Identified Opportunities for Funding
The Affordable Housing NOW! campaign will identify, select and launch the most winnable/viable initiatives for new sources of affordable housing funding.
AHN believes that the best way to meet the housing needs in the Portland Metro region is to have a region-wide fundsing source. The possibilities for a regional funding source include a real estate transfer fee (RETF), a document recording fee, a local or regional bond measure or levy, a recapture tax connected with the Urban Growth Boundary expansion.
In addition to regional funding source, AHN is working to win and a County Affordable Housing Trust Fund. Strategies throughout the region may be varied from jurisdiction to jurisdictions. A trust fund in Washington County may be the best strategy while a bond measure may only work in Portland.
Affordable Housing NOW! Funding Strategy Update
AHN Funding Strategies for the State, Region
-- Real Estate Transfer Fee (RETF)
-- Document Recording Fee
-- Bond Measure and Tax Levy
-- Value Recapture/Windfall Tax
AHN Local Funding Strategies
-- General Fund/Housing Investment Fund
-- Systems Development Charge (SDC) Exemptions for Affordable Housing
-- County Housing Trust Fund
Real Estate Transfer Fee (RETF)
What it is: A real estate transfer fee (RETF) is fee on a real estate transaction. 35 states use a RETF to generate revenue. The State of Florida has implemented a RETF with the support of Realtors, bankers and home builders. Voters in Berkley, California recently passed a .5% RETF to fund affordable housing. A real estate transfer tax of .5% in the Portland Metro area would generate an estimated $30 million per year that could be dedicated to affordable housing. RETF’s can be designed to exempt or lessen impact on low and moderate income homebuyers. To find out more about why a RETF would be great for Oregon, go to: http://www.retf4oregon.com
Background: The RETF would generate significant on-going funding for a regional housing fund. The transfer fee has gained much support from housing activists, business and civic leaders, and elected officials as the logical and most effective long-term resource base for affordable housing as an outcome of Metro’s Regional Affordable Housing Strategy adopted in 2001. Currently, state legislation passed in 1989 blocks local jurisdictions from instituting RETFs. The transfer fee has been pursued for more than eight years at the state legislature and has had little progress. However, pending the election of new leadership in the legislature, the preemption may finally be lifted. The state’s growing fiscal crisis may also offer new momentum to lift the preemption as historically hard-lined anti-tax legislators may finally shift enough to allow local jurisdictions to consider such a tax. The Affordable Housing Now! campaign will partner with ongoing efforts by City Commissioner Erik Sten, elected officials, and others to lead an effort to gain political support throughout suburban jurisdictions for a RETF. In addition to its research, the campaign will promote the RETF with legislators and other key community leaders.
Pros of a RETF:
* Ongoing, permanent source of funding for affordable housing
* Funding flexible; could be used for services, operations and capital construction
* Nationally RETFs have raised the largest sum of ongoing revenue for housing trust funds
* RETFs raise the greatest revenue when real estate markets are hot, which is exactly when funds for affordable housing are most needed.
Click here to see a list of who supports a RETF.
Have more questions about the RETF? Click here.
Process to win with RETF: Currently, state legislation blocks local jurisdictions from instituting RETFs. Therefore in order to win a regional RETF, we must first get the state preemption lifted in Salem during the current legislative session. Once the preemption is listed, AHN can build a campaign to take the RETF to the voters. Another option would be to have the legislator pass a statewide RETF.
Current Status of RETF strategy: A new group, Real Estate Professionals Building Community (REPBC), has emerged with the purpose of actively supporting affordable housing and home-ownership initiatives by working toward the enactment of a real estate transfer fee in the state of Oregon. To find out more about REPBC, and why a RETF is good for Oregon, go to: http://www.retf4oregon.com/
Document Recording Fee
What it is: The State of Oregon currently assesses a Document Recording Fee under ORS 205.323 in all real estate transactions. Many states across the nation, most recently Ohio, have dedicated part or all of their Document Recording Fee income to meet housing need. Oregon’s current Document Recording Fee is $21 per document. Currently the Document Recording Fee revenues go either directly or through the state back to the County Assessor’s offices.
