Should Portland amend System Development Charge Exemptions Code to add a temporary exemption for residential housing projects (amend Code Section 17.14.070)?

The City of Portland ordains.Section 1. The Council finds:In 2015, the Council, through Ordinance 187371, declared a housing emergency, which has been renewed six times and was most recently renewed in September 2024 through Ordinance 191897.In 2023, more than a third of Portland households and about half of all renters in the city were cost-burdened, meaning they paid 30 percent or more of their income on housing costs and were at increased risk of housing instability, with homelessness as the worst manifestation.The 2023 State of Housing in Portland Report shows that housing affordability remains a challenge for most Portlanders, as rents and home sales prices have continued to climb and outpace incomes.The Council adopted the 2045 Housing Needs Analysis as a supporting document to the City's Comprehensive Plan on December 15, 2023, by Ordinance 191547, which found a need for more than 120,000 new housing units by 2045.As identified in multiple City reports and forums, including a July 25, 2023, Council Work Session on Housing Production and the 2023-2024 Inclusionary Housing Calibration Study, rising construction costs and other market conditions in recent years have increased the costs to build housing in Portland.In 2024, 818 units of market-rate housing were produced in Portland, the lowest level of production in over 10 years, with similar levels of new housing forecasted in each of the next three years, for a total of 2,500 new units.On January 10, 2023, Governor Kotek signed Executive Order 23-04 acknowledging a statewide housing shortage and affordable housing crisis, establishing an annual housing target statewide of 36,000 units.The City has been engaging in much-needed permit improvement work in earnest since 2021, resulting in the creation of a new organizational structure for the City’s permitting functions in July 2024 and ongoing work to improve technology systems and business processes, increase the use of data, reduce code barriers, and improve the customer experience.The City adopted a Housing Production Strategy in August 28, 2024 through Resolution 37673 to guide the City’s actions to increase housing production across all housing types and affordability levels.The Housing Production Strategy identifies a variety of ways that the City influences the amount and types of housing that is built within city limits, including but not limited to: a) requirements like zoning and permitting regulations and development charges for public infrastructure; b) financial resources to provide direct funding for new housing construction; and c) financial incentives, such as exemptions from property taxes and development charges and development bonuses.The City’s Inclusionary Housing program links the production of new private-sector development to the creation of new regulated, permanently-affordable housing units located in mixed-income buildings. Increasing private-sector development creates housing affordable to low- to moderate-income households through Inclusionary Housing.The City collects system development charges (SDCs) as part of the permit process for new residential and non-residential development, which provides resources to expand public infrastructure for sewer, water, parks, and transportation to accommodate the additional needs generated by the new development.The City establishes SDC rates across multiple bureaus in alignment with state law, and SDC rates are typically adjusted by the Council, or automatically adjusted for inflation by City Code, on an annual basis.Currently, SDCs total approximately $20,000 per new housing unit and can range from $15,000-$35,000 per unit.The City currently offers an exemption from SDCs for rental housing that is affordable to households earning up to 60 percent of area median income and for new homes available for sale that are affordable to households earning up to 100 percent of area median income, and qualifying Accessory Dwelling Units and office-to-housing conversations.In 2024, the City began offering a 24-month, no-interest deferral of SDC payments that is set to expire in August 2025.City Code requires Portland Parks & Recreation (PP&R) and the Bureau of Transportation (PBOT) to review and update their SDC methodology, rates, and project list every 10 years. The adopted Housing Production Strategy identifies the need to comprehensively study how SDCs affect development feasibility and adjust them accordingly to find the right balance between adequately serving new growth and minimizing adverse impacts to housing feasibility.PP&R will complete the 10-year review and update of their SDC methodology by summer 2026 and PBOT will start the process to update the fees, methodology, and list of transportation projects eligible to receive SDC funding in 2025 for adoption in late 2026. In alignment with the Housing Production Strategy, during these revision periods, bureaus will evaluate SDC fee structures and exemptions to incentivize housing with development types, affordability levels, and locations that better serve housing needs and equity goals.In March 2025, Mayor Wilson and Governor Kotek convened conversations with developers of multifamily housing with the intention of identifying opportunities to spur housing production at a time when high construction costs and market conditions present immense challenges to building homes in Portland and across Oregon, and on May 1st announced a city initiative to usher in the development of 5,000 new units of housing in Portland by waiving SDCs for three years.The City Code authorizes the City Administrator to adopt administrative rules and procedures necessary to implement adopted City Code and Charter provisions.NOW, THEREFORE, the Council directs:Amend City Code Section 17.14.070 as shown in Exhibit A.The Community and Economic Development Service Area shall ensure that City Council receive written implementation reports every six months for the duration of the SDC waiver. Report discussion will include but not be limited to:Unit characteristics (e.g., total units, structure type, income category where known),Development trends (e.g., comparison of quarterly permit issuance volume over the last five years, up to and following the enactment of the SDC waiver and comparison of permitting volume with published construction cost indices and benchmark financing rates).Progress toward stated policy goal of 5,000 new units.Identification of any material changes in the rate or timing of permit issuance and construction starts following implementation of the waiver, including observed trends in project movement, activation of previously dormant applications, or other indicators of increased project viability.Total estimated value of SDCs waived to date by bureau.