The city of Portland has agreed to contribute $6 million towards the cost of a high-rise, mixed-use complex because the building is supposed to include 60 units of “affordable housing.” “That’s like paying for a Toyota and getting a Tesla in return,” Portland Mayor Ted Wheeler enthused.
No, Mr. Mayor. It’s more like paying for a Tesla and getting a Toyota. A very small Toyota, also known as a Scion.
The building in question is supposed to make innovative use of cross-laminated wood to form one of the tallest wooden buildings in America. Normally wood is not allowed for high rises due to fire danger, but the Oregon wood products industry has been trying to boost the use of this material and claims it has overcome the fire problem. The project developers, coincidentally called Project (technically, Project^, but pronounced “project”), are so enthused that they are willing to put up $1.2 million of their own money towards the $29 million structure.
In other words, they aren’t very enthused, that being just 4 percent of the cost. The rest is supposed to come from federal, state, and local affordable housing funds–and they are still begging for the last $2 million.
Willamette Week, among others, finds this project questionable, claiming that the building is going to cost more than $650 per square foot and each apartment will cost more than $567,000. But this arithmetic is faulty as there are supposed to be 60 apartments plus retail and office space, so each apartment has to cost less than $483,000.
At 90,000 square feet, the cost per square foot is $322. The two-bedroom apartments are supposed to be 660 square feet, for a cost of about $212,665. Add the cost of common areas and the apartments as condos would probably sell for a little more than $250,000. Though Willamette Week‘s numbers appear to be wrong, even $322 per square foot is a Tesla price for residential construction.
The apartments are supposed to be affordable to people earning 60 percent of Portland’s median income. The city’s median family income in 2016 was slightly more than $80,000, 60 percent of which was $48,000. Following the guideline that the family should spend no more than 25 percent of its income on a mortgage, at current interest rates (3.75%) the family could afford a 30-year loan of $216,000. Provided families earning 60 percent of median incomes have $54,000 in cash to spare for a 20 percent down payment, the apartments are indeed affordable.
Other than the down payment, there’s just one hitch: the Scion-sized apartments at 660 square feet. Draw a square that is 25.7 feet on a side. Or draw a rectangle 22 feet wide and 30 feet deep. Now divide that into two bedrooms, a living room, kitchen, dining area, and at least one bathroom. Is that really livable?
By comparison, for $212,500, you can buy a 3,083-square-foot, four-bedroom, three-bath home in Houston. For $245,000, you can buy a 2,500-square-foot, four-bedroom, 2-1/2-bath home in Raleigh. For $249,000, you can buy a 3,932-square-foot, five-bedroom, 3-1/2-bath home in Oklahoma City. A family making $48,000 a year in one of these cities would have no problem finding quality housing.
So why should Portland be excited about spending millions of dollars of government funds to provide dinky apartments to moderately low-income families? Moreover, if Portlanders are really willing to pay $250,000 for a 660-square-foot condo, then why are any subsidies needed at all? This is just another way to scam taxpayers out of their money in order to provide huge profits for developers.