Wednesday, October 19, 2005
$180,000 tax subsidy per housing unit
No wonder downtown Portland has become such a real-estate hot spot. Developers have received $92 million in annual tax breaks, for ten years, to build 5,000 condos, apartments, and other housing units. Over the full ten years that's $180,000 per dwelling unit! Considering that most of these are one- and two-bedroom apartments, that's more than it would cost to build most of them if they were built as single-family homes in the suburbs.
Of course, tax breaks aren't the only subsidies to Portland's downtown housing. Others include the streetcar, at $55 million and counting; removal of a major bridge off-ramp that was considered unsightly, which I believe cost $12 million; and various other infrastructure subsidies. According to the John Charles of the Cascade Policy Institute, infrastructure subsidies to the Pearl District alone total upwards of $200 million.
This Oregonian article says that Portland's city council is having "second thoughts" about the tax abatement program, not because it is so expensive, but because developers aren't providing as many "public benefits" as the city would like. The city wrote guidelines requiring that a certain percentage of units be "affordable." But when a developer submitted a major project that included exactly that many affordable units, the city rejected it, saying they wanted more. But if they wanted more, why didn't they say so in the first place?
Originally, the justification for the subsidies was that a few model developments were needed to demonstrate how popular they would be. But, of course, developers now expect that these subsidies will be provided for all such developments.
One obvious side effect is that subsidized apartments have destroyed the rental market in Portland. According to a company that tracks apartment rental rates throughout the West, rental rates in Portland have actually declined in the past year. As a result, many downtown apartments are evicting their residents and converting to condos. It remains to be seen just how well such condos will hold their value in the future.
Of course, tax breaks aren't the only subsidies to Portland's downtown housing. Others include the streetcar, at $55 million and counting; removal of a major bridge off-ramp that was considered unsightly, which I believe cost $12 million; and various other infrastructure subsidies. According to the John Charles of the Cascade Policy Institute, infrastructure subsidies to the Pearl District alone total upwards of $200 million.
This Oregonian article says that Portland's city council is having "second thoughts" about the tax abatement program, not because it is so expensive, but because developers aren't providing as many "public benefits" as the city would like. The city wrote guidelines requiring that a certain percentage of units be "affordable." But when a developer submitted a major project that included exactly that many affordable units, the city rejected it, saying they wanted more. But if they wanted more, why didn't they say so in the first place?
Originally, the justification for the subsidies was that a few model developments were needed to demonstrate how popular they would be. But, of course, developers now expect that these subsidies will be provided for all such developments.
One obvious side effect is that subsidized apartments have destroyed the rental market in Portland. According to a company that tracks apartment rental rates throughout the West, rental rates in Portland have actually declined in the past year. As a result, many downtown apartments are evicting their residents and converting to condos. It remains to be seen just how well such condos will hold their value in the future.
Comments:
$92 million divided by 5,000 housing units is about $18,000 per unit, NOT $180,000. I know you AD guys exaggerate to make your points, but being off an order of magnitude is ridiculous!
Hey Anonymous, get with the program!
To quote the newspaper article referenced:
"Since the city began offering tax abatements for multi-unit buildings three decades ago, more than 5,000 apartments have been built through the program. Property owners who qualify for the abatements don't have to pay taxes on new construction downtown and in urban renewal districts for 10 years."
and then
"But City Council members have plenty of reservations about the discounts, which take about $92 million a year off municipal tax rolls"
$18,000 times TEN YEARS is $180,000.
If the Oregonian article has the figures wrong that is one thing, on the other hand maybe you should lay off the funny cigs. Or learn to run a spreadsheet before you post.
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To quote the newspaper article referenced:
"Since the city began offering tax abatements for multi-unit buildings three decades ago, more than 5,000 apartments have been built through the program. Property owners who qualify for the abatements don't have to pay taxes on new construction downtown and in urban renewal districts for 10 years."
and then
"But City Council members have plenty of reservations about the discounts, which take about $92 million a year off municipal tax rolls"
$18,000 times TEN YEARS is $180,000.
If the Oregonian article has the figures wrong that is one thing, on the other hand maybe you should lay off the funny cigs. Or learn to run a spreadsheet before you post.
