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Mayor Charlie Hales Proposes "Demolition Tax"

Portland Mayor Charlie Hales wants to charge developers a $25,000 flat tax every time they tear down a perfectly good single-family home to build a bigger home in its place.

The goal, he says, is to discourage residential demolitions while also generating a new revenue stream to support Portland's housing investment fund.

"Keeping those old houses that are still in good condition has a strong public purpose," says Hales, who says the tax won't apply to homes in areas zoned for multi-family housing or derelict buildings.

Hales' proposal comes as neighborhood activists have become increasingly agitated by developers who tear down old Portland homes to build new ones that are often far larger than their surroundings and sometimes require removing grand old trees, such as the 150-foot Sequoias in Eastmoreland.

In addition to the $25,000 tax, developers who want to demolish old homes would have to pay $25 for every year the house stood. A house built in 1940 would cost $26,875 to tear down, as a result. (Hales landed on the $25,000 figure after studying sales prices for home demolitions. On average, builders sold new homes for $250,000 more than the old homes. Hales says a 10 percent tax on that differential struck him as appropriate.)

In 2014, developers tore down almost 200 homes, according to city records. Hales says he thinks the tax has the potential to bring down that number significantly.

If it cuts the number in half, Portland could generate roughly $2.5 million a year to support its housing investment fund, which pays for home ownership and home repairs programs in the Portland Housing Bureau, he says.

One issue that's not ironed out? How to decide whether a building qualifies as derelict and, therefore, not subject to the tax. "That's a piece we're still working on," the mayor says.

A public hearing is scheduled for Oct. 14.

"We think this is the right tool for Portland now," he says.