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This story was produced by the Oregon Journalism Project, a nonprofit newsroom covering the state.
Oregon’s housing agency has a simple yardstick for measuring how efficiently it funds construction of affordable apartments—they shouldn’t cost more to build than the national average.
For the past three years, however, it has failed to meet that standard—by a wide margin. Last year, hard construction costs for housing projects it funded averaged $318 a square foot, 31% more than the agency’s benchmark.
Every dollar over that target is a dollar the state agency, Oregon Housing and Community Services, cannot spend to build more units.
OHCS’s consistent failure to fund projects that meet its cost target surfaced at a recent meeting of the agency’s governing body, the Oregon Housing Stability Council, made up of volunteers appointed by Gov. Tina Kotek.
It’s a big job. OHCS, with a biennial budget of $3.7 billion and more than 450 employees, expects to produce or renovate nearly 8,000 units of affordable housing across the state in the current two-year budget period.
Yet the council, unlike other state oversight boards such as the Oregon Transportation Commission or the Environmental Quality Commission, meets remotely and, based on its performance at recent council meetings, rarely challenges the cost of projects that agency staff wants to fund.
That changed last month, however, when a proposal met resistance from a new member.
At the council’s virtual monthly meeting Sept. 11, a retired Portland developer of affordable housing named Ed McNamara broke with the council’s habit of simply rubber-stamping projects. Instead, McNamara, who joined the council in July, said he couldn’t support a package of four proposed developments.
“I don’t understand why they cost so much,” he said of two of the projects. Every other council member voted yes. McNamara abstained.
McNamara declined OJP’s request to elaborate on his comments. But the concerns he expressed at the public meeting focused directly on the cost of two projects that far exceeded the agency’s benchmark for cost per square foot. And more broadly, McNamara’s dissent cut to the heart of Oregon’s housing crisis.
When she entered the governor’s office in 2023, Tina Kotek made increasing the state’s housing supply a top priority. She promised to build 36,000 new units a year, a figure Oregon has come nowhere close to reaching.
Although the governor has supported easing land use restrictions and zoning requirements to increase housing, the biggest and sharpest arrow in her quiver is OHCS, by far Oregon’s largest funder of affordable housing.
Every year, OHCS publishes key performance measures to help lawmakers and the public gauge its effectiveness. Since 2017, one of those measures has been construction costs of the affordable rental housing that it funds.
Specifically, the agency uses a national index of construction costs for affordable housing compiled by a company called RS Means. The agency’s benchmark is RS Means’ national average for hard costs.
As recently as 2022, OHCS met the benchmark. But in each of the past three years, OHCS has missed it by a wide margin (see chart below). Last year, it paid an average of 131% of the RS Means average.
The impact of paying more for construction is simple: Fewer units get built and more people remain homeless (Oregon’s rate of homelessness is the nation’s second highest, according to federal figures, trailing only New York’s). OHCS readily acknowledges that even with a vast increase in its budget over the past decade, it hasn’t come close to meeting demand. “The need for affordable rental housing units is significantly greater than the resources available through OHCS,” the agency wrote in a draft of its proposed budget for next year.
One of the projects the agency’s board approved in September over McNamara’s objections was a 72-unit apartment project in McMinnville budgeted at $413.12 per square foot, far above the RS Means’ 2025 national average and likely far above the pending number for 2026.
Housing development manager Erica Calderon of the project’s developer, Bienestar, a Hillsboro nonprofit, offered several reasons why her project was so expensive: The building will have a concrete rather than wood-framed podium, two elevators, interior corridors, and parking tucked under the living space.
Calderon insists Bienestar is cost-conscious: “We went back and value-engineered the project several times.”
Other developers have demonstrated they can build affordable housing for far less than the national average: Another project approved in September was a 168-unit development in Corvallis with hard construction costs budgeted at just $172.80 per square foot. It was one of two about which the housing council’s McNamara had no concerns.
The developer of the Corvallis project is the Annex Group, a for-profit developer based in Indiana that has built affordable housing across the country, including a previous Corvallis apartment complex.
Annex’s David Wesner said his firm uses in-house designers and general contractors and focuses on eliminating any conflicts with local code and zoning requirements.
“We have several strategies to deliver affordable housing as cost-effectively as possible.” Wesner said.
While different locations, designs, and building materials can increase the cost of construction, the vice chair of the Senate Committee on Housing and Development has pushed the state to spend its housing dollars more efficiently.
“The money to build these projects is finite, so every dollar wasted on an overpriced project is housing someone else doesn’t get,” state Sen. Dick Anderson (R-Lincoln City) told OJP.
Anderson said OHCS should use cost as a decision point, rather than greenlighting a deal just because it’s what the developer proposes to build.
“OHCS showed in 2022 that projects can hit the national benchmark,” Anderson said. “Projects like this get too little scrutiny, and the agency should force projects to explain variances so high above the benchmark before they approve it.”
OHCS disagrees with Anderson. The agency believes the RS Means average is something to keep an eye on, but should not be the only factor in determining whether it funds a project.
“A cap of this type could also exclude projects with higher costs because of family-sized units, rural locations, supportive services space, or durable construction—all of which align with the agency’s statutory direction,” said OHCS spokeswoman Jessie Schirrick. “Many costs are also outside a developer’s control.”
Anderson is skeptical of that explanation. “The agency set this benchmark for itself in 2017 and has missed it for years,” he said. “If OHCS believes a project needs an exception, it should make that case publicly—with every dollar accounted for. Transparency is required.”
Housing Stability Council chair Mary Ferrell and three of her council colleagues did not respond to a request for comment.
Through a spokeswoman, Kotek said she wants OHCS to pay attention to cost.
“The governor expects state agencies, including Oregon Housing and Community Services to administer programs in line with programwide benchmarks and performance measures,” said Kotek spokeswoman Hazel Tylinski. “These requirements are in place to strive for efficiency and diligent use of public funds.”
(Earlier this month ProPublica reported that OCHS director Andrea Bell failed to disclose that her husband, Joshua Crites, works for a firm that advises OHCS funding recipients. OHCS told OJP that Crites had no involvement in the deals the Housing Stability Council voted in September to fund.)
