Portland’s 30 percent set aside of funds for housing boasts some success, some problems and some trouble ahead

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“Homeless Giant” by Eric Drooker. His graphics have appeared on countless posters, books and CD covers and his paintings are often seen on covers of the New Yorker Magazine. He makes his work available to social-justice nonprofit organizations at no cost.

From the Dec. 12 special affordable housing edition, “In need of a new deal.”

In October of 2006, the Portland City Council unanimously approved an ordinance that created what is known as the 30 percent Urban Renewal Tax Increment Set Aside. The new ordinance mandated that the Portland Development Commission (PDC) redirect 30 percent of all money projected in nine Urban Renewal Areas through a complex bond system to be spent on affordable housing serving people earning below 80 percent median family income over the next five years.

The move by the city was seen as an historic victory for housing advocates who for decades had struggled to correct years of urban renewal-fueled gentrification and displacement that continues to radically change Portland’s demographics, specifically those with little to no income and minority communities.

For years, advocates and loosely built coalitions had worked to create city-sponsored programs to balance affordable housing against higher end development. Despite the creation of unit goals for specific urban renewal areas, the city struggled to create the affordable housing needed due to lack of available funds after competing public priorities for urban renewal dollars — such as transportation, business recruitment and store front improvement — consumed renewal funds.

In response to the lack of units being built, organizers began to explore a California policy in 2002 that mandated set percentages of urban renewal funds to be dedicated to affordable housing. The set aside strategy was chosen because of its proven track record in California and regardless of competing priorities; unmet housing would finally have a dedicated funding stream.

Four years later, that strategy became a reality when the ordinance passed. Today, a little more than two and half years into program’s 5-year projected goals, the city and the PDC find itself struggling to stay above water in a shrinking economy and swimming to find a formula that works for affordable housing in a sea of bureaucracy.

On Tuesday, Dec. 9, the PDC released a two-year status report on the progress being made in the nine urban renewal areas. Updated revenue forecasts for 2009-10 and beyond will be presented to the public later in the month or in January.

Street Roots obtained a draft report of the 5-year projected goals produced by the Portland Development Commission from September of this year. Representatives from Nick Fish’s office, Portland’s Housing Commissioner, chose not to talk about the 5-year projected goals outlined in the draft or the specifics about the nine URAs – choosing rather to wait until a final analysis is released by PDC later this month.

A public meeting is scheduled for Dec. 19 with both Commissioner Fish and a PDC representative co-chairing a work-session with several developers, along with public and private finance partners and advocates to review the up and coming set aside annual report and to brainstorm strategies to assure that the goals that lead to the establishment of the set-aside are met.

According to Chief of Staff Sam Chase, “The key will be to bring the right partners together and focus on specific solutions that ensure the set aside dollars get out the door.”

The Nine Urban Renewal Areas

River District

In June 2008, City Council voted to expand the River District Urban Renewal Area into parts of Old Town/Chinatown neighborhood and parts of the central business district. It also created a controversial satellite district for the purpose of building a school and community center in outer southeast Portland.

The decision to broaden the geographical area and the economic scope of the River District is being challenged through an appeals process by a group calling themselves Friends of Urban Renewal, a contingent of former business and neighborhood leaders. Opening arguments on the case begin Dec. 12.

The PDC allocated $1.6 million dollars to affordable housing – 10 percent of the districts total expenditures from the River District’s earned revenue from TIF in the first two years of the set aside plan.

Money allocated through the set aside in the River District has gone to units in the Grove Apartments, housing 0-30 percent median incomes, along with money for 0-60 percent going to the Lovejoy Stations, the Sitka Apartments and Station Place Senior Housing in the Pearl.

If the district’s controversial changes stand, the district is poised to be one of PDC’s bright spots on the affordable housing front with several projects on the slate for 2009, including a homeless youth center and several smaller projects for low-income Portlanders.

Asked what happens if the appeal is successful, Sara Culp the Housing Project/Program Coordinator with the PDC says, “the city and the PDC will need to rethink strategies and look at a host of different options, including boundaries and specific projects.”
Funding for a homeless day access center, a multi-million dollar state of the art building that will include an access point for individuals on the streets and housing units for people living at a 0-60 percent median income level is expected to start in 2009. Other projects in the future include Block 247 – an affordable family housing project for 60 percent median income.

