Hundreds of new affordable homes will be built on the outskirts of Bend after state regulators selected the city for a pilot program.

Some lawmakers and developers have long questioned whether Oregon’s restrictive land use laws, which require cities to go through a lengthy and expensive process to expand their boundaries, contributes to a statewide affordable housing crisis. Lawmakers in 2016 created a pilot program to allow two cities to develop affordable and market-rate housing outside their urban growth boundaries without going through the normal expansion process, and Bend was selected this week.

Bend’s site is a roughly square-shaped 35 acres between Bear Creek Road and U.S. Highway 20. Its western edge is adjacent to city limits, and it’s near a fixed-route bus.

“This property happens to be very close to most of our infrastructure, so it’s a great opportunity,” said Lynne McConnell, Bend’s affordable housing manager.

The property will have 394 total homes, 185 of which will be restricted to people making less than 60 percent of the area median income. That’s about $38,000 for a family of four.

Another 175 homes will be set aside for families making less than 120 percent of the median income, or less than $77,000. Twenty-five homes will be market-rate, and the remaining nine are for apartment managers.

All of the affordable and nearly all of the middle-income units will be rentals in multifamily buildings. Thirty-eight middle-income units will be available for sale. The 25 market-rate homes will be attached single-family homes, all of which will be for sale.

The city plans to annex the land within two years, and construction is likely to begin in late 2020 or 2021, McConnell said. Pacwest Builders, which doesn’t have experience with affordable housing, will work on construction with Housing Works, the regional housing authority.

“We wanted to make sure we had the strongest team possible, because affordable housing has so many technical quirks,” McConnell said.

The pilot program allowed one small and one large city, and five Oregon cities — Bend, Redmond, Eugene, Sisters and Wheeler — expressed interest. But after the other cities dropped out, Bend and Redmond were left to compete for the chance to add more housing.

Jack Zika, a Redmond real estate agent and member of the city’s planning commission who was elected to the Legislature earlier this month, is working on a bill to allow both Central Oregon cities to participate in the program. He said he plans to meet next week with the city managers of both cities.

The bill could change the program to allow two cities in each group or change the population sizes for the two groups. Both Bend and Redmond are considered large cities because the pilot program defines a large city as one with more than 25,000 residents.

“The whole thing comes down to getting more regional control of our land use,” Zika said. “The pilot program is a good start.”

Redmond, which has been a more affordable alternative to Bend, is now experiencing faster growth in its real estate market than Bend. Bend’s median home price of $435,000 is still significantly higher than the median price of $309,701 in the Redmond area, but Bend’s home prices in the third quarter of 2018 were up 4.93 percent from the same period in 2017, while Redmond’s were up 8.14 percent.

McConnell said the city of Bend is likely to support Redmond in its bid to participate in the program. Redmond’s proposal included bringing in county-owned land, and seeing the difference in how the two projects work would be valuable for the state, she said.

“Our City Council has actually already indicated support in ensuring Redmond could go forward with their proposal, too,” she said. “It benefits the entire region when more affordable housing is built.”

— Reporter: 541-633-2160; jshumway@bendbulletin.com