What's Happening?
The Oregon Housing and Community Services (OHCS) agency has consistently failed to meet its own construction cost benchmark for affordable housing projects, exceeding the national average for hard construction costs by a significant margin. For the past
three years, the agency has funded projects where hard construction costs averaged 31% more than its benchmark, reaching $318 per square foot last year. This issue was highlighted at a recent meeting of the Oregon Housing Stability Council, whose members are appointed by Governor Tina Kotek. During the meeting, a new council member, Ed McNamara, abstained from voting on a package of four proposed developments due to concerns about their high costs, particularly two projects that far exceeded the agency's benchmark. Despite his dissent, the projects were approved by the other council members.
Why It's Important?
The consistent overspending by the Oregon Housing and Community Services agency has significant implications for the state's affordable housing crisis. Every dollar spent above the benchmark means fewer affordable housing units can be built, exacerbating Oregon's second-highest homelessness rate in the nation. Governor Tina Kotek has made increasing the state's housing supply a top priority, aiming for 36,000 new units annually, a target the state has not met. The agency's failure to adhere to its own cost-efficiency measures undermines these efforts and raises questions about the effective use of its substantial $3.7 billion biennial budget. State Senator Dick Anderson, R-Lincoln City, emphasized that finite funds mean every dollar wasted on overpriced projects directly translates to housing that someone else does not receive, calling for greater scrutiny and transparency in project approvals.
What's Next?
The Oregon Housing Stability Council and OHCS face increasing pressure to address the rising construction costs of affordable housing projects. State Senator Dick Anderson advocates for OHCS to use cost as a primary decision point and to publicly justify any projects that significantly exceed benchmarks. Governor Kotek's office has stated that she expects state agencies, including OHCS, to administer programs in line with benchmarks and performance measures to ensure efficiency and diligent use of public funds. This suggests a potential for increased oversight and stricter adherence to cost targets in future project approvals. Developers like Bienestar and Annex Group, with varying cost structures, will likely continue to seek funding, and the agency may need to re-evaluate its criteria for project selection to prioritize cost-effectiveness without compromising other statutory goals like family-sized units or supportive services.
Beyond the Headlines
The issue of escalating construction costs for affordable housing in Oregon points to a broader systemic challenge in addressing housing crises nationwide. While OHCS argues that factors like family-sized units, rural locations, and durable construction can increase costs, the disparity between projects and the agency's own benchmark suggests a need for more rigorous cost-benefit analysis and potentially innovative construction methods. The dissent from a council member like Ed McNamara, a retired affordable housing developer, highlights the internal recognition of these inefficiencies. This situation also brings to light the tension between the urgent need for housing and the responsible stewardship of public funds. The debate over whether to cap costs or allow for exceptions based on project specifics will continue to shape Oregon's approach to affordable housing, potentially influencing how other states balance these competing priorities.
