Offering an Alternative Plan to Metro's Massive Property Tax Increase

Metro Regional Government is asking for a $652.8 million property tax increase for the purpose of building affordable housing.  Since Metro put the measure on the November ballot, Affordable Oregon has been a vocal critic and has written repeatedly about why the measure is a poor use of public funding and solves very little of the problem at hand (click here for those articles).

Lets face it, being critical is easy.  Anyone can pick apart a proposal or an idea and cast aspersions on a plan.  At some point as a critic, you have to put your money where your mouth is.  If Metro’s gargantuan property tax increase is a bad idea, then what’s your plan?  After all, the Metro Area is enduring a serious housing crisis and something has to be done.  What does Affordable Oregon think should be done to create more affordable housing?

Glad you asked…

AFFORDABLE OREGON’S PRIORITIES FOR CREATING AFFORDABILITY

First of all, the entire region needs to take a deep breath and recognize throwing money at this problem is not the solution.  If Metro’s numbers are to be believed, we need approximately 48,000 affordable housing units to satisfy our housing crisis.  According to Metro’s most optimistic forecast, building each of those units will cost $172,000 per unit to build.  Simple math says to solve that problem with public money you need 8.25 BILLION dollars to fix the affordable housing crisis or 12.5 times the money Metro is currently asking for in their bond.  

What is needed to solve the Portland Metro Area’s housing crisis, is a comprehensive strategy, adopted across the region, that addresses all of the issues creating higher housing costs in the market and uses all of the tools available to lower housing prices.  Here is what we propose should have been considered before asking for 2/3 of a billion dollars from the public…

 

Work to Lower the Price of Land: 

 

The cost of land for residential development is well over $500,000 per acre throughout the region.  You simply cannot build an affordable home in this region if the dirt under the house or housing complex is costing more than $10 per square foot.  What causes high land prices?  Some will point at the increasing population in the area putting pressure on the cost of a home, but even a shoddy economist will tell you the average income of those folks will eventually create a situation where home prices reach equilibrium.

If its not demand, then it must be supply.  The supply of land in our region is controlled by one organization:  Metro.  Using a process that only addresses land supply every 5-6 years (now every three, sort of) and then favors the most difficult land to build, has taken its toll on affordability.  UGB expansion areas somehow manage to be enormously expensive (because of massive infrastructure requirements) to build and physically challenging to develop.  The artificial lack of supply created by a tight UGB and the incremental addition of poor land for development is the single greatest contributor to our lack of affordability.  Ironic that Metro is now asking voters to relieve the very pressure they created with a massive property tax increase.  Add land in reasonable places on a rolling basis and the price of land will fall.  Perhaps if Metro would have done this sometime in the last three decades we wouldn’t be facing this issue at all.

 

Make Local Governments Pay Their Fair Share: 

 

Every city and county in the Metro Region will stand up in a crowd and lament the lack of affordability for their citizens.  However, the minute someone suggests they help contribute to lowering the price of housing, they vanish.  The LGAP study shows local jurisdictions are creating 10%-20% of the cost of a home through fees and charges to the builder before the home sells.  If these local governments are committed to affordability, why not entertain this plan:

 

  • Determine the annual need for affordable housing in your jurisdiction and pick a number of units you are looking to add.  Lets say its 200.

 

  • Offer a proposal to builders to waive ALL fees and charges assessed by the jurisdiction for each unit they build specifically conforming to standards for affordable housing.  Require the builder or end purchaser of the product (investment entity) to hold the property for 10 years and use it exclusively for affordable housing.

 

  • Put these projects at the head of the queue and process them rapidly, ensuring needed affordable housing is being built as quickly as possible.

 

A plan using these elements in the City of Portland could save up to $80,000 on each housing unit or $16 million overall (using our example of 200 units) and allow the end purchaser/builder to offer these units at a significant rent savings, creating affordability.

Seems simple enough right?  Except that would mean local jurisdictions choosing to forego a great deal of revenue to contribute to affordability.  Unfortunately, jurisdictions would all rather see taxpayers foot that bill than forego the fees and charges they are due.  How do we know it’s true?  Portland passed its $258 million affordable housing bond in 2016 and when it finally develops some housing from the bond (which 18 months later it still has not done) it will do so paying for development, engineering and permitting costs.  Who will get that money?  THE CITY OF PORTLAND.  All that money goes right back to supporting the bottom line at the City of Portland’s various development related bureaus.  Same will be true for Metro’s measure.  Cities and Counties will charge the same fees etc to the bond as they would to any other builder. Its safe to say 10% to 20% of the housing bond will be eaten just by local government fees and charges.  That’s not helping anyone.  Why not make the money go that much further by waiving these fees?

 

Shorten the Time to Market:

 

The City of Portland is learning a harsh lesson that builders in Portland and throughout the region have known for a long time:  building housing in the Metro region simply takes too long.  As noted above, the City of Portland declared a housing emergency and begged their voters for $258 million to build needed affordable housing immediately.  Voters obliged in November of 2016.  Its now July of 2018 and the City of Portland has not built one new affordable housing unit.  Yes, they did manage to purchase 52 units built privately at market rate (nearly 2/3 more than their bond can support) but even the City itself cannot manage to get a housing project through its own process in under 18 months.  How does that make sense?

Welcome to the reality of development throughout the Metro Region.  When builders complain about the amount of time it takes to get to market, the collective eyes of every jurisdiction glaze over.  Now, the reality of doing business as a builder in their system is punching them right in the face.  Portland cannot deliver affordable housing fast enough in part because of its incredibly time consuming process.  If Metro passes their property tax increase, the same situation will play out across the region.  Affordable housing will not appear on the market (not if it goes through the development process and is built wholesale as it is supposed to be) for at least 24 months.  It’s time for the legislature to create hard deadlines with financial penalties for jurisdictions that cannot manage their own development process in a timely manner.

What if Metro would have taken the process of examining how to create actual affordability seriously instead of just putting their hand out and asking for $652.8 million dollars?  What if the jurisdictions, industry and Metro would have collectively considered a plan that included all stakeholders paying their fair share to creating affordable housing, wouldn’t this plan be much more effective and more palatable?  Unfortunately, they just asked for money without doing the hard work.  In order to go back and do it right, we need to first stop this measure from passing and send Metro and all stakeholders back to the table to come up with real solutions.

 

We need your help to defeat Metro’s 652.8 million property tax increase.  Click here to contribute to the campaign today!