South Park Blocks
The South Park blocks, like the downtown URA is well established and has shown results on the affordable housing front. The district’s URA status will expire at the end of this year – meaning that all of the debt incurred through the bond process has been issued in the South Park Blocks. The PDC expects that affordable housing investments through the TIF set aside to be carried through 2012 – specifically for the preservation of Section 8 housing.

From 2006 through 2008, more than $11 million dollars has gone to affordable housing projects, including creating 50 new 0-30 percent housing units for Portland’s poorest residents and completing a preservation project of 80 units of 31-60 percent housing at Fountain Place in the central city. PDC also worked to preserve 223 units of Section 8 housing units at Clay Tower.

“Given the challenges that construction and land costs present, and the increased challenges with the market,” says Culp. “We feel positive about what we’ve been able to achieve in the first two years.”

“The PDC has done a great job at working to ensure the availability of affordable housing in the South Park Blocks,” says Julie Massa, Portland policy advocate with the Oregon Opportunity Network, an advocacy group for nonprofit affordable housing developers.

Stretching from Southwest Stark and Burnside and cutting through the heart of downtown into parts of Portland State University, the district created in 1985 is well situated and has provided millions of dollars for city projects in the central city. The PDC is in the process of reviewing options downtown for future projects once the South Park Blocks URA expires in January.

Downtown Waterfront
The Downtown Waterfront Urban Renewal Area is one of the better known renewal areas. Established in 1974, and boasting a $1.6 billion dollar assessed land value, the area in recent years has spearhead projects with Mercy Corps and oversaw the preservation of Portland’s Union Station.

The district is also due to expire at the end of this year. Current housing investments will run through 2010, after which the PDC and the city hope to have evaluated a new district downtown.

More than $13 million dollars of capital coming from the set aside has been injected into downtown projects working with individuals living at 0-60 percent of median income.

“Districts that already had a pipeline of affordable housing projects planned look good in the early years of the policy because there were opportunities already bubbling up there, and there was TIF available to get some of those projects done,” says Culp.

The PDC successfully delivered on several projects in downtown in 2008, including the preservation of housing units at the Yards at Union Station, the Estate Hotel and Musolf Manor (where Street Roots is housed).
Massa says that building new units is important, but equally important is keeping the affordable housing stock secure and affordable.

“Preservation is critical,” says Massa “It’s important to keep an eye on the past, while planning for the future. We have to be thinking about both.”

Central Eastside
The Central Eastside represents the complexity and hardships in creating affordable housing in a free market – especially during economic hard times. Good times appear to be right around the corner for some in Central Eastside, but not good enough times to produce the revenue needed to house poor and working people through the set aside model – many of whom live and work in the neighborhoods surrounding the URA.
The Central Eastside renewal area runs from SE Hawthorne to Powell, and from the Willamette River to Martin Luther King Jr. Blvd.

The fomer industrial area of warehouses and rail traffic is being turned into a bustling neighborhood of small businesses, restaurants and transportation projects (Portland Street Car, light rail line).

The five-year Housing Set Aside target for the district was set at $5.1 million for the first $35 million in debt issued – meaning that unless $35 million was indebted through tax revenues, the $5.1 would be void.

Only $11.3 million has been issued, most of which has supported job creation, infrastructure investments and major building renovations to encourage growth in the tax base. Falling short of the $35 million threshold, the $5.1 million for affordable housing is lost somewhere on the high seas. “Seeing fewer construction cranes in the air lately means that yes, we’re probably not going to see the TIF growth that we would have projected in better times,” says Culp. “And that’s going to mean less TIF for all types of projects, including housing.”

PDC claims that beyond upgrades to the Hooper Detox Center and working with the city and county to preserve 88 housing units at the Clifford Apartments (which houses 0-60 percent) that the URA will not produce revenue to support any affordable housing projects in the first 5-years.

North Macadam
No district has been more controversial than North Macadam, specifically for housing advocates.

Less than 10 years ago most of the area on the South Waterfront was vacant — and cheap. The area became ground zero for housing advocates that lobbied the city to buy the land and invest directly into affordable housing before the big boom occurred. Nine years and hundreds of millions of dollars later, there is still no affordable housing on ground in North Macadam.

The district is now home to the Portland Tram, Oregon Health and Science University (OHSU) and several high-end condo buildings and small businesses. The North Macadam district is complex and daunting for anyone touching the affordable housing issue.

Since 2006, investments and property acquisition have been made for Block 49 – on the corners of Moody and Bancroft — to the tune of $7 million. Yet market realities and the lack of funding availability in the URA are making it impossible to get anything off the ground. Zero units have been built there.

