Document text
Tax could spur low-income housing Sunday Jan 28, 2018 at 4:45 AM Damian Mann Mail Tribune @reporterdm Frustration with the lack of affordable or workforce housing has prompted Medford City Council to look at a tax on new construction to encourage developers to build low-income units. Based on research by a newly formed Housing Advisory Committee, the council may place a 1/3 of 1 percent tax on new construction that would be added to the permit cost. On a $300,000 house, permits and system development charges amount to $12,000, and the new tax would add another $1,000. The council is expected to vote on the tax Feb. 15. The revenue from the new tax would raise an estimated $540,813 annually that would be leveraged with grants to generate eight or nine times that amount that could help stimulate construction of low-income units. Bend, which adopted a similar tax in 2006, has been able to build about 600 multifamily units with the money it raised. The council is also looking at making other changes to encourage more development in the city, which has a historically low vacancy rate as well as rent prices that are being pushed up because of economic forces, including the low vacancy rate. The average rent in Medford has gone from just over $1,000 in 2011 to more than $1,400 in 2016, according to the website Zillow. Developers are currently required to pay system development charges, which are used to pay for roads, parks and sewers, when they pull permits. The city is considering a change that would allow the developer to wait until the project is completed before having to pay the fees. For single-family houses, the fee might be paid at close of escrow. "What we all recognize is that there has been a dramatic increase in housing costs," Councilor Michael Zarosinski said. "The increase has affected the affordability of housing in the valley, which has been particularly hard on low-wage earners." He said deferring system development charges could help developers, who wouldn't have to finance those charges up front. By freeing up this up-front cost, it could encourage more developers, particularly smaller developers, to achieve the financing necessary for these projects. Also, he said, the council wants to look at creating some local regulations that would encourage multiple developers to build separate projects on one tract of land. One owner could, say, build a fourplex, while another could build a larger apartment complex or a commercial development. Zarosinski said an owner of land now needs multiple investors to get a project off the ground. If the city regulations were changed, it could allow for more developers to participate in a large-scale project instead of one developer bearing all the costs, Zarosinski said. Another possibility is to use some of the money from the construction tax to provide short-term financing to a developer to help qualify for a loan from the bank. Other proposals being looked at include increasing the building height allowed in residential areas to encourage more apartment complexes. The city could also give priority to applications for housing developments that are considered affordable. The tax on construction, which is charged in three cities in Oregon, came out of talks with the 17-member Housing Advisory Committee. Randy Jones, with Mahar Homes and also a member of the committee, said he thinks the developer community will be on board with the extra construction tax idea. "I think this is going to work," he said. — Reach reporter Damian Mann at 541-776-4476 or [email protected]. Follow him on www.twitter.com/reporterdm.