The Housing Alliance is proposing of an additional $15 per document to be paid to Oregon Housing and Community Services, which would generate approximately $60 million per biennium for housing. This would increase the typical fee to $36 per document. There are additional per page fees of $5 per page that would not be affected.
Pros of a Document Recording Fee:
* Small fee presents minimal burden on individual real estate transactions, while generating significant funds for housing
* Funds would flexible, like an RETF
Process to win with a Document Recording Fee: Oregon legislature needs to increase fee in ORS 205.323.
Current Status of a Document Recording Fee: The Housing Alliance has the Document Recording Fee as a lead item in its 2007 Housing Opportunity Agenda. To learn more, go to: http://www.oregonhousingalliance.org/_downloads/White_Paper-$100m.pdf
Bond Measure and Tax Levy
What they are: Tax levies and bond issues have been used throughout the country as a significant source of affordable housing revenue. Oregon allows most local taxing districts to ask voters for temporary additional taxing authority. Voters may approve "local option" taxes for specific purposes.
For the most in depth explanation of the bond and levy strategies, got to http://www.portlandalliance.com/pdf/NewFundsforAffordableHousing.pdf to reada study commsioned by CDN, Home Builders Association of Metropolitan Portland, Neighborhood Partnership Fund and the Portland Business Alliance
General Obligation Bonds: Public bonds (or loans) that are guaranteed by a voter-approved property tax levy. With a GO Bond, a jurisdiction gets voter approval to sell bonds. The bonds and interest are then repaid by a special additional property tax. Bonds can be sold over a year or more, and then repaid over a longer period, usually twenty years. (These property taxes do not count against the Measure 5 and 50 limits, so do not affect "compression").
General Obligation Bonds have been used successfully in other cities to finance housing redevelopment, homeownership programs, and preservation.
The Oregon Constitution limits bonds in several ways:
> Bonds must be approved by a double majority, or by a simple majority in a November election in an even numbered year.
> Bond proceeds can only be used for construction and other capital expenses.
> Bond proceeds can only be used to finance projects that will be government owned, though they can be leased to non-profits.
Bond elections have generally been successful in Multnomah County, but have enjoyed less voter support in other counties.
Levies: Voters would act to approve a special purpose tax increase, for a limited period, and for a defined amount of money. The money would then be collected with property taxes and distributed to the taxing jurisdiction.
Levies are attractive because the funds raised can be used for any purpose
Which voters approve, and could therefore be used for operating support or rent subsidies in addition to housing construction costs.
Seattle has a successful housing levy program, which has funded low income housing development in Seattle for more than 20 years. They began with a simple bond program in 1981 which financed elderly and disabled housing owned by the Seattle Housing Authority. In three subsequent elections, the most recent in 2002, Seattle voters have approved tax levies to pay for preservation, new construction, enhanced property management, home ownership and rent subsidies. 59% of the most recent levy was targeted to individuals earning less than 30% of median income.
A levy option in Oregon would be limited by Constitutional limits imposed by Measures 5 and 50. These measures combined mean that:
> Levies must be approved by a double majority except in a November election in an even numbered year.
> Levies for operating funds can be for as long as five years.
> The total dollar amount of levies plus general government taxes cannot exceed $10 per $1,000 of real market value of a property. If the total exceeds the limits, levies are proportionately reduced, or "compressed". Estimates are that in October 2003, property tax levies currently approved (parks, children’s levy, library) for many Multnomah County properties will be compressed by 25% to 30%.
Levies have generally passed in Portland and Multnomah County. The success rate of levy elections in other counties is not as good.
Strategically, in Multnomah County a levy approach would need to be negotiated with other competing needs to avoid or minimize compression. In other counties, a levy strategy does not face compression but faces competition on the ballot as well.
