Portland Proposal Would Suspend Development Fees to Spur Housing Construction

This article by Alex Zielinski is republished from Oregon Capital Chronicle.

Portland Mayor Keith Wilson and Gov. Tina Kotek announced a plan Thursday to incentivize developers to build more new housing in Portland.

Their pitch, announced at a morning press conference, is to temporarily waive certain fees developers are required to pay to build in city limits. These system development charges, or SDCs, are meant to offset the cost that new construction may have on certain city utilities and services, like the sewer, streets or parks.

Wilson and Kotek propose suspending those fees on any new housing developments in Portland over three years — or 5,000 housing permits — whichever comes first.

For years, Portland developers have pointed to SDCs as a deterrent to new construction, as it can easily tack tens of thousands of dollars on a project’s price tag. In 2023, a city commissioned study found that SDCs can account for more than 6% of total development costs for a new building.

Waiving or freezing SDCs to boost development isn’t a new idea for Portland. The city has long allowed developers who build housing that’s affordable to low-income homebuyers to skip paying SDCs, in order to encourage construction. But this policy would apply to housing at all price points.

In 2023, the city adopted a goal to build 120,000 new housing units by 2045, or about 5,200 per year. Last year, economics firm ECONorthwest projected the city was on track to field about 500 new housing permits annually.

Suspending SDC fees has a cost. Recent data from the fiscal year beginning in July 2021 show that Portland Bureau of Transportation collected about $6 million in SDCs from residential development, while Portland Parks and Recreation gathered $16 million.

Wilson said this plan would undoubtedly result in funding cuts.

“But we’re confident that the short-term loss of the capital will really help out with long-term gains for Portland,” he said Thursday.

The announcement comes as the city faces a ballooning budget shortfall, with some of the steepest cuts expected in parks and transportation bureaus. Wilson will release his proposed budget Monday.

The policy will need approval by Portland City Council to go into effect.

This article was originally published by Oregon Public Broadcasting.