bridge Housing) in the Pearl are under construction. Miracles Central (by Central City Concern / Miracles Club) is about to start construction soon in the Lloyd District.

J_R
Guest
J_R

Private developers don’t shoulder the burden of providing lower income housing – the purchasers of regular housing do, by paying more for their purchases.

If a developer is mandated to have 30 percent of his housing on the “affordable” side, he has to reallocate costs to the other 70 percent. When developing an apartment building, for example, the cost of the land, the structure, the fire suppression system, the elevators, etc. are the same regardless of whether a unit costs $100k or $300k (or rents for $600 or $1800). Even the windows (number of which and energy efficiency are mandated by code) cost the same per unit. The point is that the builder/developer can cheapen a few elements for the “affordable” units, but the only way to really have a significant effect is to undercharge for those and add to the price of the regular units.

My mother lives in a city where they require the cable provider offer a discount to seniors; the cable franchise gets the same revenue per customer as they do in other cities by boosting the regular rate for the non-seniors.

There’s no free lunch – just someone else paying a bit extra.

MC
Guest
MC

They are essentially saying they are a business, and that the public sector needs to play a role in housing those with low income – whether that is something like fee waivers to for-profit developers who set aside affordable housing, rent subsidies, or funding for non-profits to develop affordable housing. Its akin to a grocery store saying they are not a food bank – they don’t lower their prices for their lower-income customers; rather, society provides food stamps so people can shop. Or to take it to an extreme, a homeowner saying they don’t want a homeless person to camp in their yard, although they may be happy to pay taxes to support transitional housing programs. We may disagree with the statement (I myself support IZ if the government steps up to waive some fees or provide adequate density), but IMO its not something to gag at …

9watts
Guest
9watts

Thank you, MC for that great reply; made me think.

Your examples of a grocery store and a homeowner are evocative, but I also know for a fact that some grocery stores (well farmers markets) do discount their produce to low income shoppers, and some homeowners do let homeless people camp on their property.

We live in a society that has steadily shifted toward more intermediaries, more ways to push these issues out of our interpersonal and economic exchanges and onto institutions that we may happily or grudgingly fund through our taxes. This is what it is, but it also puts a distance between us, puts these social ills and the people impacted by them out of sight, suggests there’s always someone else whose job it is to attend to this so we can not be troubled by it. But what if our actions, our comfortable lives, are implicated in creating those conditions that result in inequality? What if our lives would be enriched by addressing these issues not through intermediaries and taxes but directly?

Property developers, like others, come in various flavors, with a greater or lesser helping of social conscience. Saying that a developer is a business and that he has no responsibility to help poor people get housing—because he too pays taxes—may or may not be an adequate response. A developer can choose to maximize his returns by (perhaps) building McMansions for wealthy customers, or he can decide to take some measure of responsibility for the gentrification his efforts (may) contribute to and decide that he is going to build houses for the rest of us, forgo some of those earnings. Why wait until I retire to (perhaps) turn around and do philanthropic things with all the profits?

I guess for me your post raises the question of what role developers should or could play w/r/t housing people who are not at all wealthy.

Charley
Guest
Charley

Any progress on a report about Wednesday’s RVNA meeting?

Kiel Johnson (Go By Bike)
Guest
kiel johnson

Living in affordable housing is a right and not a privilege.

Without affordable housing our city stops growing. Singapore is an interesting model. 80% of the population lives in public housing, they have one of the highest GDP per capita’s in the world yet are constrained by a natural water urban growth boundary. If Singapore hadn’t made affordable housing a policy priority they would have lost out on economic development elsewhere.

Think of all the smart, creative, diverse folks being priced out of SF right now. Maybe one of them is the next Steve Jobs but inside of setting up shop in SF where they can collaborate with other creative people and start Apple 2 they are priced out and living in Detroit. They could have started a new giant company that pays a ton in taxes but instead they are out in the cold waiting at some bus stop in Detroit for a bus which will never arrive.

http://www.nytimes.com/2014/05/04/magazine/rent-too-damn-high-move-to-singapore.html

PeeJay
Guest
PeeJay

Exactly right, Kiel! San Francisco is sabotaging its future because it’s in the short term self-interest of every current homeowner to keep prices up and supply down. Let’s not do the same to Portland. And I say this as a current homeowner!

