Agenda Packet 12-12-18 Work Session

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Draft Summary Report: Eugene Housing Tools & Strategies 6 unit. Property owners, developers and city staff said this requirement can be challenging to meet from both a site design and financial feasibility perspective for certain lots. Eliminating this regulation would likely have a relatively small impact on the on-street parking supply since developers satisfying this regulation may need to widen or add curb cuts, which reduces on-street parking supply.  The factors limiting ADU production in Eugene are multi-faceted, and there is no one silver bullet that alone would better support their development. To encourage ADU production, the City of Eugene would need to take a number of steps, depending on the political appetite for increasing their supply. Options include adjusting the land use code and the structure of SDCs and other city fees as they apply to ADUs, increasing community outreach and education efforts regarding ADUs, and exploring ways to support applicants trying to build ADUs, who typically are preempted from taking advantage of traditional financing mechanisms available to professional developers.  These efforts together could potentially enable the addition of up to 43,000 units to Eugene’s housing stock. While it is unlikely, of course, that every homeowner that is able would choose to build an ADU, the sheer number of potential ADUs points to the great impact ADU-supportive policy could have. If owners of just 5 percent of potential ADU lots were to build one, the number of units added would be 2,150, which is equivalent to about one-third of all dwelling units permitted in Eugene from 2008 through 2017. CONSTRUCTION EXCISE TAX EVALUATION In 2016, the Oregon legislature passed SB 1533, which enabled municipalities to tax new development based on construction cost, to fund affordable housing. Municipalities can levy a construction excise tax (CET) of up to one percent of construction cost on residential projects, and on an unlimited proportion of construction cost for commercial and industrial projects. Projects with construction cost of less than $100,000 are excluded under the law. There are nine municipalities that have active CET policies. Bend, which was the first Oregon municipality to implement a CET policy, as well as Medford, which was the most recent to do so, both levy a tax of just one-third of a percent of construction cost. Most other municipalities with CETs, including Portland and Milwaukie, have set the rate at one percent of construction cost. Corvallis is the only municipality to charge a higher tax (1.5 percent) on commercial projects. The City of Eugene is currently considering implementing a construction excise tax and has asked Strategic Economics to evaluate the potential impact of such a tax on revenue for affordable housing and on development feasibility of market-rate housing production. Key Findings and Recommendations on CET  Revenue Potential: Implementing a CET valued at 1 percent of construction cost for commercial and residential projects could raise up to $3 million per year for affordable housing, based on recent development trends in Eugene.11 This assumes that the tax would not have rendered any project infeasible, in which case the sum would be lower. Funds raised could be used in a revolving fund to leverage affordable housing development. 11 Estimate based on City-provided construction valuation data. December 12, 2018, Work Session - Item 2