Paul Conte: City should fund subsidized housing with land value capture

Presenter: Paul Conte says to solve our housing crisis, Eugene needs subsidized housing. In an interview Nov. 20, he defined a housing crisis.

Paul Conte: A housing crisis is when you have to choose between paying the rent or your medical care. As simple as that. So it’s when the cost of your housing is so high that you don’t have enough left for basic human needs. So how do you get more affordable housing into an area? The only way you’re going to get it is with subsidized housing, and believe me, I have supported and helped get subsidized housing into our neighborhood over many years, and it’s the best stuff you can get.

[00:00:41] These are not ‘the projects.’ These are really, really well-done housing. We have good public and public private housing agencies in Eugene, so we can work with them. We’ve got the talent there.

[00:00:54] Now, if you’re going to do that, you can’t get it done at market rate. The theory has been quite well debunked, that you can somehow let a developer make enough profit off of a project and still provide a substantial amount of—we’re talking apartments here—of truly affordable housing for lower income and lowest income.

[00:01:20] So the city has said that they have an affordable housing requirement, but it’s at 80% or more of Area Median Income (AMI) and that level is not stressed. They are not under financial stress for the most part. They are under a choice stress.

[00:01:36] And I don’t mind actually money going towards housing at that level through development. And I don’t mind if a developer makes a lot of profit—if they don’t do it by sucking out resources from other programs, or destabilizing neighborhoods, or causing displacement.

[00:01:54] So we have to have fully subsidized housing, of which there are a number of projects in Eugene. Why don’t we have more of them? Because of money, right? This council has completely bollixed the management of the budget, so that they’re now talking about adding a tax for square footage of housing. That’s a good way to help with housing, right? Tax the square footage. (Scoffs)

So what you have to do is something called land value capture. And this is very simple. It’s been known and identified since the 1920s.

[00:02:28] When you upzone a property, you increase that land value. And a developer makes money as a relative amount above what their costs are. So when you move from allowing them to build a single house to building a duplex to building a fourplex to building a cottage cluster of eight units and stuff, every one of those allowances increases the value of that land. And they make a multiple off of that. So they’ll make a lot more money, even though they pay more for the land, if they could put eight units on it.

[00:03:04] Now, the false claim by the proponents of middle housing is, ‘Oh, well, you know, these eight houses will now be cheaper than if we put one house on each of eight lots.’ Well, duh. But the problem is that those houses still aren’t going to be affordable because the investor is going to maximize what they can get from that.

[00:03:23] So what can happen is—and this did happen in Eugene in some instances—the anticipation of what would become available in properties led to their increase in costs before a single structure was built.

[00:03:35] So what is being done, and this is being done in a number of jurisdictions and in a number of different countries, is called land value capture.

[00:03:44] So when you upzone, and when you improve amenities, you improve the value of land. Both of those, the community is creating the value, the community owns the value. So first thing you don’t do is you don’t tax an owner who wants to continue to live there—although their value has in theory increased with their land—so that they can stay there.

[00:04:05] The second thing you do is you capture some of that uptick in value when the sale occurs. But if somebody is going to make a lot more money because you upzoned it, and then they go ahead and do it, you’re going to let them have enough so that it’s profitable to do something, but you’re going to capture some of that money. And then you put it directly into fully subsidized or heavily subsidized public housing.

[00:04:32] This is well known. Boston is doing it this way. Other communities are doing it this way.

[00:04:39] What’s going on right now is a scam. You’re not making a score against the elitist, racist, etc. etc., people, you are screwing low-income households. And the profit from doing that is going to predatory investors.

[00:04:55] This entire thing about middle housing is a fraud, and it’s at worst harmful. And who is making the money off of it? A bunch of exploitive investors. And we’re supposed to have a so-called progressive government. And here we have what are handmaidens of the developers and the investors.

[00:05:16] What’s getting built in Eugene, is not ‘affordable housing’ for households that are truly cost-burdened by the cost of housing. Instead it’s being built at the higher end, you know, upper-middle-income and high-income level. From what I’ve seen, what’s getting built is taking out affordable housing because to an investor, the best target is a house, a single house that’s had deferred maintenance, not very big, not very attractive, and therefore still would be at least the most affordable to a household that would like to buy a house, right?