Jeg
Guest
Jeg

And what you’re saying is some bungalows must be razed for more dense housing or we’ll have a shortage like SF.

We need more density close in and along corridors. And, yes, even in some old bungalow hoods. If we dont let owners build more density if they desire it, housing will be out of reach for the poor even with inclusionary zoning practices.

Jon M
Guest
Jon M

But Portland already imposed a growth boundary that explicitly acted to depress supply by restricting outgrowth. You cannot complain about limiting supply while also approving of growth boundaries and other zoning restrictions that act to depress development activity.

9watts
Guest
9watts

“Steve Jobs… They could have started a new giant company that pays a ton in taxes… ”

An unfortunate example since Apple is one of the best at evading taxes:
http://www.businessinsider.com/how-much-money-apple-avoids-paying-in-taxes-2014-6

I’d rather skip chasing big-money, get-rich-quick schemes and just do what we do here. Life is so much more than GDP.

Jon M
Guest
Jon M

Life is more than GDP?? What sense does that make? Um, why has our lives improved so dramatically in the last 30 years…economic growth. Whether at the national economic level or at the household level, economic growth is the reason why our lives are so different than those in South America, Eastern Europe, Latin America, and even Southern Europe.

Heck, even the lives of those in poverty are dramatically different than 25 years ago what with high numbers of the poor reporting to the federal government their ownership of major appliances, including computers, cell phones, and automobiles.

Apple doesn’t abscond on paying it’s tax bill. Like individuals do, that firm properly utilizes tax breaks and other provisions in the tax law to improve it’s tax position. I have to wonder if you voluntarily give back any income tax refund for pre-tax contributions to your defined contribution retirement plan, give back an child tax credit, give back your home mortgage interest deduction??? If not, then you’re as guilty as you’re alleging Apple to be.

9watts
Guest
9watts

“I have to wonder if you voluntarily give back any income tax refund for pre-tax contributions to your defined contribution retirement plan, give back an child tax credit, give back your home mortgage interest deduction???”

I actually do pay my taxes in the way you dismiss with all those derisive question marks, so back off.

“Um, why has our lives improved so dramatically in the last 30 years…economic growth.”

Speak for yourself. For most people—who are not CEOs—economic growth, so called, has not translated into any income improvements over that time period. But quite apart from any narrow financial accounting, the reason I’m ticked about our slavish pursuit of economic growth is that it kicks to pieces the biophysical basis of our lives, our planet.

Jon M
Guest
Jon M

Oh? So you pay taxes on what would otherwise be tax-free contributions to a defined contribution retirement plan? You give back thr child tax credit? I doubt it.

And income has not grown in the last 25 years, except for ceo’s? Really? Nonetheless, i wasnt discussing income but economic growth. And just like income, that has expanded over the last 25 years, improving our lives in so many ways. But continue to ignore that.

Lester Burnham
Guest
Lester Burnham

I’d say don’t buy Apple products for that very reason, but many seem to look the other way with that company. Not sure why.

Jon M
Guest
Jon M

Its not an issue of looking the other way. It is an issue of a firm properly working the tax code to reduce its tax liability… Ezactly as individuals do every year wrt income taxes.

9watts
Guest
9watts

Kiel I thought that was a terrible article in the NYT. Not that it isn’t of a piece with just about everything you can read about housing these days, but how much sense does it make that in the US today (according to the article) we spend $62B/yr on federal rent supports, all the while encouraging fecundity, continuing to underwrite completely outdated pronatalist policies? Focusing always and only on the supply (shortage) of housing without ever asking about how demand (longage) comes to be is a recipe for (continued) disaster.
Not impressed.

Kiel Johnson (Go By Bike)
Guest
kiel johnson

Firstly, I still hold that Apple is a good example. Even if they skip out on paying corporate taxes they are still paying a host of other taxes. Plus all the additional companies that have sprung up around them.

