Inclusionary Housing and the Multifamily Pipeline in Portland

Inclusionary Housing and the Multifamily Pipeline in Portland

CoStar Market Insights: Number of Newly Permitted Units Far Below Amount of Units Currently Under Construction

The 136-unit Couch9 apartment complex, which delivered in August 2017 in Portland’s Pearl District.

The Portland City Council’s much-discussed Inclusionary Housing program was intended to increase the city’s number of affordable housing units. Instead, it has greatly reduced demand for multifamily building permits.

In October 2015, amid that year’s record-breaking 10 percent annual rent increase across the Portland, OR metropolitan area, the Portland City Council declared a housing emergency and began passing legislation aimed at curtailing rent growth and increasing the number of affordable housing units.

Inclusionary Housing, arguably the most significant of the new policies that emerged, was adopted in February 2017. According to the Portland Housing Bureau’s website, the policy "requires that all residential buildings proposing 20 or more units provide a percentage of the new units at rents affordable to households at 80 percent of the area median income."

Typically, developers are required to reserve 20 percent of the project’s units for affordable housing. The impending legislation prompted a mad dash to get multifamily projects permitted before the law went into effect.

According to CoStar data, 2,367 market-rate units delivered in 2017 within the City of Portland, and 1,768 units have delivered thus far in 2018. The Portland Housing Bureau’s website states that after the adoption of Inclusionary Housing, newly permitted apartment projects include a total of 170 inclusionary housing units - which equates to approximately 850 total permitted apartment units.

This figure is a fraction of the number of units currently under construction.

Within the City of Portland, there are currently 63 market-rate apartment projects with 20-plus units under construction, amounting to 6,604 total units. Almost 4,100 of those units broke ground within the past 12 months.

CoStar forecasts a record number of Portland multifamily deliveries in 2018, with approximately 6,300 units anticipated to come on line across the entire market. Many of these projects were permitted prior to Inclusionary Housing.

Comparing this number against the Portland Housing Bureau’s log of units permitted since February 2017, it seems plausible that the current pace of Portland multifamily construction will not be maintained in the future.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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