Multnomah County Enhances Portland’s Housing Incentive Program to Foster Development in High-Cost Areas

At BC Group, we’re excited to see what impact this will have and applaud the efforts taking place to encourage affordable housing.

In a significant move to support housing development in Portland’s pricier neighborhoods, the Multnomah County Board of Commissioners, on a recent Thursday, approved a pivotal amendment that broadens the scope of Portland’s Multiple-Unit Limited Tax Exemption (MULTE) program. This enhancement introduces additional tax exemptions for developers, aimed at making housing projects in high-cost areas like the Central Eastside and Northeast Portland economically viable.

Originally implemented in 2016, Portland’s inclusionary housing program mandates that developers constructing projects with 20 or more units allocate a portion of these units as affordable housing. Specifically, developers are required to offer either 20% of the units at rates affordable for households earning up to 80% of the area median income (AMI) or 10% of units for those earning up to 60% of AMI. These affordability conditions are to be maintained for an impressive duration of 99 years, as highlighted by Dory Hellyer, the Portland Housing Bureau’s development incentives manager, during the board meeting.

The MULTE program initially provided a complete property tax exemption for all residential units within the Central City, alongside a partial tax exemption for affordable units situated in other neighborhoods. This is contingent upon developers committing a fraction of their units at 60% of AMI for 99 years.

In an ambitious proposal, the city requested Multnomah County’s collaboration to extend these tax exemptions to additional areas, including Slabtown, the inner eastside, and Hollywood. It’s important to note that the tax exemption is only applicable if developers incorporate units affordable to households earning up to 60% of AMI within their buildings. Opting to pay a fee, providing units in alternative locations, or selecting the 80% AMI option disqualifies developers from receiving the exemption.

This policy has been instrumental in facilitating the addition of approximately 1,300 new affordable housing units to Portland’s development pipeline, many of which are now completed and occupied.

The recent amendments not only extend the tax exemption reach but also pause the existing cap on tax exemptions until 2030. Additionally, they establish a commitment to evaluate the impact of these incentives through a comprehensive study. Previously, a cap limited the tax exemption to an average of $3 million annually or $15 million over five years. Post-2030, this cap will be adjusted to $6 million annually or $30 million over five years, ensuring sustained support for affordable housing development.

A 2027 study is mandated to assess market conditions and the continued necessity of these incentives, with a predetermined resumption of the cap in 2030, regardless of the findings.

Jeff Renfro, a Multnomah County economist, described the expanded exemption as a “low risk” strategy to catalyze development. He reassured that this extension would not impact county revenues, which have already accounted for a slowdown in development activity.

Furthermore, the amendment introduces a requirement for the county to produce annual reports on the program’s performance. These reports will detail the forgone tax revenue and enumerate the affordable units generated, categorized by affordability level.

Set to take effect on March 1, these changes represent a proactive approach by Multnomah County and the City of Portland to address housing affordability and availability in the region’s high-cost areas, ensuring a more inclusive and sustainable urban development trajectory.