State pilot project would ease UGB restrictions

A shortage of affordable housing will likely be an ongoing problem in Bend and Central Oregon, members of the state’s Land Conservation and Development Commission learned Thursday.

Five members of the seven-member commission were in Redmond on Thursday, learning about local issues and conducting the commission’s regular business. The appointed commission oversees the Department of Land Conservation and Development, which administers the urban growth boundary system and other statewide land use standards.

Thursday, a panel consisting of an economist, a representative of the Central Oregon Builders Association and the director of the regional housing authority briefed the group on affordable housing issues specific to Central Oregon.

Damon Runberg, regional economist with the Oregon Employment Department, said the rise in housing prices in Bend in recent years has been different than it was during the “bubble” period before the 2008 economic downturn. Before 2008, much of the growth was driven by speculation, but the recent growth is the result of population increases, Runberg said. The region continued to grow through the recession, even while construction of new housing all but stopped, he said.

For a family to afford the median-priced home in Bend in 2016 — around $340,000 — it would need an income of slightly more than $60,000, assuming the family also had the $68,000 in cash for a 20 percent down payment, Runberg said. For a median-priced two-bedroom apartment, that same family would need an income of more than $40,000.

“The median family in Central Oregon can’t afford to buy the median house in Bend,” Runberg said.

Karna Gustafson, vice president of governmental affairs for the Central Oregon Builders Association, said an increased supply of land and relief from fees and regulation could help keep the price of housing in check. Gustafson said system development charges — the fees paid to offset the cost of expanding roads, utility systems and parks for a growing population — and permitting adds more than $21,000 to the cost of building a house in Bend. With smaller 4,500- to 4,800-square-foot lots selling for around $83,000 in Bend, that extra $21,000 makes it challenging for developers to build homes within reach of lower-income residents, Gustafson said.

Tom Kemper, executive director of the Central Oregon housing authority Housing Works, focused on apartment-style multifamily housing.

Kemper said building apartments ultimately comes down to the availability of financing. At market rate rents, an investor could expect an annual return of around 5 percent. Adjust rents downward to lower-income residents, and the return on investment is below 1 percent

To build apartments for lower income Central Oregonians, Housing Works has substantially relied on tax credits. The credits are allocated by the federal government to agencies like Housing Works, and the agencies sell them to investors as a mechanism for reducing the investors’ tax liability.

Commissioners also heard about a pilot project to test the relationship between land values and the viability of affordable housing.

Gordon Howard, a planner with the department, said the program would designate two cities, one with a population above 25,000 and one below. In both communities, the local government would be granted a waiver from the normal UGB expansion process to add up to 50 acres of land for housing.

Thirty percent of the housing units built on a property developed through the private project would have to be affordable housing.

Land outside a UGB is often worth as little as a tenth of what adjoining land inside the UGB is worth, Gordon said. Under the pilot program, it’s anticipated developers would acquire the land at a price somewhere between those two extremes, Gordon said.

Gordon said his department is on track to finalize how the pilot project will work in December or January, and begin working with communities that might be interested in participating.

— Reporter: 541-383-0387,

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