Think Out Loud

Outlook for affordable housing in Oregon could be getting worse

By Julie Sabatier (OPB)
April 27, 2022 6:06 p.m. Updated: May 5, 2022 9:46 p.m.

Broadcast: Thursday, April 28

An apartment complex goes up in Portland. The city voted to tax new residential and commercial construction to help fund affordable housing projects.

An apartment complex goes up in Portland. The city voted to tax new residential and commercial construction to help fund affordable housing projects.

Christina Belasco / OPB


A shortage of affordable housing in Oregon is one reason homelessness is such a persistent problem in the state. As housing prices continue to climb, it also contributes to the displacement of low-income residents. Now, tax credits used to incentivize developers to create affordable housing are becoming harder to get. That’s because Oregon Housing and Community Services, the state housing agency, is making some changes to the way it distributes those credits as well as the private activity bonds that developers depend on to make their projects pencil out. Portland Business Journal reporter Jonathan Bach has covered this and fills us in on how the problem could end up stalling much-needed affordable housing projects.

The following transcript was created by a computer and edited by a volunteer:

Dave Miller: In recent years, homelessness and housing affordability have become some of the top concerns for Oregon leaders. In response, they’ve made more money available for affordable housing, but as Jonathan Bach wrote about recently for the Portland Business Journal that extra money is having unintended consequences. For the first time in memory, developers would have to compete for crucial tax credits. Jonathan Bach joins me now with more details. Jonathan,

welcome back.

Jonathan Bach: Thanks for having me back.

Miller: My understanding is that your story came out of some reporting on one particular development. What did you hear about affordable housing tax credits from folks working on a 290 unit development in North Portland?

Bach: I had reached out to some project officials who were working on the North Argyle Apartments in the Kenton neighborhood and they were talking through the project. I talked first with the architect and then he put me in touch with another project rep and basically we’re just going through sort of the normal stuff you talk about the vision for the project. Then we get to the financing which is again as a real estate reporter something you talk about pretty frequently and he starts opening up to me about some of the troubles that they were having on the state end. Basically what this project rep, Austin Turner, told me was that they had been put under review for these 4% tax credits. These are what are called low income housing tax credits and they are pretty normal programs for a developer to apply to when they’re trying to put together their financing or the “capital stack” for a project. But being a diligent reporter, he expressed some issues with OHCS (Oregon Housing and Community Services) which is the state housing finance agency so I reached out to them for comments on this story and that’s when things started to sort of unfold. I started to learn that OHCS was planning to make what had traditionally been a first-come, first-served program, specifically the 4% tax credit, to a competitive program.


Miller: We should take a step back here. Can you give us the basics on how the financing of affordable housing developments worked in the past?

Bach: It’s so funny. Getting financing together for an affordable housing development can be quite the ordeal. As one developer once told me, the most mind-numbing part of these projects is the capital stack. And again, the”capital stack” is basically all the different sources of money that you pull together to make your project pencil out. So those can be things, again, like so-called private activity bonds. They can be money that you bring to the table. They can be loans. It’s all these different resources. So one of those resources is these tax credits and private activity bonds. Now to break that down, that’s some jargon: In Oregon the 4% federal tax credits are tied to private activity bonds’ availability. Way over simplifying. The Feds essentially allocate tax credits every year which is a credit on your tax liability for like 10 years. OHCS which is that state agency administers the tax credit program in Oregon. We’ve traditionally had a competitive tax credit program. Those are the 9% tax credits and those are subject to a state cap. While the non competitive ones, again those 4% credits which this North Argyle project was going out after, are capped by the limits of bonds. Now the private activity bonds, again, I want to define that term because it’s some jargon. There’s lots of jargon in real estate. Private activity bonds according to state are issued by or on behalf of a local or state government to finance and attract private investment projects that will benefit the community. So you can imagine why state or local governments would have an interest in helping sort of generate more affordable housing. But again as the state says under federal law, the state is limited in the amount of taxes and private activity bonds it can issue. So currently in statute, this is according to OHCS, that state agency receives $250 million for this year’s allocation. Business Oregon which is another agency gets $41 million. And then the remaining private activity bonds for Oregon are allocated sort of elsewhere. But that was a lot to unpack.

Miller: So my understanding is the state put more money toward affordable housing to actually fill in some of the gaps left in that capital stack that you mentioned, left by traditional financing. In doing that, did state housing officials not realize that this would mean more developers would actually apply for private activity bonds, that the total supply might actually be used up?

Bach: This is really the interesting thing when you talk about affordable housing policy. I’ve been covering housing for years now and one of the most fascinating programs to me is the LIFT (Local Innovation and Fast Track) Program. It’s this program that lawmakers have just poured millions and millions and millions and millions of dollars into in Salem in order to do just that like let’s get more affordable housing, let’s try essentially to sort of help subsidize affordable housing. And this is just one program. But–I think you cast it appropriately–I would say an unintended consequence is that then you get more strain on this other resource which is the private activity bonds which then gets sort of gobbled up more. And so now officials at the housing agency are reacting to that by saying, okay, shoot, maybe we need to make the application process because those tax credits and the private activity bonds are paired together. Maybe we now have to make that instead of being noncompetitive, we now have to make developers compete. So it’s, as with a lot of policy in Salem and really anywhere, where you’ve got sort of the levers of government moving, it’s this careful balancing act of tweaking this pulling this lever and pulling that one and having the inflows and outflows of money, trying to achieve the goal of what everybody wants: more housing, more affordable housing for more folks to live in.

Miller: So to go back to the beginning here, what does all this mean for that proposed development in North Portland, that is supposed to put in 290 new units?

Bach: That really gets back to why this project stuck out to me in the first place. Two hundred and ninety units and this is in one building, 290 apartments in a single building is quite substantial. It’s roughly a 72 to $75 million project. Project officials are going to–at least when I checked in with them for the story– are going to wait for OHCS guidance as they seek money through that LIFT program that I talked about, the Local Innovation and Fast Track Program. And they were going to look for about $5.3 million dollars in “LIFT” funding. But what Turner, the project representative, told me is that we’re hedging our bets right now just so that we can get access to the–and here are the keywords–private activity bonds that are set aside for LIFT winners. So everybody’s trying to clamor for these private activity bonds because they’re such a key resource but they’re under pressure is really the upshot.

Miller: And it’s fair to say–we have about 30 seconds left– that this North Argyle Development, they’re not the only ones who are feeling the pressure now?

Bach:  Exactly. Actually just in this story, there were seven other projects that were put under review by OHCS because of the fact that they sort of have run out of their allocation.

Miller: Jonathan, thanks very much.

Bach: Thanks so much.

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