Bend residents have tough time finding low-priced housing

BEND, Ore. - Housing developers and the city want to increase affordable housing in Bend. But with skyrocketing property values and dozens of people moving to Bend each month, developers often struggle to find ways to break even when building homes for Bend's poorest residents.

Bend's median home prices have shot up in recent years from a low of $204,000 in July 2011 to $349,000 in July 2016, according to the Zillow Home Value Index. But as home prices have soared, many Bend residents' salaries haven't kept up with the rising costs.

Trying to make financial sense out of building housing to sell or rent below market rate can be a struggle for developers.

"It's a battle," said Scott Rohrer, executive director of Bend Area Habitat for Humanity. "And frankly, it's getting worse. We're just racking our brains over here to try to come up with creative solutions to this."

Affordable housing means people pay no more than 30 percent of their income on rent, including utilities, according to the U.S. Department of Housing and Urban Development.

Bend was short more than 5,200 affordable housing units for people who earn less than $25,000 a year in 2013 - about 26 percent of households in Bend, according to the city's housing need analysis. Meanwhile, about one-fifth of Bend residents couldn't afford a studio apartment at fair market rent, while households earning Bend's median family income - $59,700 in 2013 - couldn't afford a home valued more than about $150,000, according to the report.

"There isn't a lot of profit in affordable home building so not everybody wants to do it," said Tim Knopp, executive vice president of the Central Oregon Builders Association and a Republican state senator representing Bend. "You have to be committed to the cause."

Building an affordable home means reducing - and sometimes eliminating - profits for builders, Knopp said. But sometimes, merely breaking even can be a challenge.

Tom Kemper, who runs the nonprofit Housing Works, said no matter how he bargains to cut construction costs, government subsidies are usually necessary to make ends meet when building affordable homes and rent-controlled apartments.

"The reality is you can only build what you can get financed, and it costs just as much to build affordable housing as it does market housing," Kemper said.

Most builders need to take out loans to pay for the development, which can be tricky if there's not a lot of profit, Kemper said.

Kemper gave an example, saying a builder could spend about $16 million to build a 100-unit rental apartment complex with one-, two- and three-bedroom units. Renting those apartments at fair market prices could generate about $961,000 each year, while renting them out to people who make 60 percent of the area median income would only produce about $380,000 per year, he said.

That means the gap between the amount of money affordable rents will generate and the amount developers needs to pay back loans is much higher - sometimes more than double - than that of fair market developments, Kemper said. And this can prevent housing developers from getting the loans they need.

Instead, developers must find other ways to scrape enough money together, for instance, through land donation and scarce government resources such as tax credits and loans, Kemper said.

In Bend, the city offers several programs to encourage affordable housing developments. Among those are exemptions to system development charges, or SDCs, which are fees collected by the city when new development is built. Exemptions from the city's SDCs can save developers nearly $21,000 per a single-family home and more than $1.3 million on a 100-unit apartment complex, said Craig Chenoweth, development services coordinator for the city.

Developers can also apply for low- and no-interest loans through the city, which are funded through the city's affordable housing fee. The fee is tacked on to building permits and has allowed the city to lend about $13.5 million since it was adopted in 2006, said Jim Long, the city's affordable housing manager. That money from the fees has since helped to leverage nearly $63 million in federal and state funds and another $14 million in private equity, he said.

Without the city's programs and land donations, it would be impossible to build many of the affordable housing units, said Rohrer of Habitat for Humanity. But despite the help from the city, finding cheap, vacant land to build on is becoming more and more of a struggle for affordable housing developers, he said.

"It's terrible," said Rohrer. "The battle is increasingly more difficult day by day."