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The Bend City Council voted 6-1 last week to expand one of its most successful programs for confronting what Councilor Barb Campbell calls “our housing crisis.”

The vote was focused on the affordable housing fee, which levies a charge on all new developments in order to fund low- and no-interest loans for affordable housing projects. The fee was first instituted in 2006, with the city charging one-third of 1 percent of the value for every building permit issued, whether for a new apartment building or a new back porch. In 2011, the rate was reduced to one-fifth of 1 percent as the Great Recession upended the building industry. Last week, the council voted to restore the fee to the one-third of 1 percent rate, an idea first floated by Campbell.

While the fee increase is likely to be passed on to homebuyers, the proposal did not attract opposition from the local building industry, which says it is more concerned with potential changes to state law.

According to the city’s affordable housing manager, Jim Long, the program has helped fund 615 rent-controlled units through $10 million in loans. That money, Long emphasized, has helped attract nearly $63 million in federal and state funds and $14 million from private sources.

Such grants and tax breaks for affordable projects are often competitive and limited, and Long said the city’s loan program is why Bend has been able to attract a bit more than $7 of outside money for every $1 it lends out.

In an interview, Long said when he attends conferences or meetings with other government types focused on affordable housing, he always proclaims to everyone in earshot, “I’m in competition with you.”

“I don’t know if we’ll always be able to leverage that much money, but (raising the fee) will allow us to create more units,” Long said. “That’s clearly a good thing.”

Councilor Victor Chudowsky supplied the lone vote in opposition of restoring the fee, a move he said was motivated by his observation that the amount of money in the fund has continued to increase.

“As long as the amount of revenue going into this fund is going up and going up so rapidly, I can’t support a tax increase,” he said. “This is a very well-funded program.”

While the total amount of money available in the fund has increased, the amount of fees collected annually has fluctuated.

The fees are collected into a loan fund, meaning the fund will continue to increase as long as the fee is implemented, as any dollar loaned out will eventually return. When a loan returns, it is counted as revenue by the city’s accounting office. However, the amount of annual fee revenue has held well below its historic peak from fiscal year 2007-08.

Andy High, a vice president with the Central Oregon Builders Association, said his organization intentionally stayed neutral on the issue of whether to raise the fee.

“Affordable housing is a big problem, and I can understand why some would want to raise the fee,” he said.

High, who serves on the city’s affordable housing committee, did say he would be interested in setting a cap on the total amount of money the fund is able to collect.

“I don’t know what the right number is, but we definitely want to have that discussion,” High said. “Let’s just say we get to $100 million, there’s just not enough land or space to physically use all of that money. The money is loaned out, it’s being recycled, and at some point we should find a cap that’s reasonable.”

Long disagreed, saying he doesn’t see the supply of affordable housing catching up with the need anytime in at least the next 20 years. A larger pot of money to loan from, Long added, would give the city more flexibility to issue long-term loans, which certain projects require.

In a typical year, Long said the city loans out around $1 million, whereas it usually receives requests worth between $1.5 million and $2 million.

Campbell also said she didn’t like the idea of a cap, saying she would be happy to end the fee when the problem has been solved.

“A cap isn’t related to any goal of actually solving the problem,” she said.

Campbell noted she often hears from builders that they prefer “carrots to sticks,” or incentives to proscriptions.

“I always hear, ‘We want carrots, carrots, carrots.’ Well, carrots cost money, and this fee is how you get the money to offer carrots,” she said.

For High, a key measure of importance is how much a policy increases the cost of a new home. For the affordable housing fee, the number is usually in the hundreds of dollars, a small figure compared to other fees levied by the city to fund infrastructure costs.

More concerning to High is the prospect of a state law that would allow inclusionary zoning, a policy that requires developers to set aside a portion of new projects as affordable.

“It’s just not a good idea,” High said, suggesting a better way to encourage affordable housing would be to streamline the process by which cities can expand their urban growth boundaries, which restrict a municipality’s footprint.

Campbell supports inclusionary zoning, saying without it as a tool, all the city can do “is peck away at the housing problem a little bit at a time.”

— Reporter: 541-633-2160, tleeds@bendbulletin.com