A Portland policy meant to expand the city’s supply of affordable housing is falling short, according to an audit. The report, released by the city auditor Wednesday, finds that the city’s Inclusionary Housing program isn’t meeting its goal to create affordable apartments for Portlanders who are the most in need.
“Renters with lower incomes, often renters of color, may not be able to rent units created through the program,” the audit finds.
Downtown Portland, March 2, 2023.
Kristyna Wentz-Graff / OPB
These findings come nearly a decade after the city declared a housing emergency, directing city bureaus to focus on programs that build affordable housing and safeguard low-income tenants from eviction, among other things. Yet, as the audit reveals, those programs may still be leaving the poorest renters without options.
Portland’s Inclusionary Housing program was created in 2017 to address the city’s housing affordability crisis. It requires that developers who build new apartment complexes with 20 or more units keep 20% of those units affordable to people making 80% or less of the region’s median income. That’s about $90,000 yearly for a family of four. The city also gives developers the option to keep 10% of those units affordable to people making 60% of the median income ($60,000 per year for a family of four).
In exchange for participating in the program, developers can have certain development fees and 10 years of property taxes waived for the affordable units. Developers can opt out of the program by paying the city roughly $25 per square foot of residential space in a new building.
The program’s goal was to create a diversity of housing options for families making below median rents in “high opportunity neighborhoods,” or parts of town with quality schools, good access to public transportation, and other amenities. The city also pledged the program would “increase housing opportunities for families and individuals facing the greatest disparities.”
Auditors say these goals are too vague and not “realistic.” Yet they maintain that the program still failed to meet most of these goals.
When auditors conducted their research in April 2023, the program had spurred the creation of 566 new affordable apartments since 2017. The majority of the housing is intended for people earning 60% or less of the median income.
“While positive, these are not the Portlanders facing the greatest economic disparities,” the audit reads.
That’s because 22% of Portland households had incomes under $35,000 in 2022 — or 33% median income, meaning a significant amount of low-income renters aren’t able to qualify for the affordable apartments under the Inclusionary Housing program. Data show that, in Portland, people of color have disproportionately lower incomes than white residents.
This disparity may only grow if Portland grows wealthier. If local median incomes continue on their current trajectory upward, that will increase the amount of income people will have to make to qualify for the Inclusionary Housing program.
“The expanded eligibility and rent increases may make Inclusionary Housing apartments less accessible to households whose incomes have not risen at the same rate,” the report reads.
The report notes that, based on the city’s current rental landscape, many market-rate apartments are already affordable for people making between 60% and 80% of the median income. Some market-rate apartments are even cheaper than similarly-sized affordable apartments offered under the Inclusionary Housing program.
Auditors find that the program has few options for low-income families. Only 131 of the 566 affordable units built under the program — or 23% — have two or more bedrooms. Only two offer four bedrooms.
The report also finds the program isn’t using funds collected through the Inclusionary Housing program as promised. The city has collected more than $5 million in fees from developers who have opted out of the program. That money is intended to fund more affordable housing programs through the Portland Housing Bureau. But, according to the bureau, that hasn’t happened. Instead, those dollars have gone toward the bureau’s general operating costs.
The program has met one of its goals: According to the audit, the majority of new units have been built in neighborhoods with easy access to good schools, transportation, and other services.
The audit does not incorporate changes to the Inclusionary Housing program made earlier this year, which increases property tax waivers for participating developers. But it notes that it doesn’t see that change addressing the issues highlighted in Wednesday’s report.
Auditors suggest the city increase incentives for developers who build apartments with more than one bedroom, clarify the program’s overall goals, help property owners market their affordable units to renters, and better educate developers on how to use the program. The audit found that property owners were often unclear about the program’s rules and regulations and that the city had a two-year backlog on following up on reports about landlords who weren’t complying with the policy.
City leadership didn’t agree or disagree with the audit’s findings.
Portland Housing Bureau Director Helmi Hisserich and City Commissioner Carmen Rubio, who oversees the bureau, co-authored a response to the audit. They wrote that the Inclusionary Housing program wasn’t built to help the city’s poorest renters and that other city programs partner with nonprofits catering to very low-income renters to meet that need. They also say that the housing bureau isn’t required to help developers advertise apartments and that they’re working to improve their compliance system.
The auditors didn’t leave the response unaddressed. The report notes that Rubio and Hisserich’s response described solutions that don’t actually address the issues raised in the audit — and could continue steering the program in the wrong direction.