MULTE Program Expands in Scope

04.09.18

The push for affordable housing in Portland is not new. Floods of new residents from out of state have caused gentrification of historic neighborhoods and skyrocketing rents, making it extremely difficult to find close-in affordable housing. The Multiple-Unit Limited Tax Exemption (“MULTE”) program provides an incentive for real estate developers to continue to meet growing demand with market-rate developments, while at the same time ensuring that the new developments provide lower-income individuals with an affordable rate in attractive neighborhoods.

The MULTE program was implemented by the City of Portland in 2016 to incentivize private development of affordable housing within the City. MULTE offers real estate developers exemption from property tax for a ten-year period, so long as those developers offer a portion of the units on the newly developed property as affordable housing. Specifically, 20 percent of the units on the property must be deemed affordable to households earning either 60 percent or 80 percent of the median family income. To be eligible for the MULTE program a project typically must be within a designated geographic area, must be of an eligible residential project type, and must have a specified total number of units per net acre of site area. If the proposed new development qualifies, all the residential units on the property are not subject to property tax for ten years, enabling the developer to offer the designated affordable units for a lower, subsidized amount.

On March 21, 2018, the Portland City Council voted to expand the MULTE program by broadening the scope of development projects eligible for tax exemption. As amended, the program does not require projects to be within limited geographic areas, and also grandfathers in residential developments in existence before the program was implemented in 2016. Tens of thousands of additional units are projected to be eligible for the MULTE program in the future.1 Therefore, the MULTE program could be an attractive mechanism for real estate developers to continue with market rate developments in locations all over Portland and still be able to offer a set number of units to low-income residents - the best of both worlds.

But the ten-year window for exemption sunsets, making it highly likely that the cost of living in such an attractive development will again jump back to market rates once that window has shut. The lower-income individuals residing in those new units then lose the subsidy and, with it, the units' affordability. Because of this, some argue, the subsidy would be best spent on existing units, for which the market rate postsubsidy would not be quite as harsh.2 Additionally, others argue that with the rising costs of development, including the cost of resources, land, and labor, the exemption may not provide enough financial benefit to pencil out for developers.3 Finally, it is also possible that incentivizing continued residential real estate development in a market that is rumored to be at its peak could send the wrong market signals and contribute to market downturn.

So while the need for affordable housing in Portland is clear, whether the benefits proffered by the newly expanded MULTE program outweigh potential costs is anything but. What is clear, however, is that the MULTE program provides an example of innovative-problem solving by City officials and enhanced opportunities for real estate developers and Portlanders looking for more affordable housing.


1Jon Bell, Council Gives the Go-Ahead to Tax Breaks for Affordable Housing Development, Portland Business Journal, Mar. 21, 2018, www.bizjournals.com/Portland/news/2018/03/21/council-gives-the-go-ahead-to-tax-breaks-for.html.
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3Elliot Njus, Portland Weighs Reviving Tax Breaks for Affordable Apartments, Oregonian, Mar. 4, 2018, http://www.oregonlive.com/front-porch/index.ssf/2018/03/portland_weighs_reviving_tax_b.html.

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