Metro weighs using supportive housing tax to build apartments

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Metro officials are weighing next steps in responding to the region’s housing needs, which could mean redirecting some funds from Metro’s Supportive Housing Services measure to building more affordable housing.

The SHS measure, which was approved by voters in 2020, has brought in far more annual revenue than initially anticipated. The measure sunsets after 10 years, so Metro will make its final tax collections in 2031.

Multnomah, Washington and Clackamas counties have spent far less than the measure has brought in. Metro even instituted a corrective action plan for Multnomah County in response to the county’s failure to get much of its funding out the door to housing providers, support services and renters.

Most of the funds from Metro’s 2018 affordable housing bond are spent or committed to projects currently in the works, but the anticipated 4,700 affordable housing units are still just a fraction of the need in the tri-county region.

Metro anticipates that most of the projects using the $653 million housing bond will be completed by 2028.

“That may leave the impression that we have plenty of time to figure out the next phase of funding, but because it often takes years to plan an affordable housing project from land acquisition to breaking ground, if we don’t identify continued funding now, the housing pipeline will develop a gap, putting us further behind,” Metro Chief Operating Officer Marissa Madrigal told Metro Council at a Jan. 16 work session. “Simply put, we can’t afford to fall further behind.”

There are three options, Metro staff said: ask voters to approve a new property tax bond measure, allocate unanticipated Supportive Housing Services revenues to building more homes, or do nothing.

Metro is forming an advisory group to look at the options and will come back to Metro Council with recommendations by May.

Even though all the money generated by the 2018 housing bond will soon be spent, property owners will be paying off the loans for another 25 years, at an annual rate of up to 24 cents per $1,000 in assessed value. The rate has dropped down to 20 cents per $1,000, or $60 per year for a house assessed at $300,000.

Another housing bond would add more taxes on top, at a time when appetite for new taxes is particularly low.

Recent surveys of Metro residents show voters believe housing and homelessness are the region’s top issues and government should be taking action, but “would not support additional taxation and have concerns about government accountability, stemming from perceptions of a lack of progress on existing tax measures,” Madrigal said. “To boil that down, the public wants government to address housing and homelessness, but they aren’t necessarily willing to support new taxes to get there.”

Revising the Supportive Housing Services measure could allow Metro to use that tax revenue to build, purchase, or renovate affordable housing units.

The SHS measure imposes a 1% income tax on high earners and businesses.

Metro could ask voters to modify the tax to allow spending on capital improvement projects and to extend the end of the tax program, which would be necessary to use housing bonds.

Those changes “should not impact local implementation plans, both because counties are struggling to spend existing allocations, and there is considerable additional revenue available,” Madrigal said.

When the measure was initially proposed, Metro leaders said it would generate roughly $250 million per year. Once the measure was approved, Metro took a closer look at the revenue forecast and estimated SHS would bring in just $180 million in the 2021-22 fiscal year, the first full fiscal year of tax collections. Actual revenue was far higher, reaching nearly $240 million.

For 2022-23, Metro had budgeted $225 million in SHS revenue, far below the actual revenue of $337 million.

Metro now estimates $357 million in SHS revenue for the current fiscal year, gradually increasing up to $437 million in 2028-29.

The seven members of Metro Council expressed support for moving forward with an advisory committee.

Metro councilors Duncan Hwang, who represents southeast Portland, and Ashton Simpson, who represents East Portland and areas further east, both said they wanted to see more “innovation” in Metro’s work on housing.

“The Portland Housing Bond and our Metro Housing Bond  we aced the numbers in a lot of ways, but housing is more expensive today than it was three or four years ago,” Hwang said. “So we aren’t moving that broader dial.”

Council President Lynn Peterson said she wanted any changes to the system to hold the value of stability near-and-dear: “… Stability of our counties being able to rely on what we as a region said we wanted them to do, so that they can meet their goals in ending chronic homelessness.”

Peterson said she wasn’t against reexamining the use of SHS funds. “But I think stability in the SHS program is probably something we need to be very specific about, as well as the stability of future work within the affordable housing realm. Because right now, it has not been stable. It’s not been stable for 40 years, and that’s why we are where we’re at.”

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