Portland housing bond: Why is the city taking so long to create new homes?

As winter wound down in 2018, Chardonai Jones and her young son bounced between living

As winter wound down in 2018, Chardonai Jones and her young son bounced between living in a hotel room and her car. She was 18 with another baby on the way, had no credit or rental history, and her fiancé had an eviction on his record. Portland landlords didn’t think they were reliable tenants.

But she and her family found home at The Ellington, an affordable housing complex that the city of Portland had just purchased as the first funded by a voter-approved housing bond.

“Most apartments required that we make 2 1/2 or three times the rent, and that feels kind of impossible sometimes unless you have three jobs,” Jones, now 22, said. “The Ellington, it gave us a break. We knew we had someone on our side to help us get back on our feet. It was our stepping stone.”

But many other people in need of a similar refuge can’t find one in Portland because publicly subsidized apartments are few and far between, even after voters signaled their strong desire to add many more.

The $258 million bond, approved in 2016 on its promise to create at least 1,300 affordable homes, has led to just 314 units in four and a half years: one new apartment complex and the large one where Jones and her family live. Three other projects are under construction, two of them newly so, and seven more remain on the drawing board. That is despite the fact the city purchased some of the land to build homes on more than 3 ½ years ago.

Although the city still appears on track to complete more than 1,300 apartments by the far end of a five to seven year timeline laid out for voters, many housing advocates are dismayed things haven’t moved faster, given the urgency of housing so many Portlanders in need.

Chardonai Jones and her family.

As Jones and her fiancé maneuvered life over the past three years, through new jobs, a precious third baby and various hardships, they found that the community asset that lifted them out of homelessness was also what prevented them from falling back into it. Some affordable housing complexes come wrapped in supportive services, ranging from behavioral health care to budget planning education. And theirs did, to her relief.

“They wouldn’t up and kick you out,” Jones said. “They will give you chances and resources to help you out with rent or your bills. They were there to help us when we couldn’t pay rent one time and it kind of makes you feel like you are family and makes you feel important.”

Now, the walls of their two-bedroom apartment are graced with family photos, her sons have dressed their shared room with Spider-Man and dinosaur decorations and their large closet has been transformed into a playroom hideaway.

The supports that Jones and her family received are the same assets thousands of others across the Portland area are vying for. Amid the growing housing crisis, taxpayers have grown frustrated with the snail-like crawl of affordable housing development.

At the outset, the delay was caused by the city’s failure to get clearance from a provision of the state constitution that prevented it from spending bond proceeds on housing complexes it did not own, a situation it got voters to fix in November 2018.

Officials say building new complexes with public subsidies requires a lengthy process, particularly given the tapestry of financing streams that must come together to make them pencil out.

But advocates are pushing back, urging for the process to be fine-tuned to open new homes more quickly and for other housing solutions to be offered in the meantime.

Portland needs a staggering 22,030 additional affordable housing units to meet the current demand, according to a 2020 Comprehensive Housing Affordability Strategy report by the U.S. Department of Housing and Urban Development. That means the city needs to nearly double its cache, which currently sits at about 23,500 regulated units, according to a 2017 report from the Metro regional government agency.

NEW PROJECTS BREAK GROUND

The most recent bond-funded project to break ground was the Las Adelitas apartment complex in Northeast Portland’s Cully neighborhood. The site was previously home to the infamous Sugar Shack strip club. The building was bulldozed in late 2018 after a coalition of neighborhood groups purchased it as its owner faced federal prostitution and tax fraud charges.

While the development attracted headlines for the building’s scandalous past, it’s also a prime example of the enigmatic affordable housing process which involves tangled financing, permitting and public approval processes.

Ernesto Fonseca, director of Hacienda Community Development Corporation, which owns Las Adelitas, said an exhaustive process led up to the groundbreaking. The $23 million project required drawing on 25 different pots of funding across 16 different partners including federal, state, county, city and regional governments and private investors. It took a combination of tax credits, grants and loans.

Affordable housing in Portland

A construction site for affordable housing in the Cully neighborhood in Northeast Portland. April 6, 2021. Beth Nakamura/StaffThe Oregonian

“The bumps were primarily financing and process bumps,” Fonseca said. “The application processes for financing are complicated and repetitive but are not necessarily synchronized. So you end up applying for city funding and then waiting for the next round of applications for state funding to open and then keep waiting for the next opportunity. It is a complicated logistical operation.”

Hacienda paused the process at the start of the pandemic to observe how the building and borrowing economies would shift before moving forward on some private loans, he said. But ultimately the slow process was the result of roadblocks in lining up the publicly supported dollars.

While private multi-family housing developments typically have two to three finance sources, affordable housing developments often have 10 to 20, said Matthew Gebhardt, a Portland State University urban planning professor who researches affordable housing financing.

