Rents Rise Nearly 20 Percent in Apartment Building Owned by City of Portland

In recent weeks, Portland City Hall has pledged to halt—or at least slow—the city's breakneck rise in rents.

Mayor Charlie Hales declared a citywide housing emergency Sept. 23. A week later, he pledged $20 million in city money to fund shelters and affordable housing. City Commissioner Dan Saltzman is calling for landlords to provide a 90-day notice of any rent hike higher than 10 percent.

The problems the city are trying to solve are evident at the Headwaters Apartments in Multnomah Village.

The building, completed in 2007, is seeing an exodus of tenants because rents are spiking nearly 20 percent this year. At least six renters have left the 100-unit building in the past month, according to remaining residents. That's a lot of turnover in a market with vacancy rates of about 1 percent.

City Hall doesn't need to enact large-scale reforms to curb the rent hike in Multnomah Village, however.

That's because the Headwaters Apartments are owned by the city of Portland.

More than a decade ago, city officials recognized a looming housing shortage. In 2004, the City Council approved an innovative financing package that paid to replace an abandoned Eagles Lodge with a model of sustainable and—at least notionally—affordable housing. The city issued $12 million in bonds to be repaid from Headwaters rents and chipped in another $2 million from the Portland Development Commission.

After years of rent increases in the low single digits, the Headwaters' residents were recently asked to absorb hikes of nearly 20 percent to keep their leases.

That kind of spike is contrary to the city's stated intention of providing affordable housing at the Headwaters—and, WW has learned, it caught city officials unaware. WW asked city officials about the rent hikes this week. Mayoral spokeswoman Sara Hottman said Hales was traveling and would defer comment on the Headwaters to Housing Commissioner Saltzman.

On Oct. 6, Saltzman's housing adviser, Shannon Callahan, said no one at City Hall, including Saltzman, knew about the steep Headwaters rent hike.

"The rent increase is being rescinded immediately," Callahan tells WW. She says the city has not had a policy about rent increases but will include the Headwaters in pending renter protections.

Two Headwaters residents shared five years of rental agreements at the building with WW and agreed to be interviewed, although they asked for partial anonymity because they fear their candor could hurt their chances of landing new apartments.

Andrew, a Headwaters resident in his 50s who lives on a fixed income of about $1,600 a month, saw his rent jump Oct. 1 from $1,025 to $1,200, a 17 percent increase.

"It's insane," Andrew says. "They've really outpaced people's ability to pay."

He signed the new lease recently, even though it will consume three-quarters of his income. He says he's resorted to selling possessions, including a table and an iPad, to make ends meet. He can't afford restaurants or movies and recently gave up a weekly $9 bottle of wine, a reminder of better days when he lived in Napa Valley.

"I'm going to have to borrow from my mother to make ends meet," he says. "I never imagined that, at my age, I'd have to do that."

Through the Housing Bureau, the city regularly provides subsidies and various kinds of support to developers, but it only owns two apartment buildings: the Fairfield and the Headwaters.

Documents show that city leaders approved the unusual construction of city-owned "workforce" housing aimed at serving Portlanders making 70 percent or less of the city's median income. (A 2011 Oregonian investigation found the project falling far short of city goals.)

The building the city paid for is snazzier than most public housing. The complex's two four-story pods are joined by glass sky bridges, underneath which snakes a creek that was unearthed and landscaped for the project. Residents have Energy Star-rated appliances, including washers and dryers in each unit. A coffee machine in the lobby provides free java. Each unit has a terrace.

Despite the goal of affordability, rents at the Headwaters are higher than average for the Multnomah Village neighborhood. Housing Bureau numbers released in September pegged the average rent of a one-bedroom apartment there at $867.

The Headquarters' steep rates come despite two layers of public subsidy. First, the project was funded by city-issued bonds, which are tax-free to buyers and carry lower interest costs. And the city does not pay property taxes on the building, a savings of over $100,000 a year.

It's not clear why rents were increased so steeply, since the project's largest cost—the interest payment on the money the city borrowed—is fixed for 30 years.

Residents of Headwaters say it's well past time City Hall remembered the reason the building was developed in the first place: to protect low-income Portlanders from being forced out of the city.

"This isn't the Pearl, and it's not downtown," says a female resident in her 40s who lives on a fixed income of $1,900 a month. "I can't afford a car, and it takes me 30 minutes to get to my classes downtown by bus."

Based on the increase for units similar to hers, the female resident had expected her rent to go up next month from $980 to $1,200, a 22 percent increase.

"I've lost a lot of faith in our political system," she says. "This is gouging—just pure greed."

This post appeared in the Oct. 7, 2015 print edition under the headline "Part of the Problem."

Willamette Week