City of Portland doesn’t know how much money its affordable housing program saved developers

The city’s Inclusionary Housing program seeks to stimulate affordable housing construction through financial incentives

The city of Portland’s Inclusionary Housing program, or IH, seeks to stimulate affordable housing construction by offering financial incentives to developers. Whether through tax exemptions or waiving fees and charges, developers are saving money through the IH program, but how much?

What started as a simple question for the Portland Housing Bureau, or PHB — asking how much public revenue the city foregoes through the IH program — proved to have a much more complicated answer.

Specifically, Street Roots asked how much the city foregoes in exempted property tax and construction excise tax, or CET, as well as waived system development charges, or SDC — the three main forms of public subsidies the city affords developers through the IH program. The city offers the savings to developers to make up for lost revenue from lower rents.

Four public records requests and 33 email exchanges with PHB later, the city still couldn’t provide a concrete answer to the question.

The reason? It isn’t keeping track of the hard data. In other words, the city doesn’t know how much would-be public money it lets developers pocket through the very program it runs. What PHB does have is estimates.

“We do not have the data,” as Gabriel Matthews, PHB public information officer, put it Aug. 6. “The hard data you’re requesting does not exist as such.”

While the city acknowledges it doesn’t have hard data compiled, it would like to change that. There are some efforts underway, according to Christina Ghan, Commissioner Carmen Rubio’s policy director.

Rubio, who introduced recent changes expanding financial incentives under the IH program, oversaw PHB until Mayor Ted Wheeler consolidated all bureaus under his oversight in July as part of the city government transition. Ghan said the city’s new permitting and development department will allow PHB to track the data more easily but did not give a clear answer on when PHB will start tracking foregone revenue.

“The recently launched Portland Permitting & Development (formerly Bureau of Development Services and staff from other bureaus related to permitting) will allow us to improve the coordination across various bureaus and systems related to permitting, which provides an opportunity for improved data tracking in our permitting system,” Ghan said in an email. “This can help us track this and other related permit information more closely in real time and — importantly — in an automated way that can make it considerably less staff intensive to aggregate information. In the meantime, PHB will continue tracking the detailed estimates as it does now.”

Currently available

Street Roots reviewed numerous data sets PHB did have, including those submitted to the City Auditor’s Office last year and data sets Street Roots obtained directly from PHB. The vast majority of the data on foregone revenue is estimates, which Matthews said PHB uses for compliance and program tracking.

Street Roots identified discrepancies between data submitted to the auditor’s office and data PHB provided directly, though Matthews confirmed the accuracy of estimated SDC and CET exemptions shown in the data PHB submitted to the city auditor.

Depending on the data set, the low-end estimate for public subsidies on the current stock of IH projects is between $129.5 million and $135 million total throughout the lifespan of the 10-year property tax exemption — not including direct funding PHB provided some projects. These foregone revenue estimates are lower than the actual cost because PHB only uses the first-year estimated property tax exemption to calculate foregone revenue, and property taxes increase over time.

The IH program created 1,760 total ‘affordable’ units thus far. However, landlords can rent nearly 30% of those 1,760 units — 515 — within $6 of federally determined area “fair market rate,” as Street Roots reported Aug. 7.

Despite the city not knowing how much money it’s letting stay with developers, City Council voted unanimously Jan. 31 to expand the IH program’s Multiple-Unit Limited Tax Exemption, or MULTE, effective March 1. Under MULTE, IH projects receive a 10-year property tax exemption on all ‘affordable’ IH units, or depending on location and project specifics, all residential units.

The city also suspended the program’s previous rolling five-year, $15 million foregone property tax revenue cap until 2029, meaning there’s now no hard limit to how much money developers can save.

Rubio said the expanded tax exemptions were made to cover the program’s costs in a Jan. 31 press release.

“The Inclusionary Housing program is doing what it was meant to do: expanding access for low- and moderate-income families to live in some of the most desirable areas of Portland,” Rubio said. “At a time when development activity has dropped off, these changes will ensure that the City is providing enough financial incentives to adequately cover the costs of complying with the program.”

When asked how the city makes decisions on expanding financial incentives without hard data on foregone revenue, Ghan referred Street Roots to a November 2023 calibration study on the IH program conducted by BAE Urban Economics.

“The analysis provided by BAE was rigorous, and sufficiently detailed the effect of IH on individual development projects, as well as the value of the various incentives to offset the financial impact of IH,” Ghan said in an email. “It was the imbalance of these two things — particularly in a moment when housing development is facing incredible challenges and many new projects are on hold — that prompted the City to act. That data-driven approach is why the expanded MULTE area is limited to areas with documented local market rents that are higher than the restricted IH rents at 60% MFI.

“The City was comfortable suspending the cap on foregone revenue in part because there were other, more significant barriers to developments moving forward right now than the effects of IH, and that the cap created an additional level of doubt for the development community at a time when we need to be doing everything we can to make sure that the housing that Portland needs actually gets built.”

