5 Things Metro's 652.8 Million Property Tax Increase Will Not Change

As Metro rolls out their massive $652.8 million property tax increase proposal, they are conveniently forgetting to highlight how little the tax measure will do to create affordability throughout the region.

Here are 5 things you might have assumed the measure will change and why these items will remain unfixed no matter how much tax money you throw at the problem:

 

Number 1:  This property tax increase does nothing to change the visible homeless problem throughout the region.

 

Let’s be honest people, the City of Portland and the Metro Region has a massive and growing street population.  Portland, which once was one of the cleanest cities in America, is littered with floating garbage, human feces and aggressive panhandlers.  You cannot enter or exit a highway via an on ramp without confronting homelessness.  We need to do something to help these folks and make our city and region livable for everybody.

Unfortunately, Metro’s $652.8 million property tax increase does nothing for the visible homeless population.  Most if not all of the housing proposed by this measure will require applicants to have a job and some discernible income in order to qualify.  By in large, the folks we see living in tents on downtown streets or camped out in the parks do not have jobs and are incapable of holding a job for a variety of reasons (mental health, disability, drug abuse or simple lack of desire).  The measure will help what is often referred to as the “invisible” homeless, those who are living in less than ideal (shared housing, couch surfing etc.) situations which is good thing, but it will do nothing to reduce what you see each day.

 

Number 2:  This property tax increase has no ability to stop the ever-increasing gap between wages and housing prices for more than 95% of the Metro Region.

 

The Oregonian reported this week that for a minimum wage worker to afford the average rent in the Portland Metro Region, they would have to work 81 hours a week.  That’s right, they would need two minimum wage jobs (or as some might have figured, one job that pays the equivalent of $24 per hour) to make their rent affordable.

Proponents of the measure will no doubt point to these statistics as the dire need for Metro’s property tax increase.  The truth is, this just shows what Affordable Oregon and the opponents to this tax have been saying all along:  $652 million is a drop of water flicked into the ocean and it will change virtually nothing.  Rather than waste time and effort begging for additional tax dollars that will have very little impact, why isn’t Metro bringing stakeholders from local government, private industry, the affordable housing non-profit community and the public together to arrive at a comprehensive plan focused on affordability?  Oh, that’s right, because its easier to just ask for more money.

 

Number 3: This property tax increase will marginally INCREASE rents and mortgages on everyone else in the region, thereby making housing less affordable overall.

 

Look, we are not total idiots here at Affordable Oregon (despite claims to the contrary).  We understand the need for taxes.  When assessed for the right purposes and a great deal of thought, taxes can have great utility, especially providing infrastructure and services that are not economically viable otherwise.  Still, how is it logical in our current housing crisis to believe the solution is to increase taxes on people already struggling to pay rents/mortgages so that 5-8% of the total population pay less?  Why didn’t Metro look at other funding options or feed reductions throughout the region to fund affordability?  The answer cannot always be “lets put the cost to help people on those struggling LESS than those we are trying to help.”  You only grow the number of people who need help.

 

Number 4:  This bond will create almost no net effect on affordability throughout the Metro Region.

 

Take a moment to look at the numbers folks:  Metro is asking for $652.8 million over 30 years.  If this bond passes, Metro will put the bond on the open market and raise funds backed by a tax guarantee.  Investors must buy the bond to generate the money for this measure.  That happens as slow or as fast as the market sees fit.

So lets just assume that Metro receives bond proceeds at a rate that allows them to build their maximum number of affordable units (3,900) over a 15 year period (meaning, the bond fully funds).  3,900 divided by 15 = 260 units per year we can build for affordable housing.  This is what we are going to see come on the market yearly assuming local governments can get the housing through their own process in under 12 months (which the LGAP tells us is very unlikely).

According to Metro’s own analysis, the region needs 48,000 units priced at rates that individuals making less than median income can afford.  Let’s assume that the need only increases 1% per year:  48,000 x 1% = 480 units.  480 – 260 leaves a net increase in needed affordable units of 120 per year.  If our need for affordable housing just increases at 1% per year and this measure passes, our need will still increase by 120 units throughout the region annually.  Money cannot solve this problem, in fact it cannot even begin to turn the tide.

 

Number 5:  Passing this measure will do nothing to force the Federal Government to provide the additional subsidies needed to support newly built units.

 

The forgotten factor in this entire affordable housing argument is the Federal Housing and Urban Development Department (HUD).  Building affordable housing units is only the beginning.  To subsidize the rents on these properties and make them viable for private or even responsible public ownership, HUD is critical.  Without the feds providing millions in subsidized rent vouchers on behalf of those making less than median income, no jurisdiction can afford to fully maintain the affordable housing that will be built if this measure passes

For some reason, we all love to believe that building units solves the problem.  In fact, it’s just the beginning.  Each newly built project needs a substantial amount of annual cash flow to support ongoing maintenance and repairs.  HUD pays for a portion of this by providing vouchers to offset the cost.  Of course, HUD doesn’t just give local governments whatever they need to offset these costs.  Rather, they decide on a big, overall budget number annually and then divvy out the vouchers based on whatever overall number congress will support.  That number is WAY LESS than what it takes to properly maintain and care for the units for which we just made a massive investment of tax dollars.  Plus, there is no way of knowing how much HUD will give because their budget is a political football depending on which party is in power.

Take for example Washington County.  Half a million people live in Washington County and currently the County gets a total of 200 full rent vouchers from the federal government to subsidize affordable units.  According to HUD, for Washington County, those vouchers are equal to $1,330 per month for a two bedroom apartment.  1,330 x 12 = $15,960 per voucher annually.  Washington County gets a minuscule $3,192,000 from the Federal Government to support affordable housing!  If 527,000 folks live in Washington County, that’s $6 per person per year.

If this measure passes, hundreds of units of affordable housing will be built and there is no guarantee and a high likelihood that federal dollars will not be there to support maintaining the newly built assets.  That means they either fall into disrepair and our return on investment ends up being significantly less than what it should be or local governments further burden their general fund budgets to support maintenance of these properties.

What the press, civic organizations and the voting public should be asking themselves is why Metro didn’t do a better job of looking at the entire picture and addressing the root causes of our already massive and growing affordability issues.

The answer is, it was simply easier to just ask you for more money and pretend they did something.