The Owner of An Abandoned Car Wash Doesn’t Have to Pay Property Taxes Because He Pledges It Will Someday Be Affordable Housing

In a city where affordable housing is desperately needed, state and local governments play a delicate game: make affordable housing financially attractive to developers, but keep them on a delivery timeline.

Address: 5733 NE Martin Luther King Jr. Blvd.

Year built: 1995

Square footage: 2,832 square feet (car wash); 0.37 acres (entire lot)

Market value: Purchased for $1,005,000 in 2020

Owner: George Schmidbauer

How long it’s been empty: Since 2015

Why it’s empty: No financing and no taxes

The derelict car wash tucked behind a Kentucky Fried Chicken on Northeast Martin Luther King Jr. Boulevard gives no indication it’s about to become housing, unless you count the tents.

For nearly seven years it has sat fallow. Tarps are strung across the stalls, heaps of junk have been known to spill onto nearby properties, and people with nowhere else to sleep live in tents pitched in the concrete shells of the car wash stalls.

The owner of the property, 28-year-old California timber heir George Schmidbauer, says it will be another two years before construction on a low-income apartment complex begins—and that’s only if he gets more financing from the state.

Meanwhile, he pays no property taxes.

The city of Portland says he doesn’t have to. That’s because Schmidbauer is reserving the land for affordable housing and has brought in a nonprofit to manage daily operations of the project.

According to the Portland Housing Bureau, there’s no limit on how long Schmidbauer can sit on the tax-exempt lot before shovel hits dirt.

In a city where affordable housing is desperately needed, state and local governments play a delicate game: make affordable housing financially attractive to developers, but keep them on a delivery timeline.

The car wash along MLK lies in the middle of that balance—and appears stuck.

Miriam Hernandez has worked across the street at Boost Mobile for eight years. She’s seen cops and cleanup teams come by periodically to sweep the campers, but less so recently. She’s never seen the car wash as anything but a shell.

“It got a lot worse during COVID,” Hernandez says. “There didn’t used to be all those tents and trash.”

The car wash in Northeast Portland was Schmidbauer’s first Portland investment. It was relatively cheap—just over a million-dollar sale price—zoned correctly and seemed to be in a place where affordable housing was desperately needed, Schmidbauer thought.

But Schmidbauer quickly hit speed bumps. “I’m a young guy and this was my first project,” Schmidbauer says of the 2020 purchase. “I want to get this one in Portland done first, but it’s proving challenging enough. It needs to get done, and it’s tough to hold on to property with no end in sight.”

He’s applied for affordable housing loans from the state—specifically a low-income housing tax credit and a loan program called Local Innovation Fast Track, or LIFT—for two consecutive years. No luck.

Schmidbauer’s project received relatively low scores on its LIFT application this year and was elbowed out by other projects, according to scoring documentation provided to WW by Oregon Housing and Community Services.

But in 2023, Schmidbauer will have no chance at all of getting LIFT funding.

That’s because, WW has learned, OHCS and Metro this spring backfilled the budgets for affordable housing developments created by the 2018 Metro housing bond. A number of those projects are behind schedule and further burdened by high construction and labor costs due to stubborn inflation.

In an attempt to keep those voter-approved projects on track, they quietly rerouted all of the available Portland-area LIFT funding for the upcoming year—which is reserved for housing that will serve low-income people of color—to projects under the bond.

In other words, the state decided to backfill projects from the housing bond with $20 million that was supposed to subsidize new projects.

That’s never been done before in the history of LIFT.

“Metro’s top priority is ensuring that the region and each jurisdiction will be successful in following through on the timeline and production commitments, in spite of significant shifts in the landscape due to [private activity bond] volume cap and cost escalation pressures,” an internal Metro memo from September reads. “Unprecedented cost escalation is creating new risks that will require significant contingency planning moving forward.”

That was money Schmidbauer was expecting. “That’s what I’ve designed this project for,” Schmidbauer says. “Now it’s gone.”

Meanwhile, as Schmidbauer watches his state funding dry up, he has no incentive to move quickly. He doesn’t have to pay property taxes.

That’s because of a tax exemption, overseen and approved by the Portland Housing Bureau, for nonprofits that provide affordable housing.

It also grants the exemption to property owners so long as they reserve the land they own for affordable housing, and so long as they work with a nonprofit to manage the future development.

Schmidbauer is working with EngAGE Northwest, a Burbank, Calif.-based nonprofit that provides an array of creative classes and programming to elderly low-income communities, to eventually provide services to the proposed 93-unit apartment building.

Schmidbauer initially told WW that depending on “how you look at it,” he was losing money on the property due to taxes and the water bill.

When WW pointed out that he was not paying property taxes and asked if there were any other taxes to be paid, Schmidbauer said, “None that come to mind.”

A list provided to WW by Multnomah County Assessment & Taxation shows 717 properties enjoy the same tax exemption as Schmidbauer’s car wash, though most currently provide housing. Most of the properties are owned or operated by either the city or well-established nonprofits like Human Solutions and Rose Community Development Corporation.

WW asked the Portland Housing Bureau why there’s no expiration for the exemption, even if a property owner is sitting on vacant land for years with nothing but a promise to build housing.

“While this has been identified as an issue for further consideration, in general, if projects have the funding available, they will move forward as soon as possible to bring units to market,” says bureau spokeswoman Martha Calhoon. “It can take years, however, for nonprofits to line up financing for a particular project, and an additional hurdle like an expiring tax exemption could put a whole project in jeopardy.”

Meanwhile, Schmidbauer has reserved other state and regional grants of $770,000 for his proposed apartment building. One is a $450,000 grant from Metro for affordable housing close to transit.

Metro spokesman Nick Christensen says, “There’s no official expiration date, but if it fails to make progress, the steering committee could elect to cancel the award.” While Metro doesn’t cut the check until the project is completed, those funds are currently set aside for Schmidbauer—and available to nobody else.

That’s also the case for a $320,000 weatherization grant from the state. “The funds are reserved for the project,” says OHCS spokeswoman Delia Hernandez. “In about 90 days, [we] will make a determination to give more time or withdraw the application.”

The car wash hasn’t been functional since 2015. Before Schmidbauer bought the property, it passed through the hands of several developers, one of whom planned a food cart pod.

Now, there’s little reason for Schmidbauer to make it anything at all.

Schmidbauer says he’s not exploiting the tax exemption or being complacent about the development: “I never thought about using it to hold land. Say I held land for five years, and then was like, ‘Ope! I’m going to have to build market-rate housing.’ You have to pay back all those taxes.”

That’s not the case, in fact. The city says that so long as the intent to build affordable housing was genuine, an owner who sells the property doesn’t have to pay back taxes.

Schmidbauer says he’s now considering selling the land if he can’t find another financing method.

Every week, WW examines one mysteriously vacant property in the city of Portland, explains why it’s empty, and considers what might arrive there next. Send addresses to newstips@wweek.com.