Background: Recent voter support up and down the West coast for bond and levy measures to fund affordable housing demonstrates the viability of gaining voter support in the Portland Metro area. California passed a $2.1 Billion bond this past November. 58% of voters supported bond in San Francisco, that only did not pass because of a required 66% approval. Seattle passed a $86 million bond in June 2002, establishing a 22 year legacy of Seattle voters supporting increased funding for affordable housing. Because Seattle has two decades of success using Bond monies to fund affordable housing, we would have regional model from which to gain technical assistance in the development and implementation of a bond measure.
Oregon’s recent history of property tax limitation initiatives may impact the effectiveness of local option taxes and bond measures. *
Pros of a Bond Measure:
* Funding significant; could raise more money than Portland's Housing Investment Fund has generated in the last 10 years
* Can be designated to housing needs of very lowest income levels
* Strategic partners include Portland Business Alliance and Home Builders Association
Cons of a Bond Measure:
* Funding could be constrained to limited purposes; bonds could be used for capital expenses only
* A limited pot of money that would have to be renewed by the voter passage of a second, subsequent bond or tax levy
* A region-wide Bond presents significant difficulties
Pros of a Levy:
* Funding significant; could raise more money than Portland's Housing Investment Fund has generated in the last 10 years
* Funding flexible
* Can be designated to housing needs of very lowest income levels
* Strategic partners include Portland Business Alliance and Home Builders Association
Cons of a Levy:
* Levies must be approved by a double majority except in a November election in an even numbered year.
* The total dollar amount of levies plus general government taxes cannot exceed $10 per $1,000 of real market value of a property. If the total exceeds the limits, levies are proportionately reduced, or "compressed". Estimates are that in October 2003, property tax levies currently approved (parks, children’s levy, library) for many Multnomah County properties will be compressed by 25% to 30%.
Process to win with a Bond Measure or Levy: Run a City-wide, county-wide, or Metro-wide affordable housing bond or tax levy campaign.
Metro has used general obligation bonds in the past, and Metro’s Regional Affordable Housing Strategy suggested the consideration of bonding for affordable housing. Metro has the authority to impose targeted taxes up to $15 million per year, and currently only raises $7.5 million per year. This means that $7.5 million more could be raised to repay a revenue bond for affordable housing, if a target for taxation could be identified that has a strong correlation to the need for affordable housing and widespread political support (a luxury home tax, an exclusionary housing tax, etc.)
It’s critical to have clearly defined goals. A case needs to be made to voters for the goals, and goals must be achievable. It’s important to have the ability to meet or exceed the goals, and to be able to clearly demonstrate success. Seattle is a great example of this. They started with a very limited approach and built from election to election.
Current Status of Bond or Levy Strategy: In March 2003, Affordable Housing Now!, the Portland Business Alliance, the Homebuilders and the Neighborhood Partnership Fund released a study of cities, states and other jurisdictions that have passed bond measures/tax levies to fund affordable housing. AHN will use the study to evaluate the political support, voters, and constituency necessary to drive the initiative and to determine whether the bond could generate enough political support to fund a campaign, and whether voters would support a bond measure/tax levy.
No viable regional structure currently exists that has the capacity to develop housing, the authority to develop housing, and the trust of other governments in making housing decisions. We may need to consider parallel strategies rather than a joint effort.
Value Recapture/Windfall Tax
What it is: A one-time "windfall tax" being consider by Metro on land brought into the Urban Growth Boundary (UGB) in the December expansion of the UGB that could be used for affordable housing. When the public decision to bring new land into the Urban Growth Boundary is made, the value of the land brought in immediately sores as a result. Value recapture mechanism would "recapture" some the added value land receives solely as a result of the decision to bring it in the urban growth boundary. Metro regional government has identified an interest in examining value recapture mechanisms as a means to develop resources for infrastructure, greenspaces, transportation, affordable housing and other public needs. How the mechanism would work and whether it would generate funding for affordable housing has yet to be determined.
