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Portland wants Legislature to allow inclusionary zoning, but progressive economist says it won't help with housing crisis

Portland city officials and affordable housing advocates hope they finally will be able to convince the Oregon Legislature to end the state ban on “inclusionary zoning,” as allowed in 48 other states. That would enable Portland to require developers to include some affordable units when they build larger apartment complexes.

But on the eve of a pivotal committee vote in Salem to end the ban, an influential liberal economist is questioning whether inclusionary zoning is worthwhile. Joe Cortright, director of the City Observatory think tank, argues that inclusionary zoning hasn’t worked well elsewhere, and that it will drive up housing prices and shift development outside of Portland, increasing suburban sprawl.

“Evidence from Boston, where it’s been in place for some time, suggests that inclusionary zoning will cause fewer total new units to get built,” Cortright wrote in an article he posted last week on the City Observatory blog.

In New York City, he wrote, it has produced less than 3,000 new units in a decade, not much more than Portland achieved in the Pearl District alone.

“It’s basically tokenism masquerading as public policy,” Cortright said in an interview after his post raised concerns of affordable housing advocates. “In my view, it’s a really counterproductive policy.”

Making developers build some affordable units, without granting them any public subsidies, will cause them to raise rents on their other units or move to suburbs without such policies, Cortright said. “The people who develop apartments then have to make up the price somewhere else. If I’m an apartment developer, that’s essentially driving up the costs of Portland compared to everywhere else.”

That must be music to the ears of homebuilder lobbyists and their allies who lobbied the Legislature to ban inclusionary zoning in Oregon cities. Texas is the lone other state that bars it.

Cortright is generally seen as a progressive economist. He was a leading critic of the ill-fated Columbia Crossing Bridge to Vancouver, who heralded the economic importance of Portland becoming a magnet for “young creatives.”

On Friday, Portland Housing Bureau Director Kurt Creager was reached just before heading into a legislative committee hearing to testify in favor of inclusionary zoning. Creager, who had just finished reading Cortright’s blog post, said he disagreed with the economist’s critique of inclusionary zoning, which he calls inclusionary housing.

“It is working in areas that are more like Portland than New York City or San Francisco,” he said.

Creager came to his Portland job last year after working in Fairfax County, Va., a suburban Washington D.C. area that has successfully used inclusionary zoning. For every apartment project of 50 units or more, Fairfax County requires 12 percent of the units to be affordable, Creager said, resulting in 2,700 affordable units. Along transit corridors, the county requires 20 percent of units to be affordable, which has resulted in another 4,500 approved units, though most of those are not yet built.

New York’s program has been voluntary, Creager said, and Mayor Bill DeBlasio wants to beef it up. Boston’s policy hasn’t worked that well, he conceded, but said the mayor is recalibrating it to be more effective, as San Diego recently did. San Francisco has a pending ballot measure to strengthen the affordable housing requirements in its policy, Creager said.

Portland has effectively used urban renewal financing in the Pearl District, South Waterfront and elsewhere to subsidize affordable apartments, Creager said. But by state law, urban renewal areas can’t take up more than 15 percent of a city’s land base. Portland’s urban renewal areas take up 13 percent of the city, and that will rise to 15 percent if Mayor Hales creates a new urban renewal area this year along a rapid bus line planned on Powell Boulevard and Division Street.

“Inclusionary housing would provide us with a tool that would be available citywide,” Creager said.

He envisions it being most helpful in Portland along transit corridors, and doubts it will cause developers to build elsewhere, because many residents are flocking to live in the city's close-in, walkable neighborhoods with urban amenities.

City Commissioner Dan Saltzman said inclusionary zoning isn't a panacea but he thinks it will be an "important tool" to remedy the housing crisis.

"We're going to be reasonable in our approach, and we're going to include everybody who has a stake in the issue in creating the rules," Saltzman said, if the Legislature reverses the ban.

Creager testified Friday that if the bill before the Oregon Legislature had been in effect, Portland would have seen an estimated 4,000 additional affordable units from 2010 to 2014. No full figures are available for 2015, but his staff calculated that 803 more units would have been built through August.

Of course, that’s somewhat speculative, because the policy would have driven up costs for developers.

“Our estimate is that about half of the (affordable) housing need can be addressed through inclusionary housing policies in the next 20 years,” Creager said. The other half, he said, can come via urban renewal and other public subsidies.

But Creager said the bills before the Legislature could die if they don’t emerge soon out of committee.

The Welcome Home coalition, which includes 119 organizations concerned about affordable housing, calculates that the Portland area is short more than 40,000 affordable rental units, the largest share of them in Portland.

Portland and some surrounding suburbs are experiencing some of the fastest-rising rents in the nation. Arguably, Portland is experiencing more widespread gentrification pressure than ever before. Those factors plus the proliferation of homeless camps prompted Portland and Multnomah County to declare housing emergencies in recent months.

Portland officials and affordable housing advocates have lobbied the Legislature to lift the ban on inclusionary zoning, among a menu of strategies to promote more affordable housing.

Portland also boosted the share of urban renewal money going to affordable housing, and dedicated taxes from Airbnb-style rentals to a housing construction fund.

The city also is studying a new "linkage fee" that would raise property taxes in select areas to generate more housing funds, and a new "density bonus" that would allow developers to build taller

buildings in exchange for funding some affordable units.

Housing advocates also are promoting a large bond measure to pay for more units. That would require a public vote to raise property taxes.

stevelaw@portlandtribune.com

503-546-5139

@SteveLawTrib

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