Portland Aims At Reduced Fees To Lower Housing Costs And Prices

The Governor of Oregon, Tina Kotek, and the Mayor of the State’s largest city, Portland, Keith Wilson formed a Multifamily Housing Development Workgroup in March of this year. On May 1^st, the Governor and Mayor announced a proposal to waive system development charges, often called impact fees, for three years or when 5,000 units of housing are completed, whichever comes first. In the announcement, the City of Portland indicated that currently there are permit applications in for about 6,000 units. The idea is a good one, but like so many of these measures at the state and local level raise the question, “Why have these charges at all if they are such a barrier?” and, of course, while necessary to help increase supply, are these sorts of measures sufficient to result in increases in production?

Service development charges are fees that are charged on new development to offset the impact new development might have on services and infrastructure. For example, that new apartment building down the street might be adding 200 new fixtures—toilets, faucets, and showers—that will require water service including new pipes and treatment facilities. According to a 2023 study, these charges in Portland can add up to as much as 6% of total development cost, not insignificant in a business model that depends on marginal returns on investment.

First, what is the production of housing in Portland at least measured in permits issued, and what are rents like? As I have pointed out before, answering the first question is really difficult because most jurisdictions don’t track permitting data in a transparent way. The City of Portland would surely point out that it has a pretty cool map tracker for permits, but it doesn’t tell the story about how long it takes from permit application to issues of a certificate of occupancy, the point when a new unit can be lived in.

It’s also difficult to look across many years to see how many permits were issued for apartments since the system includes permits ranging from remodels to single-family construction to large scale commercial projects. The data from the Saint Louis Federal Bank (FRED) isn’t all that helpful either since it tracks permits across the Metropolitan Statistical Area (MSA) that includes multiple cities, even Vancouver which is in Washington State.

But one analysis by ECONorthwest did the work, finding that Portland only permitted about 500 multifamily units in 2024. In previous years, like 2023, production was higher, with the City permits almost 2,000 units of multifamily housing. The City’s housing plan calls for 120,000 by 2045 in response to projections “that 97,471 additional households are expected by 2045,” and that “after factoring in vacancy rates and second home replacements, Portland’s needed housing is 106,571 additional units by 2045.”

These sorts of projections might seem scientific, but are truly aspirational or apocalyptic depending on one’s point of view. Like most housing projection data, when compared to reality, such long-term production goals just aren’t realistic. And where exactly are the 6,000 permits referenced by the City in the process? Without knowing that, it’s impossible to know what their trajectory is and whether, even if freed of service development charges, the projects will deliver housing that will result in lower consumer rents. The truth is housing production varies, and while eliminating the fees on these projects in certainly necessary to improve the likelihood that production will yield 5,000 units in three years, it isn’t sufficient to promise that result.

And here’s another thing, rents went down in Portland about 0.5% in the last year according to Apartments.com. The average rent in the city for a 1-bedroom apartment is about $1,500 and the Area Median Income (AMI) for 2025 is $86,870 for one person who, using the usual 30% rule, can afford a 1-bedroom costing about $2,100. What I like about Apartments.com is they track apartment unit rents by the share of the total percentage. According to their data, 48% of apartments in Portland are between 1,000 and 1,500 a month, affordable to someone earning as little as half the area median income, or about $45,000 per year.

Again, why have service development charges at all if they have such a significant impact on production. I’m all for getting rid of them everywhere, especially if we know higher costs get passed on to renters. Portland should implement the change and carefully evaluate it. It is a cost shift as services and infrastructure costs will get passed on to all rate and taxpayers, but isn’t that fair given the wider impact of housing shortages? And the evaluation should take a look at whether production has fallen because of lack of demand which might account for the flat rents. Is there really a crisis in Portland today? Even if there isn’t, eliminating the charges now is a really good way of insuring there isn’t one in the future.