Eligible multiple-unit housing shall be constructed, converted, or preserved after the date of adoption of this program, and completed on or before January 1, 2022, unless the program is extended and a later sunset date is established through the Oregon State Legislature.
Project owners must submit certification including any necessary supporting documentation of the public benefits and other project requirements identified in the approved application to PHB with the first annual financial documentation submitted.
Rental Project Compliance
- Extended Use Agreement: The owner of a rental project approved for exemption will be required to sign an extended use agreement (EUA) to be recorded on the title to the property.
- Annual reporting and review:During the exemption period, the owner must submit project financial information annually to PHB within 60 days from the end of the project’s fiscal year. The financial information shall include, but is not limited to the following:
- Full project-based audited financial statement
- Internal Revenue Services tax information (tax returns)
- Ten-year operating cash flow statement, showing actual cash flow for all prior years and the current year and shall include a to-date calculation of the rate of return for the project
- Annual Property Report (APR) or similar form
- Electronic Tenant Survey (ETS) (to validate subsequent rental and household income compliance, when unit becomes available for rent after initial occupancy)--every fifth year, the tenant income qualification submitted shall be certified by a third party.
- Any other documentation deemed necessary by PHB to calculate or evaluate the rate of return for the project.
PHB will prepare an annual analysis of the project’s financial data including a to-date calculation of the rate of return for the project using the same method utilized in its initial recommendation for the tax exemption within 180 days of receipt of all required financial information.
PHB will advise the owner in writing whether the projected rate of return will exceed 10 percent for the entire exemption period and may result in an Accrued Payment Liability (APL).
If PHB determines that the number and unit mix of affordable units is less than the approved percentage or does not match the unit mix of the project, the next available units must be rented to households meeting the income requirements and the project must be brought into compliance before the next reporting period.
Subsequent monitoring of the incomes of these households is not required until the affordable unit again becomes available for rent, at which time it must be rented to an income qualified household earning 60 percent (or 80 percent if approved as such) of the area median family income (MFI) for the remaining term of the property tax exemption, unless another unit has subsequently been rented at an equivalent affordable rate to a qualified household so that the project continues to comply with the affordability guidelines.
- Project rate of return: At the end of the final year of the exemption, PHB will calculate the rate of return for the project during the exemption.
If the rate of return does not exceed 10 percent, then the EUA terminates at the end of exemption.
If the rate of return exceeds 10 percent, then PHB sends a written notice to the last known address of the owner requiring the owner to elect one of the following:
- The EUA may remain in full force and effect for an additional 5 years after the end of the tax exemption , extending the affordability requirements approved for the exemption; provided that the number of units subject to the rent restrictions as approved is the same number necessary to reduce the net present value, using a 10 percent annual discount rate of the project’s projected market-rate (unrestricted) annual cash flows by an amount equal to the APL; or
- The owner pays an APL in an amount equal to the lesser of either the net present value using a 10 percent annual discount rate of the difference between the project’s actual annual cash flows during the exemption and the proforma projected cash flows for the project that would provide a 10 percent rate of return during the exemption or the maximum amount of the property taxes that would have been assessed if no exemption had been granted.
For-sale Units Compliance
- Agreement: Prior to approval, applicants must execute a document to be recorded on title to the property requiring PHB verification of homebuyer affordability and owner-occupancy qualification prior to the sale of the property to the initial homebuyer.
- Homebuyer verification: The initial homebuyer must submit a Compliance Verification Form and supporting documentation at least 10 business days prior to closing on the home purchase and must not close without PHB review and response. The verification form must be signed by all homebuyers; income documentation should be submitted for all homebuyers who will both be on title to the property and living in the home.
- PHB review prior to closing: PHB will notify homebuyer and escrow of homebuyer qualification (affordability and owner-occupancy) prior to closing.
- Sales over the price cap : Escrow must notify PHB if a property is selling over the established price cap. If the exemption is already in effect, it will be terminated and escrow must request the amount of any taxes exempted due from Multnomah County to be paid at closing by the seller.
- Construction completion: The property must be fully constructed upon sale (documented by final permit or certificate of occupancy and usually verifiable by PHB through Portland Maps).
- Verification of closing: Homebuyers must send PHB documentation of the final sale price and title holders within 30 days of closing by submitting a copy of the recorded Warranty Deed or the Final HUD-1 Settlement Statement.
- Subsequent homebuyers: If a property with a tax exemption transfers title during the ten year exemption period, the exemption will continue as long as the property remains owner occupied.
- Owner occupancy: For-sale units may not be rented at any time (both prior to initial sale and after homebuyer approval). After initial sale, the property must be owner occupied (or listed for sale and vacant) during the exemption period. Properties which are rented are subject to termination of the exemption.
Termination of Active Exemptions
If the property no longer qualifies for the tax exemption prior to the exemption expiring, the exemption will be terminated.