In Brief:
- Voters approved a $650 million housing bond in the Portland area that has exceeded its target of financing 3,900 affordable units by more than 1,000 units so far.
- A local bond in Portland has also outperformed its targets.
- The funds have helped build thousands of units that wouldn’t exist otherwise, but rising development costs are now making it harder to build.
In 2018, voters in the three counties surrounding Portland, Ore., — already shouldering some of the highest tax burdens in the country — approved a small property tax increase to back a $652.8 million housing bond.
Like other cities in the west, Portland and its surrounding metro area were facing a worsening crisis of homelessness and housing affordability. The bond measure, floated by the Oregon Metro Council, an elected regional governing body, promised to help fund an estimated 3,900 affordable housing units, with a focus on helping people with the lowest incomes. Six-and-a-half years after its passage, with nearly all the funds allocated, the bond is exceeding expectations. Nearly 5,000 bond-funded housing units are currently in development, according to a recent Metro report. By the time all the money is spent, Metro now expects the bond will have helped produce 5,600 units, while also overshooting its goals for family-sized units and homes that are affordable to people making less than 30 percent of the area median income (AMI) per year.
“There was a conversation about the trade-offs. We could build more units if we were just building 60 percent AMI housing,” says Emily Lieb, a housing policy director at Oregon Metro. “There was an intentional choice to focus on deeply affordable homes and homes that would be sized for families.”
Part of the reason why the bond is outpacing its targets is because the targets were conservative in the first place, Lieb says. Metro assumed it would finance projects that would also get federal low-income housing tax credits, but it didn’t assume they would also make use of a wide variety of other public and private financing streams, including, in some cases, land donations, which have allowed the bond funds to stretch farther than they would on their own. Another reason is that they focused on getting the money out the door to local jurisdictions as quickly as possible, Lieb says. The funding was allocated to projects in Multnomah, Clackamas and Washington counties based on their share of the regional population.
“In essence, we were looking to distribute affordable housing investments everywhere in the region,” Lieb says.
The regional housing bond followed a local bond approved by Portland voters in 2016. That measure raised $258.4 million with a goal of 1,300 affordable units. Like the Metro bond, it has exceeded its initial targets, with 1,859 units across 15 projects. Gabriel Mathews, a spokesperson for the Portland Housing Bureau, also credited conservative estimates and the availability of other funding streams with the Portland bond’s overperformance. In at least one instance, a project took advantage of both the Portland bond and the Metro bond.
For developers, the availability of public bond funds has made it possible to do more projects, to add more units or larger units to a planned building, or to offer deeper subsidies for some units. In most cases, the bond funds are only a fraction of the overall financing of a project. But their availability, and the goals set by the governments that issue them, let developers know what types of projects are possible.
“Funding is the tail that wags the dog. It is what drives what gets built,” says Stefanie Kondor, an executive vice president at Related Northwest, a housing developer.
Related has developed four projects with financing from the Metro bond, including the recently opened Aldea at Glisan Landing in Portland. The complex has 96 apartments, with 81 sized for families and 15 set aside for tenants earning less than 30 percent of AMI.
Bridge Housing Corporation, a developer that works all over the west coast, has developed 382 units across three projects financed by the Metro Bond. For one project, an 82-unit complex in Beaverton called Cedar Rising, bond funds supplied about a third of the overall financing, says Sierra Atilano, the chief real estate officer for Bridge. The bonds only supplied about a tenth of the funding for a larger, transit-oriented project in Portland called HollywoodHUB. But they made it possible to go bigger. Without the Metro bond, Bridge would have had to cut three floors and about 60 units from the 224-unit project, Atilano says.
Despite both the Portland and Metro housing bonds overshooting their goals, the region’s housing affordability and homelessness problems continue to get worse. And in recent years, the costs of housing development have risen substantially due to inflation, labor costs, uncertainty around tariff policy and lower sale value for Low-Income Housing Tax Credits, Atilano says. In the Pacific Northwest, the cost of building new tax credit housing is in the mid-$500,000s per unit, she says — about twice what it was five years ago. And the per-unit development costs are much higher in California. Bonds help pay for housing that wouldn’t otherwise get built, but once they’re spent, they’re spent, Atilano says.
“It comes in ebbs and flows. Most states have yet to find a permanent solution for a tax or bond measure,” she says. “Until you get a spigot that’s left on long term, it will continue in ebbs and flows. It makes dents in projects for a while and then it dries up.”
(One exception to the rule, Atilano notes, is Measure A in Los Angeles, a half-cent sales tax approved by voters last year to pay for housing and homeless services.)
Oregon Metro and the Portland Housing Bureau try to communicate to the public that the bonds have helped prevent the affordability and homelessness challenges from getting even worse than they are now. But it’s a tough message when people still see evidence of those problems everywhere. Polling suggests the region’s residents aren’t interested in voting for another housing bond at this point, Lieb says.
Meanwhile, Metro is still gathering data on the total number of people living in the units financed by its bond. It estimates it could be as many as 18,000 by the time they’re all completed, with a focus on “families with children, seniors, people of color, immigrants and refugees, non-English speakers, and veterans,” Lieb says.
“Our demographic data is showing that we are being successful in reaching those communities,” she says.
