Housing incentives

Subsidized housing is under construction on Southeast Fifth Street in Hermiston. Most tax incentives for housing are for low-income options.

A housing report compiled by city of Hermiston staff has found tax incentives for subsidized housing but few options for incentivizing developers to build market rate homes.

“All of those are really targeted toward affordable housing,” City Manager Byron Smith said, adding that the city needs housing “of all types.”

One option in the report presented to the city council last week is the New Market Tax Credit, which offers a federal tax credit to investors for certain types of projects in low-income census tracks. The credit is mostly for commercial development, but is available for mixed-used projects where less than 80% of the gross rental income is from residential units.

Another federal tax credit is the Opportunity Zone credit, which applies to one of Hermiston’s census tracts west of Highway 395 between Orchard Avenue and South Punkin Center. It allows developers to defer capital gains taxes on certain developments, including residential, in low-income neighborhoods.

The city could declare a portion of town a Vertical Housing Development Zone, allowing a partial property tax abatement on multi-story, mixed-use projects in the zone, if all of the residential units in the project are for low-income residents. The report written by Hermiston City Planner Clint Spencer stated the criteria involved made it a “challenge to think of a property that might benefit from this designation.”

The state also allows some property tax abatements for affordable apartment projects in places the city has declared a “transit-oriented development” zone. Properties within one-quarter mile of one of the stops for Hermiston’s HART bus system would be eligible to be included in a zone.

“This is an intriguing possibility for Hermiston,” Spencer wrote. “There is considerable residential land within a quarter-mile of a bus stop. It may be worth doing a targeted parcel inventory to determine if/where parcels which are of sufficient size, vacant, and properly zoned exist.”

The city could also slowly increase property taxes to newly annexed properties over 10 years instead of asking property owners to pay the full rate starting their first year inside city limits. That option could provide incentive to developers building just outside the city limits.

The city council asked staff to compile the incentives report earlier this year as part of the city’s ongoing efforts to increase housing availability. Other efforts have included changes in zoning and reducing some requirements for rules, such as lot coverage.

City Councilor Jackie Myers said the city’s efforts to build and improve infrastructure in town can also help incentivize developers. For example, the new water tower and water mains the city is installing in the northeast part of the city will provide the water pressure developers need to build housing on acres that were previously too cost-prohibitive to develop.

Several new housing projects have been announced in Hermiston this year, including a subsidized apartment complex under construction off of Southeast Fifth and Sixth streets and subdivisions off of Theater Lane and Elm Avenue.

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