[00:06:01] But instead, what the investors are doing is they’re buying those houses that are on larger lots, knocking them down, and building more houses. True, the housing, the dwelling count goes up, but the net is that the housing count goes up for higher-end houses and it goes down for lower-cost houses.

[00:06:22] It’s causing displacement because now in those areas where this is happening the most, it is displacing families from that. And if you want to see how that’s working, look at the area that’s south of 29th, that’s in sort of what used to be a swamp, generally lower-quality, lower-cost houses on very large lots, and it is atrocious, some of the things are being built there. All you have to do is get on the ground and look at some of those.

[00:06:52] Essentially, these are not middle housing. These are being called cottages / cottage cluster with a filtration drainage area is the courtyard and with structures that are two and a half stories high, five feet from a neighbor’s adjacent back property. This is not about helping the housing crisis.

[00:07:17] Presenter: He’s surprised the city’s still pursuing the same approach to HB 2001, after it was twice thrown out by the courts.

[00:07:26] Paul Conte: The way the ordinance is written, it would allow up to fivefold increase in density with no credible assurance that we have water supply for that number of additional houses in existing neighborhoods, including water for fire hydrants.

[00:07:48] It doesn’t have any assurance that there would be adequate sewage or wastewater capacity for all those additional toilets that are going to be flushed. It doesn’t have assurance for adequate emergency vehicle access, both fire and medical conditions, and all those are required by state statute and state administrative rules.

[00:08:13] And the thing that’s surprising and I think most disturbing about this latest round is the current mayor, and unfortunately, the mayor-elect and a majority of councilors have simply refused to do the basic due diligence to look out for the health and welfare of Eugene residents.

[00:08:37] All they had to do was to insist that the city manager direct the staff to put provisions in that ordinance that effectively ensured that no additional density was going to be built in any area that didn’t have clear, credible capacity for water, wastewater, and emergency access.

[00:09:05] You know, when we opposed the very first version of this ordinance, the city assured the council that this was just a complainer, a number of complainers who wanted to obstruct density and new housing.

[00:09:24] And unfortunately for them, when it went to the Court of Appeals, the Court of Appeals said, no, you haven’t gotten a shred of evidence that you’re going to have adequate infrastructure.

[00:09:35] All right, so it went back to them. They came back the second time and the second time they still didn’t do that, but they tried to fake it. Basically, they falsely told the council that existing land use code standards for water, wastewater, emergency vehicle access would be enforced by existing code provisions.

[00:10:01] Well, even LUBA, which is very biased these days towards higher density, said, ‘No, you haven’t. We can read what you have in your code and it does not do that.’ So it got sent back for a third time.

[00:10:17] This time, unbelievably, the staff has tried another feint. And let me briefly explain that ruse. The staff’s latest version says, ‘Oh, we will be compliant now because we have actually incorporated the explicit requirements that are in the state’s model code for middle housing,’ and that requirement says there must be sufficient infrastructure before you allow triplexes, duplexes, fourplexes, cottage clusters and townhouses.

[00:10:50] That requirement is in the state model code, and it’s a good requirement. It says exactly what needs to be said to comply with Oregon’s statewide Planning Goal 11, which says you’ve got to have safe and effective infrastructure.

[00:11:04] Presenter: At the public hearing Nov. 18:

[00:11:08] Sarah Medary (Eugene, city manager): Following its original adoption, the middle housing code was appealed and ultimately remanded back to the city to address compliance with statewide Planning Goal 11, which concerns public facilities and services.

[00:11:19] The council readopted the middle housing code earlier this year with additional findings, but that ordinance was also remanded.

[00:11:25] In the most recent remand, the Land Use Board of Appeals explained that the city can demonstrate that the middle housing code complies with Goal 11 by adopting the sufficient infrastructure language from the state’s middle housing model code.