Secondly, Singapore is an interesting example of one way to do housing. It will probably not happen in the USA any time soon but I think it is important to show that even if you have GOV in dictating housing you can still have a very functional economy.

I liked that article because it talks about the cost of driving and that judging the success of a functioning housing market all depends on how you judge success.

I particularly liked this quote, “One of my pet peeves is that environmental reviews are only focused on the local environmental impact of building the project, but not the global environmental impact of not building the project.”

9watts
Guest
9watts

“One of my pet peeves is that environmental reviews are only focused on the local environmental impact of building the project, but not the global environmental impact of not building the project.”

Again, this is a completely one-sided view of the housing/people mismatch. The NYT writer, predictably, takes housing demand as both given and practically infinite, so the only thing of interest is which potshots to take at those who would get in the way of accommodating this demand. What does she mean by “the global environmental impact of not building the project”? How is one to parameterize the environmental impact of an unbuilt project? Viewed as a dynamic problem you could take this in a number of directions, but she’s obviously not interested in that, doesn’t appreciate that not building sends as many signals to would be dwellers as building.

Jon M
Guest
Jon M

That last quote is rich with irony…sure, you want to assess the global impact of individual driving habits, but I bet you also ignore and probably are ignorant of the far more real global impacts of, for example, the lifecycle of electric and hybrid vehicles.

Lets call much of this support for “inclusionary” zoning what it is…it’s really about forcing others to change their behaviors. You don’t like that they prefer to drive where they have to go, so you attempt to coerce them into driving less via public policies whether it’s IZ or bike lanes over street parking, etc.

Chris I
Guest
Chris I

San Francisco has inclusionary zoning… why hasn’t that worked?
http://sf-moh.org/index.aspx?page=263

Why do the people backing this bill think it will be any different here?

Jeg
Guest
Jeg

Because we can still fight against excessive preservationism in conjunction with income inclusive development. This isn’t either or.

Jon M
Guest
Jon M

Because their support for IZ has nothing to do with whether it works to improve housing conditions and everything to do with coercing the people they don’t like, developers, into doing something that they themselves cannot do. It’s abusing the state’s authority to coerce their neighbors.

Jon M
Guest
Jon M

A “right”? Easy to say for someone who will not actually be paying for that “right” to be exercised by others. Why is it so easy for you to place the burden of this “right” on others?

Furthermore, what do you see as similarities between the US with a population of 300+ million and Singapore? There is not virtually any commonality, yet, you want to import Singapore’s model to the US?

You’re one of those folks who also believes that because college educated people earn more, then we must shove more and more people into college, right? You got the whole causality thingy mixed up.

Jon M
Guest
Jon M

Oh, and why the hate on Detroit? That city was run by exactly the type of liberals running Portland today. Whether it’s Detroit, Balitmore, Camden, Cleveland, etc., etc., etc., these rusting, violent cities have been wholly dominated by progressives and liberals for 60 years. I find it ironic that while you bag on Detroit, you’re encouraging Portland’s leaders to adopt exactly the same housing policies that have already been tried and failed in Detroit and other cities.

Lester Burnham
Guest
Lester Burnham

A bleak future of streets constantly shaded by apartment towers.

davemess
Guest
davemess

“Living in affordable housing is a right and not a privilege.”

This is very true. But it is not a right to live in affordable housing wherever you want.

Adam H.
Guest
Adam H.

This is good news. I hear Portland City Council is already working on an inclusionary zoning plan for the city on the assumption that this passes.

Oregon Mamacita
Guest
Oregon Mamacita

The devil is in the details. Will the developers attach a whole bunch of perks to the inclusionary zoning? Also- the city of Portland consciously failed to make sure there was affordable housing on the South Waterfront.
Why trust the same people not to screw up again?