Ghan said BAE completed its analysis using 100 development prototypes and interviews with PHB staff, Multnomah County Assessor’s office, developers and other stakeholders.

A tough row to hoe

In response to Street Roots’ initial questions, Matthews told Street Roots to package them into a public records request and submit it to PHB. Street Roots submitted the request July 12.

“Unfortunately, the bulk of the data for the first several questions is spread out across various sources — including PHB spreadsheets, permitting systems, and the County’s systems,” Matthews said. “We can compile this data for you, but as these records would have to be created and compiled, we have to request that you submit a public records request for the data. I will also note that this will take a significant amount of time to compile.”

On July 17, Matthews called Street Roots to reiterate the public records request would take a significant amount of time and gave three options to move forward: Provide the data requested but at a significant cost due to staff time; provide the first-year estimates for foregone revenue at no charge; include a comparison of these estimates with the data for one single project that was built a few years ago at no charge.

Street Roots continued to pursue the initial data requested as well as PHB’s first-year estimates for foregone revenue.

However, on July 23, a week after Street Roots filed the initial public records request, Matthews informed Street Roots PHB would not fulfill the request because it would be creating data that didn’t previously exist.

“For total foregone revenue via MULTE, via CET, via SDC waivers, via the IH program, that hard data, as I said before, spread across various agencies, and the best way to get that data is for you to go to those agencies directly because it is their proprietary data,” Matthews said. “It’s not ours. They would have to see it before we gave it to you anyway. We’re under no obligation to create new sources. We also crunched the numbers and frankly, it would take a lot of time for us to compile all of that data in the way that you’re looking for it.”

Matthews told Street Roots to spread the one public records request across three agencies — the city’s Revenue Division, Bureau of Permitting and Development and the Multnomah County Assessors Office — despite PHB administering the IH program. While the city suspended the foregone revenue cap March 1, the program required developers to stay under the cap since its inception in 2017. The program enlisted the bureau to calculate annual foregone revenue against the previously existing foregone revenue cap.

Street Roots filed the individual records requests July 23 and asked if it would be correct to say the city doesn’t maintain a centralized process and document for recording and tracking foregone revenue through the IH program. Matthews did not answer the question directly and instead said PHB uses first-year foregone revenue estimates against the program’s foregone revenue cap.

NEWS: Nearly 30% of ‘affordable’ rents within $6 of ‘fair market rate’ under Inclusionary Housing

Not a single request yielded hard data. The Bureau of Permitting Services, which Matthews said would have CET exemption data, told Street Roots it had no such records July 30. Matthews emailed Street Roots to say PHB considered the request “closed” as of July 23, due to it previously providing first-year estimates for a portion of the program.

Street Roots pushed back on the request being fulfilled, due to it objectively not being fulfilled, and requested an explanation for why the city felt it was legally allowed to withhold the data.

In a subsequent phone call, Matthews revealed the city was not keeping track of the foregone revenue in the IH program. It could only estimate it. Matthews told Street Roots if PHB were to fulfill the request, which it was unable to do, it would cost Street Roots “several thousands to over $10,000 on a 50% deposit.”

Ghan later said PHB could provide Street Roots with foregone revenue data for a single project that had been open for a few years but would have to coordinate with Multnomah County, Portland Permitting & Development, and the City Revenue Division, despite Street Roots already going through all three individual agencies to obtain records on foregone revenue.

How it started/How it’s going

Street Roots already had some PHB data on the program and first noticed the lack of hard data — meaning the actual dollars and cents a developer saved — when it obtained data PHB provided to the city auditor for an IH audit report released in May. PHB compiled information on IH applications, including SDC exemptions, CET exemptions and estimated first-year foregone property tax revenue from 2017 through spring 2023.

The city auditor found the program fell short of its goal to build affordable housing for low-income renters, who are often renters of color. It also found PHB was two years behind in reviewing compliance data by property owners and managers of IH units.

However, the exemptions were beyond the scope of the audit, which focused on the IH program’s effectiveness and whether it was meeting its goals, according to Jenny Scott, a city auditor who worked on the IH audit report.

“We didn’t really dig into the impact of exemptions,” Scott said.

Scott referred Street Roots to PHB to verify the exemptions listed on the spreadsheets.

Street Roots did not receive an answer to questions about foregone revenue in the IH program from Wheeler’s office, who now oversees PHB, or from Commissioner Dan Ryan, who previously oversaw PHB before Rubio and led the effort to fund the IH Calibration study.

Street Roots is an award-winning weekly investigative publication covering economic, environmental and social inequity. The newspaper is sold in Portland, Oregon, by people experiencing homelessness and/or extreme poverty as means of earning an income with dignity. Street Roots newspaper operates independently of Street Roots advocacy and is a part of the Street Roots organization. Learn more about Street Roots. Support your community newspaper by making a one-time or recurring gift today.

Source