Affordable Housing Smith-Warner Conference Report by Marilyn Mauch

 Faith, Land, and Housing Conference, Saturday, April 29, 2017 --  8:30 am – 3:00 pm Presented by Warner Pacific and Community Partners:  Rockwood Community Development Corporation, Habitat for Humanity, Oregon Opportunity Network, and the Leaven Community

How can Portland’s faith communities use their land and resources to respond to the affordability crisis?  

The conference opened with Apostle Steven Holt, Kingdom Nation Church, giving an impassioned call to action for faith communities to use their resources for affordable housing.    Key thought:  It’s not only a matter of equity, but also a matter of righteous action. Matt Tschabold, Portland Housing Bureau, gave a short overview of the Portland area housing crisis and Lorelei Juntenen gave a quick-paced Housing Development “101” addressing the development process and obstacles which builders of affordable housing face.


Note:  After the conferences, I resorted to internet sleuthing  to try and reconstruct hurdles developers of affordable housing face.  My brief notes follow.  M. Mauch


Suitable land for low income housing needs to be sited near transportation, grocery stores and other community services.  In the Portland locale, such land sites are hard to find and command top dollars.  However, the rents to be charged must be relatively low given the income level of those needing the shelter.  As summarized in a Bloomberg report [1]……”there are only a few levers that truly affect a developer’s ability to finance a project.  Taking a smaller fee or negotiating a more favorable loan can help at the margins; so can making the project so appealing to residents that no one ever moves out.  To really reduce costs or raise revenue, though, there are just these options:  Spend less on land, materials, and labor, or bring in more money by raising rents or finding new public financing. But land, materials, and labor can only be cut so much (construction costs are effectively fixed by labor and commodities markets), and raising rents removes the "affordable" from affordable housing.’’

Presentations on three examples of faith communities using land for housing. 

Example 1:  Gethsemane Lutheran Church, Seattle, Pastor Joanne Engquist gave an overview of the transition of the church which now includes a new building with five floors of affordable housing above the church’s entry and office spaces, a Sanctuary and a basement community service center.  The original church chapel remains adjacent to the new building.The affordable housing was built in partnership with Compass Housing Alliance.  See Seattle Times article below.

Gethsemane church remodel includes affordable housing  (2012 Seattle Times article)

Gethsemane Lutheran Church in downtown Seattle has opened a new building that includes a sanctuary, 50 units of affordable housing and a community-service center.

The Rev. Chris Boerger’s words brought knowing laughter from the congregation at Gethsemane Lutheran Church on Sunday when he described the work it took to turn a 1950s-era sanctuary into a versatile new building that’s not quite like any other church in the region.

It’s a church, yes — but it also includes 50 units of affordable housing, and a basement community-service center that serves hundreds of needy people with a variety of programs, from Sunday soup and movies to a day shelter for homeless women and children. “This has been a building program, and it has been hard work, and it has not always been easy,” said Boerger, bishop of the Northwest Washington Synod of the Evangelical Lutheran Church in America, as he helped dedicate the $20 million project.

Gethsemane, at the corner of Stewart Street and Ninth Avenue in downtown Seattle, is the oldest Lutheran church in the city. Fifteen years ago, a church committee began exploring the idea of turning some of the downtown property into affordable housing. The land had grown increasingly more valuable over the years. But when the 2001 dot-com bust hit, a developer who was interested in the land backed out, said Jean Anderson, a congregation member who headed two of the three church committees that worked on the project.

The idea was renewed when the value of downtown properties recovered. “It kept going from one unthinkable idea to the next,” Anderson said. “A few dedicated people just hung in there. There was a lot of prayer, and faith.” The church’s brick chapel, which seats about 150, is little changed. But it’s now part of a larger building that includes a jewel-like sanctuary at Stewart and Ninth, fronted with long, thin, colored panels of art glass and fused glass. “When the sun hits it, it does amazing things in here,” said architect Jim Olson, of Olson Kundig Architects. He described the building as “one of the most meaningful projects I’ve ever worked on.” Above the church’s entry and office spaces are five floors of affordable housing, built in partnership with Compass Housing Alliance. The top is capped with a rooftop garden, meant to be an oasis in the urban location. The basement is home to Mary’s Place, a day shelter for homeless women and children, and to the soup and movies program, which feeds and entertains up to 120 homeless people every Sunday afternoon.