A strong, honest mayor would sue the developers and make them keep their bargain by taking enough luxury units on the SoWa and making them
for low-income renters.

soren
Guest
soren

“A strong, honest mayor would sue the developers …”

Low-income renters did not help pay for Hales’ election campaign…

maccoinnich
Guest

On what grounds would Mayor have sue? There isn’t a contract that has been breached. The lack of affordable housing in South Waterfront has more to do with the fact that the area hasn’t generated as much TIF money as was originally anticipated, and therefore the City / PDC has less money with which to fund affordable housing.

Jon M
Guest
Jon M

I love this cliche of “affordable housing”. What you really seem to mean is the developers take all the financial risk of developing property while you get to armchair quarterback their development activity and deprive them the full value of the property they purchased.

I wish some of you would at least define what you mean by affordable housing…and then explain why you demands for such housing should override a developer’s property rights.

Jon M
Guest
Jon M

Right, ignore the constitutional takings clause and simply take property from othrrs because you dont like them. Must be another example of the living, evolving constitution.

Jeg
Guest
Jeg

Good! Now we can focus on honing low income housing to all developments and fight the NIMBYs by declaring them afraid of the poors. They won’t hurt a bit from development and scarce parking. Property values are soaring. We must eliminate parking minimums and set a percentage of all new developments as permanently income inclusive, based on inflation.

Gary
Guest
Gary

“all they’d be doing is exposing themselves to the homebuilders’ wrath” if they voted against it.”

While I long for such a world, I suspect that should say “if they voted for it.”

RH
Guest
RH

Yeah, I like a city with affordable housing. Without it, housing communities would be ghost towns from 9-5 with everyone working corporate 9-5 jobs. We need places for the risk-takers, chefs, librarians, bartenders (gawd, I hope I’m not offending anyone). I just think a neighborhood with diverse careers with better than all 9-5.

Welsh Pete
Guest

Its a shame librarians are considered to be of a ‘diverse income’ but I appreciate your point. As a social service worker who has lived close to Division and 39th since ’99, I wonder if its still ‘my’ neighbourhood or not.

davemess
Guest
davemess

Can we have these kind of neighborhoods outside the inner city core though?
There is some decently affordable housing right now in Portland. It’s just not in the locations that are hip or super desirable. Is it the end of the world that is it 5-8 miles from downtown (compare that to San Fran where you are talking what, at least 40-50 miles?)?

Jon M
Guest
Jon M

Hmmm, so we should abrogate property rights in order to satisfy your desire have certain types of people remain in downtown after 5pm? Heck, where does the application of that logic stop? Why do you hate property rights?

Matt
Guest
Matt

So how does IZ affect single family residences/neighborhoods like Sellwood where small older houses are being demo’d and replaced with hugh, expensive new houses?

Jon M
Guest
Jon M

Lets hope it doesn’t have any affect at all. Why do you so hate huge homes? Why do you hate the fact that others can afford or are willing to borrow huge sums of money to develop their property?

Why are so many here so intolerant of the choices others make in developing the properties that they own?

Are we in Obama’s favorite island nation of Cuba where the state should control all aspects of our lives and prohibit private ownership of anything or at least permit a select few to enjoy private ownership?

What’s next? Demanding the property owners demolish their structure to satisfy your demands for affordable housing for yourselves?????

davemess
Guest
davemess

I hate that developers are not really giving new homebuyers a lot of choice. They’re not making 1k-2k new homes for people. They’re forcing anyone who wants to buy a new construction home (and this is important for some people who don’t want immediate maintenance, etc.) to buy something big.

I really don’t know how to solve this, as bigger homes = more profit.

maccoinnich
Guest

Building a new $100,000 to $200,000 single family house is basically impossible, as explained in this article http://www.builderonline.com/money/prices/are-new-starter-homes-history_o. It’s not Portland specific, but all of the reasons it gives are completely applicable here.

q`Tzal
Guest
q`Tzal

Gotta say: even a Blade Runner/5th Element sized micro-apartment is preferable to homelessness.
A lot of people don’t realize just how little square footage they actually use or need.

Gimme a basic direct housing subsidy per citizen to get a micro-apartment, no questions asked, OR the cash equivalent and you pay for more out of pocket.

