New Portland Housing Projects Could Receive Three-Year Waiver on System Development Charges

The Finance Committee of the Portland City Council today advanced a policy that would exempt new residential projects from system development charges for a three-year period beginning 30 days after the full council vote.

In March, Gov. Tina Kotek and Mayor Keith Wilson held conversations with developers of multifamily housing regarding the challenges that they’ve faced with construction costs and market conditions. On May 1, the two leaders announced their desire for the City Council to waive SDC charges for new housing projects for a three-year period with the goal of building 5,000 new residential units by 2028. Both leaders have made increasing the city’s housing supply a top priority for their administrations.

SDCs are fees that housing developers pay to the city during construction. The city uses that pool of dollars to fund capital improvement projects like building new parks and improving roads and water facilities.

In order for projects to qualify for the exemption, they must be creating new housing units—which can include single-family homes, multifamily buildings or congregate homes.

Mike Mitchoff, Portland resident and co-owner of the development company Portland Houseworks, testified to the council in support of the exemption.

“In my opinion, it’s really simple, but it’s a step in the right direction and it’s something that I think we can all be proud of,” Mitchoff said. “We’re gonna look back in three years and hopefully the numbers will justify what we’ve done here,”

Micheal Hamilton, president of Seneca Development, said developers like him “are not asking for handouts. We’re simply asking for tools, and this measure is a powerful tool.”

With high construction costs, many developers are sitting on unfinished projects they can’t afford to secure funding for, Mitchoff said.

Hamilton told the council he’s already seen the ripple effects of the proposed policy change.

“Since this SDC waiver measure was announced a few weeks ago, we have received multiple term sheets from bona fide financial institutions to fund our projects,” Hamilton said. “Three of them are now positioned to break ground this year, contingent on this waiver being implemented.”

If approved by the full council, the exemption would last three years.

City Councilor Candace Avalos expressed concerns that the exemption, if approved, would mean a loss of roughly $63 million in SDC revenues that would otherwise flow back to the city for improvements to basic city infrastructure.

“I think that this exemption could help move some housing projects that are stuck due to the financing gaps,” Avalos said before voting in support of the measure. “I just have to say on the record that $63 million in lost infrastructure revenue is serious. Especially for my district that is still waiting on basics. I believe we need to be tracking who’s using the exemption, what kind of housing it builds, [and we need to] make sure benefits are shared.”

Councilors passed the measure by a unanimous 5–0 vote. Applause erupted a few minutes before themeeting was officially adjourned.

The full City Council will deliberate and vote on the measure in the coming weeks.