Background: In December 2002, the Metro Council passed Resolution No. 02-3255A and Ordinance No 02-988 to study and propose options on a regional fiscal policy on lands added to the Metro Urban Growth Boundary and on a regional system of sharing the benefits of growth and addressing fiscal disparities among jurisdictions within the Metro district. The resolution will study the advisability, practicality, and other policy aspects of capturing some of the value of that increase for purposes of balancing disparity in tax capacity and need for equity among all areas within the region. A recommendation from Metro’s Chief Operating Officer to the Metro Council is planned by July 2003.
One idea for financing improvements and benefits like affordable housing and natural resource protection that has been informally discussed around the region has been to capture some of the windfall in property value created when the UGB is expanded. (Increases as great as 1000% were reported for land added to the UGB for industrial purposes in Washington County during the 1980s.) One example is a tax on that increase, collected the next time property changes hands after the UGB is expanded, might provide the additional funding source needed to meet the various needs. Other ideas are being discussed as well.
Pros of a Value Recapture/Windfall Tax:
* Creates greater viability of mixed income communities in new developments
* Captures benefit to public from public decision
* Region-wide solution: Resources could be used to fund affordable housing throughout the UGB
Cons of a Value Recapture/Windfall Tax:
* Politically difficult to allocate funding for housing for lowest income levels
Process to win with a Value Recapture/Windfall Tax: Advocate for Metro to develop a the value recapture as source for affordable housing funding through providing research of possible mechanisms for the value recapture and funding distribution. Present research and recommended model for value recapture tax in June. Mobilize AHN supporters to testify in front of the Metro Council in September.
Current Status of a Value Recapture/Windfall Tax:
Metro is conducting research on how to implement a Value Recapture/Windfall Tax. AHN will work to ensure the scope and methodology of Metro's research is comprehensive. AHN will track the progress and remain in communication with Metro to ensure that the consideration of funding for affordable housing is an option for the tax revenues.
County Housing Trust Fund
What it is: A housing trust fund is created to provide flexible funding resources to assist in meeting the housing needs of low and moderate income residents. Assistance may come in the form of grants or loans. Activities of housing trust funds include new home construction, first-time home-buyer assistance, home rehabilitation, transitional housing, and rental assistance. Los Angeles appropriated $100 million to the Los Angeles Housing Fund amidst 9/11 budget shortfalls after a well-coordinated 3-year campaign.
Background: The longest standing trust fund is Vermont’s Housing and Conservation Trust Fund. In 1987 the Vermont Legislature created a Housing and Conservation Trust Fund that makes loans and grants to municipalities, nonprofits, housing co-ops, and qualifying state agencies for permanent affordable housing and permanently protected open space and/or projects that combine the two. As of 1997, 4,523 units of permanently affordable rental and owner-occupied housing has been developed through the Fund.
Pros of a local Housing Trust Fund:
* Does not need voter approval
* Has considerable initial support
Cons of a local Housing Trust Fund:
* Single jurisdiction only
* May not generate significant funds in the short-term
Current Status of the local Housing Trust Fund:
Beginning as an effort of Washington County's Vision Action Network, Washington County has established the Community Housing Fund. The Community Housing Fund is a community-based non-profit that provides new resources for proposed affordable housing projects for individuals and families living in Washington County. The goal is to build a $15 million trust fund to help local affordable housing experts build and remodel 1,000 affordable housing units during the next 10 years. Low-income, working families struggling to make ends meet and people with disabilities and special needs are some Washington County residents who will live in these homes.
In the Spring of 2003, Washington County Commissioners gave $310,000 to Vision Action Network to seed the housing trust fund that will be used to build homes that low income families can afford to rent. The $310,000 from Washington County is contingent on the Community Housing Fund doubling it with matching donations from local churches, business and developers.
Specifically, the fund will be used to help nonprofit housing developers cover county building fees and to expedite the land-use approval process. To find out more about the Community Housing Trust Fund, click here.
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