Affordable housing developers in Bend will pay fewer fees under an ordinance city councilors gave initial approval to Wednesday.
Councilors voted 6-0 to approve an ordinance that would exempt system development charges — fees developers pay to help cover the additional costs new buildings bring to the city’s roads, sewer system and water infrastructure — for new affordable housing developments. The ordinance still requires a second vote in November to become law, and the program will require new approval after it sunsets in five years.
This year, charges for a single-family home are $5,220 for water, $4,665 for sewer and $5,285 for roads — meaning developers pay about $15,000 in development charges on top of construction costs and other fees. With the exemption, the city of Bend could forgo about $950,000 in fees during the budget year that ends in June, according to an analysis by the city’s financial department.
“The best case we have here is that we would get 100 new units per year,” Affordable Housing Manager Jim Long said.
However, many factors beyond the city’s control limit how many units can be built, he said. Tax credits for financing, which he described as the “crack cocaine” of affordable housing financing, are pretty rare — Central Oregon gets about one tax credit-financed project every couple of years.
This year, about 70 new affordable housing units were built in the city of Bend, Long said. Other units were created through rehabilitating existing buildings.
The new program expands an existing exemption the city offered. For the past several years, the city has exempted up to $1 million in charges for projects that receive state or federal housing subsidies. Developers had to compete with each other for a portion of the exemption, and those that received an exemption still paid 25 percent of road charges.
The exemption applies to homeless shelters, as well as rental homes, owner-occupied homes and lease-to-own homes that families who make 80 percent or less of the area’s median income can afford. That means people who make slightly less than $42,000 won’t have to spend more than 30 percent of their gross pay to live there.
As part of the exemption, the homes must remain designated affordable housing for at least five years, and they can’t be resold as nonaffordable housing in that time. Otherwise, the developer would have to pay all the exempted fees, plus interest.
The city will require a biennial report summarizing the program during its budget process.
“At any time council can review this and go back to the old system,” Long said.
Councilor Justin Livingston successfully amended the ordinance to require that the exemption sunset after five years, so another council will evaluate whether it’s working.
“I think it’s good to reauthorize, to double-check that it’s doing what it’s intended to do,” he said.
The amendment persuaded Councilor Bill Moseley to support the ordinance, though he said he was still concerned about parts of it.
“When you waive SDCs for certain users in the system, you still need all the funding for roads and the sewer system,” he said. “The costs are shifting from people who are just below the median income, so it’s a wealth shift from median-income people to low-income people.”
But Councilor Nathan Boddie, who voted against the sunset clause, said the exemption was such an innovative idea that he didn’t see the need to tie it to a future vote.
“This is such a good idea that it doesn’t need to get wrapped around the political process every few years,” he said.
Affordable housing units will still have to pay system development charges to the Bend Park & Recreation District. This year, those charges are $7,358 for a single-family home, $6,914 per unit in multifamily developments and $2,968 per bedroom in hotel rooms, dorms, assisted living facilities and accessory dwelling units (like an apartment over a garage). Each half of a duplex pays the single-family charge, and any building with three or more units pays multifamily charges.
The park board is unlikely to discuss adjusting charges for affordable housing units until the district finishes updating its comprehensive plan next summer, park district Finance Director Lindsey Lombard previously told The Bulletin.
“This is something that I’m hopeful our colleagues on the parks board will take up as well,” Boddie said. “It’s something I’m really hopeful that they’ll give serious consideration to.”
The Affordable Housing Advisory Committee, which suggested the ordinance, also suggested recalculating water and sewer charges for duplexes, triplexes and fourplexes. That was not included in the ordinance voted on Wednesday.
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