Chris I
Guest
Chris I

Inclusionary zoning only benefits those that fall under the income cap that the city designates for “low income”. Everyone else gets to pay more for housing, as developers are now less likely to build. Including “below market” units in a project makes it less profitable, and less likely to happen.

If you really want affordable housing, the government should be building developments devoted 100% to “below market” units, and placing them around the city. Or you can work to remove existing restrictions on private development, which will also add the the housing stock and put downward pressure on prices. Inclusionary zoning just creates classes of people: those who are poor/lucky enough to get one of these units, and the rest of us, who will pay more for housing than we would otherwise.

http://en.wikipedia.org/wiki/Inclusionary_zoning#Controversy

jeg
Guest
jeg

Inclusionary zoning can call for middle income units. You are applying restrictions that don’t exist.

maccoinnich
Guest

You’re then mandating subsidized housing for a larger pool of people while reducing the pool of people available to provide the subsidy.

jeg
Guest
jeg

We can still do this while working toward improving the property tax situation. This may be in part a stop-gap, but it is necessary to keep affordable housing in all neighborhoods.

Jon M
Guest
Jon M

And what could wrong with government housing projects?

Sincerely,
NY
Chicago
Detroit

Chris I
Guest
Chris I

Sweden, Norway, Denmark, Germany, The Netherlands, Belgium, etc…

bman
Guest
bman

Yes, at the site of St Francis park, SE 12th and Stark.

Jon M
Guest
Jon M

Rent controls and inclusionary zoning requirements do not reduce the incidence of homelessness and they do not otherwise improve property values. It merely deprives property owners of the full value of the property that they bought. Many of you treat developers as abstract objects, not real people at all. But developers are real people seeking a return on their investment. To many of you, I must be raping and pillaging because I buy municipal bonds and corproate stocks. Sheesh. So many people who refuse to take risk with their own money attempting to coerce others via police power to develop private property as they see fit rather than the property owner developing that property as he sees fit.

Only in America, I guess…

davemess
Guest
davemess

Jon, do you like the direction that Portland is going?

bjcefola
Guest
bjcefola

I think the most important thing about inclusionary zoning is that it doesn’t make a shred of difference without new development. If the state removes the prohibition, and if the city of Portland adopts the policy, it will be a real rubber-meets-the-road test for those who have been protesting new development on the grounds that it reduces affordability.

I think neighborhood response to Home Forward’s project to build new affordable housing in “good” areas will serve as a preview.

maccoinnich
Guest

So I am not a lawyer, but I have a question for any lawyers that are on here: is this bill actually substantially different from the law already in place? Currently municipalities are prohibiting from using their zoning code to set sale prices of property EXCEPT WHEN they offer voluntary incentives, density bonuses etc. Portland currently waives SDCs for affordable housing, and is planning on introducing density bonuses as part of the new Zoning Code coming after the 2035 Comprehensive Plan is adopted. The bill that passed the house allows municipalities to use their zoning code to set sale prices of property, but ONLY IF they voluntary offer incentives, density bonuses etc. That would seem to be pretty much the same.

John Liu
Guest
John Liu

Can anyone point us to studies or data about what actually happens when IZ is instituted? In other cities, what has happened to rents, building activity, diversity?

I can see the arguments both ways. Even if you postulate that cities should actively promote economic diversity in developing neighborhoods, I can see the arguments both ways on whether IZ succeeds. I’d like to see some actual data, if there is any.

Doug Klotz
Guest
Doug Klotz

What some commenters may understand here, but was not immediately obvious to me, is that this bill does not effect rentals. It’s only for-sale properties, i.e. single-family homes (with the problem Michael mentions: you can’t lower the price on 10% of a single house), and on condominiums. It does not affect rentals, the largest portion of new housing being built in Portland, for better or worse.

bjcefola
Guest
bjcefola

Could it effect rentals by requiring the developer to sell a portion of the rental units to an affordable housing agency, which could then sublet units?

Eric
Guest
Eric

Half of the land area in Portland is used for parking. Maybe park some multi-story dwelling trucks on Broadway to maintain the protected bike lane?