A private lender often isn’t willing to give a large loan to an affordable housing project, he said. To fill in the gap, nonprofit developers must arduously piece together other dollars.

OTHER ROADBLOCKS

Between the planning, designing and financing process, it typically takes up to two years before subsidized housing projects break ground, said Portland Housing Bureau Director Shannon Callahan. Every project has its own unique hiccups along the way such as environmental review surprises, neighbors trying to block a development and the city’s slow permitting process.

For example, as workers demolished the Westwind Apartment complex in Old Town to make room for new construction, they found a gasometer in the basement. Developers had to stop and figure out how to safely remove the old mechanism that stored gas and supplied energy. The new building is not slated to open until early 2023.

“If you are redeveloping a parcel of land, you can find some very strange things,” Callahan said. “The gasometer was a huge, monstrous thing and it was a surprise that had to be addressed.”

A large affordable housing complex being developed at Southeast 30thAvenue and Powell Boulevard, the previous site of the Safari Club strip club, is now slated to open in spring 2023, more than five years after the city purchased the land. That property also had surprises buried deep beneath the ground, Callahan said. Methane gas had to be removed from the soil and unstable foundation had to be addressed, she said. Once workers started inspecting, they learned that the land was once a big gully and prior developers had filled in the area with garbage.

“You can’t build a foundation on unstable garbage,” Callahan said. “We had to change the plans and go deeper … until we hit actually solid ground.”

There are other factors that also slow development and make it more costly, including the public review process, environmental reviews, open bidding processes and the requirement that firms doing construction work for public agencies pay prevailing wages.

“Sure, we want things faster and cheaper, but some of the lengthy processes we have set up are based on values we established as a community,” said Marisa Zapata, director of Portland State University’s Homelessness Research and Action Collaborative “We want an open bid process to ensure there is equity, and we want to pay prevailing wages because we don’t want to put more people into housing insecurity by paying them less.”

The units at Las Adelitas, for example, cost an average of $410,000 each. That includes paying prevailing wages and using more durable building materials than private developers tend to, among other things. The housing bond provides an average of $175,000 per apartment, so those dollars must be coupled with other funding to cover the full costs.

FINANCING NEEDS UPDATING

Critics say the process for all affordable housing developments can be better. And that conversation ultimately circles back to financing.

“People say the permitting process takes forever and yes, that may be true, but we aren’t going to suddenly have a lot more affordable housing come online faster simply by making the permitting process faster,” Zapata said.

The simple yet difficult solution, Zapata says, is to create a single pot of affordable housing dollars at the federal level.

“Creating this massive affordable housing fund that is in one place and not requiring developers to have to leverage one fund against another would move the needle,” she said. “Everyone will balk at that suggestion and say it is too much money and ask who should be responsible for that, but that’s the big issue.”

Gebhardt said financing applications could be streamlined by requiring just a single application for a collection of grants and loans as opposed to requiring developers to submit separate applications for each opportunity.

Affordable housing in Portland

The Ellington apartment complex in Northeast Portland. April 6, 2021. Beth Nakamura/StaffThe Oregonian

In the meantime, advocates are urging the city, county and area nonprofits to look for other quicker solutions to the affordable housing crisis such as creating so-called master leases and preserving naturally occurring affordable housing. Katrina Holland, director of housing services organization JOIN, said she believes there needs to be a serious discussion among elected officials and housing agencies about the opportunity to lease large collections of vacant apartment units or a collection of single units spread throughout the city.

An estimated 15% of downtown Portland apartments are currently vacant, according to Costar Group, a real estate data company.

Under a master lease, the agency could use housing vouchers to subsidize market-rate rents to make them affordable to low-income renters who qualify. While master leasing is not new, Holland would like to see it used in a new way by pairing it with permanent supportive housing services like mental health care.

To be sure, the housing bond is just one tool in the larger region’s growing toolkit. But until the housing need is met, Multnomah County’s homeless population of near 4,000 individuals will continue cycling between emergency shelters and the streets while 28% of housed Portlanders teeter on the edge, spending more than 50% of their income on rent, according to the 2019 Point in Time Count and the U.S. Census Bureau, respectively.

The next of the 12 bond-funded projects to open its doors will be the 138-unit Crescent Court complex in East Portland, city officials say. The complex, which will offer intensive social service supports including on-site child care, should begin leasing units at the end of 2021.

And this month, the 50-unit Hayu Tilixam project in Cully will be the next to break ground. However, the majority of the bond projects are projected to be completed in 2022 and others are slated to open in early 2023. The final project, atop the Safari Club site, isn’t estimated to swing its doors open until spring 2023.

Nicole Hayden reports on homelessness for The Oregonian|OregonLive. She can be reached at [email protected] Follow her on Twitter @Nicole_A_Hayden.