The Portland (OR) City Council on Wednesday approved a 1% construction excise tax that officials said will help fund the city’s affordable housing projects. The state authorized Oregon cities and counties to establish the tax earlier this year, repealing a 17-year ban on inclusionary housing laws.

Portland will start collecting the tax August 1 on both commercial and residential real estate projects, with the tax proceeds earmarked for the city’s Inclusionary Housing Fund (IHF) and the Oregon Department of Housing and Community Services (OHCS). Tax revenue from residential construction will be distributed between the IHF (85%) and OHCS (15%), while 100% of the tax proceeds from commercial projects will be paid into the IHF.

Commissioner Dan Saltzman told Oregon Public Broadcasting that the tax should raise an estimated $8 million per year. The extra money will help build qualifying projects targeting those who earn 80% or less of the median family income for Portland as determined by the U.S. Department of Housing and Urban Development.

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