New mandate will serve as critical tool for increasing Portland’s affordable housing supply
On December 21, City Council voted unanimously to amend Portland’s Zoning Code and Housing Code to implement an Inclusionary Housing (IH) Program. The new program requires all new multifamily or mixed use development with 20 or more units to set aside some of the units as affordable housing. The new rules go into effect on February 1, 2017.
Watch the videos of City Council sessions about the Inclusionary Housing Program (November 29 and December 14).
Acknowledging that the city is experiencing an unprecedented housing affordability crisis, Mayor Charlie Hales said before he voted, “We’ve committed hundreds of millions of dollars to add more affordable units to Portland’s inadequate supply, but the lack of local policy tools to address the issue continues to price renters and low-income families out of their neighborhoods."
"Inclusionary Housing is a big and important step that will add another strategy to help provide more affordable housing in Portland. The program will leverage private development to provide affordable units, helping to create the diverse neighborhoods that Portlanders value, and keep Portland a livable city for all."
What is the Inclusionary Housing Program?
The Council-adopted program requires new multifamily development to provide housing affordable to households below 80 percent of median family income (MFI) or $58,650 for a family of four. The program includes an incentive for projects that provide units for households at 60 percent MFI or $43,980 and below.
Specifically, the program will provide:
- Incentives to offset the cost of providing the affordable units, including Construction Excise Tax (CET) waivers, System Development Charges (SDC) waivers, density bonuses and property tax exemptions.
- An exemption from minimum parking standards for development projects that are close to transit and provide on-site or off-site affordable dwelling units. This exception applies only to affordable dwelling units that are located on sites that are far from transit. This exception does not apply when a fee-in-lieu of affordable housing is paid.
New construction of 20 or more units must provide those units on-site, off-site or pay a fee in lieu of constructing affordable units, which will go into an affordable housing fund. An “offsite option” allows developers to comply with the inclusionary requirements by either building new units or dedicating existing units at a site that is near the development site.
Acknowledging the difference between the Central City and the rest of Portland
The IH Program identifies two “inclusion rates” to account for the difference in scale and development costs of multifamily development in the Central City versus the rest of Portland.
- In the Central City: Require projects with 20 or more units to provide 20 percent of units at 80 percent MFI or 10 percent of units at 60 percent MFI.
- Outside the Central City: Phase in a lower inclusion rate, starting at 15 percent of units at 80 percent MFI and 8 percent of units at 60 percent MFI. On January 1, 2019, the rates will increase to match those in the Central City.
In addition to the Title 33 Zoning Code amendments, other parts of the Inclusionary Housing Program will be implemented through revisions to Title 30, the Housing Code. These provisions include the incentive packages offered to offset the costs to development and a fee schedule for the in-lieu fee option.
Changes to the Zoning Code and Housing Code will become effective on February 1, 2017.
The Oregon State Legislature passed SB 1533 on March 3, 2016, authorizing local governments to create inclusionary housing programs. Key provisions of SB 1533 established the level of affordability (80 percent MFI), the maximum share (20 percent), and the requirement that local governments provide incentives to offset some of the costs of providing the affordable units.
Under the direction of Commissioner Dan Saltzman, the Portland Housing Bureau led the community discussion on the proposed Inclusionary Housing Program.
In support, the Bureau of Planning and Sustainability proposed a set of new Zoning Code regulations to implement the Inclusionary Housing Program consistent with SB1533.