[00:11:38] The proposed ordinance addresses the remand by directly incorporating the sufficient infrastructure requirements from the model code to ensure that the higher density housing allowed by this ordinance will only be developed on lots or parcels with sufficient infrastructure, which includes water, wastewater, stormwater, and access.

[00:11:56] Tonight is a public hearing only and deliberations are scheduled for Nov. 25.

[00:12:01] Presenter: Explaining why the courts have rejected that approach:

[00:12:04] Paul Conte: Here’s the rub. The model code was written so that a city could adopt it, but they would then have to plug in, well, what is it that tells us that you’ve got sufficient infrastructure? Because that’s going to be different in different cities and jurisdictions.

[00:12:22] And that would mean something like you have done planning recently that shows that in certain areas, your city, you have excess capacity that can handle that density and other areas you don’t. So we’ll know where we can allow this increase in density with middle housing and where we don’t until we get the infrastructure. That’s all there is to it. They didn’t do that. They didn’t do it at all.

[00:12:48] In fact, the only thing we can even find in their supporting findings is a reference to what’s known as the Metropolitan Facilities and Services Plan. And that does talk about wastewater water and so forth. The problem is that that’s so old. 2017 basically is when they did the last analysis. They did a little bit of an update more recently, a few years ago, but still before the legislature even considered the so called middle housing statute.

[00:13:25] So they’ve already been up once where Court of Appeal said, ‘No, no, no, we’re sorry. That’s not good enough. You need to do a real analysis.’

[00:13:34] They didn’t do it. Well, listen, we have experts. We have attorneys. We have a large number of citizens, all saying, show us the money. Show us where you actually have a reference to something that is an established service level that you’re going to use as a metric. Not one of them presented any information about that to the council. All right, so they don’t have it. It’s as Al Capone said in the movie, or Robert De Niro: ‘You got nothing.’

[00:14:07] Robert De Niro (as Al Capone): You got nothing. Nothing.

[00:14:10] Paul Conte: You got nothing. All right. So they’re trying to hoodwink the public again. Well, the public’s caught on to it. So there are only four people that showed up for the in-person, for the hearing. Well, you know why that was? Because the city sent out a notice that said the hearing was on Tuesday and it was on Monday.

[00:14:30] But let me tell you what people did do. They submitted written testimony and my quick count on it, like I said, 140 people opposed what it sent back to the staff to put in some teeth into and some credible criteria for this requirement and four people who didn’t.

[00:14:49] Kaarin Knudson, the mayor-elect, sent a message I don’t think she expected to be in the record, but I found it. And it said that people that were submitting testimony were just copying and pasting from something that I had posted. So we have a mayor here who has disregarded and tried to denigrate and dismiss messages that people took the time to send that are very simple. They don’t have to write a dissertation and she’s trying to just blow that off.

[00:15:19] The other thing that was interesting in that message is she said, ‘We know that the city has to—,’ must was the word she used. ‘We must have either an existing infrastructure that’s sufficient, or we must have a plan for it, and we have, must have funding for it, before we let building happen.’

[00:15:38] This is nice because now we have the mayor-elect confirm that they know what they have to do, and they haven’t done it. So if the council doesn’t do anything, they are going to get a remand. We already have the attorney who’s written most of the brief for it.

[00:15:54] So the problem here is (whether or not you agree with the density), the state law requires and any sensible person knows, you’ve got to have a water supply, you’ve got to have sewage system, you’ve got to have adequate emergency access. That’s what’s really at the heart of this.

[00:16:12] And for this council, mayor, and council majority and staff to blatantly try to get around that is really shameful.

[00:16:20] Let’s hope locally maybe a few of our councilors will start to hold our city manager and our planners accountable for presenting them with credible, legitimate, honest, evidence-based solutions rather than this just untenable thing we’re looking at right now, which is coming right back to the council if they approve it without any changes.

[00:16:47] Presenter: Paul Conte says the city should explore land value capture for sustainable funding of subsidized housing. Because, after years of ignoring city residents who testified on HB 2001, what has the city got to show for it?

[00:17:02] Robert De Niro (as Al Capone): You got nothing. Nothing.