Another parcel of land in North Macadam (Block 33) is also a possible affordable housing site for the future. Currently, the PDC owns the air rights over that block to develop affordable housing. The property itself is owned by a third party – OHSU – which has a lease that would convert to PDC ownership when they develop a planned parking garage.

PDC and the city could develop affordable housing on top of the garage. Nothing can move forward until OHSU breaks ground on the parcel of land.

One person close to the project, who declined to speak on the record, said the city has been banking on using the set aside money, low-income tax credits and bonds to finance the project, but in the current economic climate, those options just don’t pencil out.

New strategies will need to be employed to achieve affordable housing production in North Macadam, according to both PDC and housing advocates.

“There will be affordable housing in North Macadam,” says Culp. “We’re optimistic.”

Gateway Urban Renewal Area
Before the economic collapse, city planners projected that by 2015, the Gateway Regional Center would be one of the most accessible locations in the Portland region due to its transportation system: adjacent to two interstate freeways, light rail transit to downtown, the airport, Gresham and in 2009, Clackamas Town Center. Now that the economy has retreated, so have projections.

According to the PDC, Gateway, like both the Central Eastside and North Macadam, are going to be huge challenges in generating the necessary resources to get projects off the ground, specifically housing projects.

“The initial plans in those URAs were to invest in infrastructure and commercial development projects that would help spur TIF generation by increasing the tax base,” says Culp. “How we time the investments in affordable housing is tricky, because there are so many worthy things we need to support in those neighborhoods, and each year, it means making tradeoffs between what gets done with limited public resources.”

To date, 6 percent ($200,000) of the 30 percent goal has been met in Gateway.
According to the PDC, efforts are underway to boost the TIF generated dollars in the district with infrastructure investments intended to spur new development.

“It’s going to take time,” says Culp.

The PDC says there just isn’t the cash flow available to build parks, pave streets, make business loans and do major affordable projects in Gateway. While the PDC is optimistic about homeownership and 31-60 percent housing in the future – meeting the zero to 30 percent goals for housing seems unlikely in the next three years.

Human Solutions, a nonprofit, affordable housing provider, has acquired property in the Gateway URA and is looking to build workforce housing along with an employment program. But due to the current economy, progress on the project has been slowed.

“The biggest barrier we are running into is getting tax credits in the current market,” says
Jean DeMaster with Human Solutions. “We can’t finance anything without those credits, and the longer we wait the more expensive projects cost. Without the set aside money from PDC we wouldn’t be able to even think about building a new project – we’re hoping we can work with them and get something done.”

Dorene Warner with Human Solutions says that PDC has given them a commitment of $1 million dollars to do predevelopment on the project. The money will enable the non-profit to put together the necessary tools to be able to move once the financial market opens back up.

“But the reality is that no one knows what’s going to happen in the market over the next two to six years,” says Warner. “And anyone that tells you they do know what’s going to happen doesn’t know what they are talking about. We just have to have faith things will work out.”

Convention Center
The boundaries for the Convention Center URA encompass the Lloyd Center area from NE 17th to the Willamette River, and from NE Everett to NE Russell, including Martin Luther King Jr. Blvd. all the way to Rosa Parks Ave. Major projects include the Street Car Loop and the Hotel Convention Center – a $4 million dollar expenditure which is now experiencing difficulty getting off the ground.

According to the PDC the URA is one of the more challenging in the city. The URA has not shown the growth that many have expected. The amount of money generated through tax revenues is projected to fall short of the indebtedness the city has allowed through 2013.

“Resources are very limited,” says Culp.

To date, the district has created only 6 percent of a 26 percent goal. The URA is meeting its goals with 31-60 percent housing units. PDC committed $3.1 million dollars towards the development of 32 new affordable housing units, including six at zero to 30 percent median family income levels. The URA also has two affordable homeownership projects in the works, but according to Culp, they both are facing challenges with the current economy and finding private lenders to move the projects along.

PDC has also invested heavily toward helping Central City Concern with workforce housing in the URA. They are projected to give the organization more than $1 million dollars this year to help rehab existing facilities that provide more than 150 units to low-income workers.

The PDC is in the process of planning efforts to re-configure the North and Northeast URAs (Interstate, Convention Center) to provide future funding for strategic projects.

Interstate
Interstate is hopping. Composed of older residential neighborhoods and interconnected commercial districts, the URA is the largest in Portland. Business and residential development along the light rail corridor is booming. The URA is ahead of the curve on many of the affordable housing goals over the past two years, but times are changing.

According to PDC documents, the URA is projected to exceed housing allocations for the 30 percent set aside goals – spending $3.7 million on affordable housing projects to date.

Still, like in many of the URAs throughout Portland, finding the resources for Portland’s lowest income individuals and families is difficult. The PDC has invested heavily in the first two years of the set aside in homeownership and 31-60 percent housing units. The organization is in the process of developing a new strategy to target zero to 30 percent median family income housing.

“The challenge with Interstate is looking at what older buildings need preserving versus new construction ideas and plans and the costs associated with both,” says Culp. “The good thing about Interstate with the set aside is that it allowed for new rental projects to get funding that might not have otherwise received funding through other means.”

Lents
The Lents Urban Renewal Area covers a broad area of neighborhoods in outer Southeast Portland. Major projects for the PDC include I-205 light rail, a town center and the 92nd and Harold Redevelopment Project that includes a new light rail station, a 32,000 square-foot office building, workforce housing, and several other neighborhood improvements.

In the first two years, 12 percent ($2 million) was spent on the 30 percent goal in Lents.
According to PDC documents, housing investments in the Lents URA have been ramped up considerably with the set aside policy. To date, investment has focused on homeownership – although planning efforts are underway for mixed-use and income projects. The PDC documents also outline that housing for those at zero to 30 percent median family income is challenging, and that if goals are to be met new strategies and leverage other resources will be key.
“Some have really come out against the set aside in Lents,” says Nick Sauvie, Executive Director of Rose Community Development, a non-profit housing provider.

Sauvie says the relationship between the neighborhood association and the PDC make it complicated to create low-income housing in Lents.

“Many people feel like the set aside for housing was rammed down their throats,” says Sauvie.

Culp says the neighborhood has historically felt like they have an abundance of affordable housing on the private market so the idea of bringing more low-income housing into the neighborhood has been a challenge for some.

“Prior to the set aside, Lents produced exactly 32 units of affordable housing through the URA – that’s an average of 3.2 units over a 10-year period,” Sauvie says.

Sauvie says that while leaders in the neighborhood and with PDC are doing good work, “three affordable housing units a year for the lowest income folks isn’t cutting it.”

Culp says Lents is going to be particularly challenging in the coming years because of competing priorities.

“I think there’s still a tremendous importance for advocates and elected officials to keep the pressure on PDC to produce the affordable housing units throughout the city, including Lents,” says Sauvie. “It’s an issue that can’t just be prioritized when we get around to it.”

“It takes time,” says Culp.

By Israel Bayer
Staff writer

Sidebar: What is urban renewal and tax increment financing?

Urban Renewal: a construction program to replace or restore substandard buildings in an urban area. – Merriam-Webster Dictionary

Urban Renewal is a state-sanctioned program designed to help communities improve and redevelop areas that are physically deteriorated, unsafe, or poorly planned. The Portland Development Commission uses urban renewal as a tool to help specific areas of the city realize capital projects — parks, streetscapes improvements, community centers and the like — that would not happen on their own.

How does it work?

The basic idea behind urban renewal is simple: future tax revenues pay for revitalization efforts. The City Council and the PDC draws a line around an area (urban renewal boundary) and identifies improvements within that area. The city then issues urban renewal bonds to pay for the identified improvements. As property values increase in the area due to new investment, the rise in property tax revenue (called the tax increment) is used to pay off the urban renewal bonds. The financing is called tax-increment financing (otherwise known as TIF) and it is the most common method of paying for improvements in an urban area. From this, the City Council has specified that 30 percent of the urban renewal revenue be dedicated to affordable housing.

More than 40 Oregon cities and counties have urban renewal programs in operation. Since 1958, when PDC was established as Portland’s urban renewal agency, the City Council has created 20 urban renewal areas. PDC currently administers 10 urban renewal areas; River District, Downtown Waterfront, South Park Blocks, North Macadam, Airport Way, Convention Center, Center Eastside, Lents, Interstate, and Gateway Regional Center.

— Portland Development Commission

3 responses to “Portland’s 30 percent set aside of funds for housing boasts some success, some problems and some trouble ahead

  1. Pingback: Is Seattle kicking Portland’s booty? « For those who can’t afford free speech

  2. Pingback: We want our 30% set aside, already! « For those who can’t afford free speech

  3. From the Indian treaties on down, when has any agreement with our government national or local ever been honored?

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