“This place is an extraordinary gift to the downtown community,” said Gethsemane’s pastor, the Rev. Joanne Engquist, who moved from Cambridge, Mass., to be pastor of this church in May 2011. At the time, the building site was just a hole in the ground. On Sunday, Engquist talked about how she hoped the church would be more than just a shelter and a place of worship — it would also be open to the community, and people would seek it out for fun, games and laughter. “This is a magnificent project,” she said.

Example 2:  Rivergate Community Church and Habitat for Humanity, North Portland

Rivergate Community Church is located on North Lombard Street.  The congregation was in decline and aging.  There were three levels to the church that impeded congregational use as well as their desire to use their bottom floor Fellowship Hall to serve activities with and for the Portland community.  However, they couldn’t afford to put in an elevator to enable easy access to all three levels of the church buildiing.  The church sits on a large piece of land much of it lying empty or for parking.  When the church inquired, they found that the empty plot was the largest unused lot in the area.  After much congregational deliberation, they decided to inquired if Habitat could build affordable housing on the land.  They sold that plot to Habitat and 12 affordable houses were erected and the congregation was able to install an elevator.  The congregation and the people moving in have developed a community garden.  The congregation is also “big” on pot lucks and they join with the families to have good times at the meals together.  While before, the church was seen as a” sleepy place” in town, it is now well known for what they have done.


The presentation at the housing conference consisted of a video that explains their journey in full.  You can see it at the following internet address:


Click below to see the video shown at the Warner Smith Possibilities Housing Conference

 Example 3:  St. Andrews and All Souls Episcopal Church + University Park United Methodist – Rob Justus, developer.

See the below for write-ups on the affordable housing being provided by University Park UMC.


A North Portland church is beginning its quest to help solve the affordable housing crisis in the city. Created on Thursday, 04 August 2016 | Written by Bianca Pahl |

Almost two years ago, University Park United Methodist Church’s members discussed the possibility of utilizing their property to build affordable housing units for low-income households. In April, when the church’s Board of Trustees of the Oregon-Idaho Annual Conference agreed to guarantee the loan, University Park’s talk turned into action.

The church, at 4775 N. Lombard St., is now securing loans, hiring a contractor and awaiting permit approvals.

The congregation will build a 26-unit apartment building on its property, which will cost $2.1 million to construct, says the developer, Rob Justus. Funding will come from a bank loan and the profits of selling a home set aside to house the pastor, which is no longer needed.

If everything goes smoothly, construction on the apartments should start in the spring of 2017, says University Park Pastor Julia Nielsen.

The Annual Conference hopes to organize a system where it can repurpose other properties for affordable housing. Nielsen says University Park will be a prototype project for other churches wanting to do the same. “If we can do this, we might be able to learn some things that we can share with other churches,” Nielsen says. “Our goal is to solve the affordable housing crisis in Portland. I think there’s a possibility of making that happen.”

The church partnered with Justus, cofounder of Home First Development, who says two other churches have already approached him about starting an affordable housing project since he began the University Park apartments. Many churches have assets and are thinking of new and innovative ways to use those assets to help the homeless and the community, says Lowell Greathouse, the mission and ministry coordinator for the Oregon-Idaho Annual Conference.

“It opens up the possibility of sparking a revolution or a new way for churches to be involved in addressing affordable housing,” Greathouse says. The route University Park is taking is appealing, Justus says, because it doesn’t involve the government, saving time and money. The church owns the land and the bank issues a loan. “It’s straightforward financing,” Justus says.

The church is more than 120 years old and at one time had hundreds of members. The congregation has been dwindling in members for the past 20 years, Nielsen says. More than a year ago, St. Johns Community Church formed a union with University Park, and the community grew. Both churches, which now share the same place of worship, have a historic relationship with helping the homeless in each of their communities.

Portland’s sizzling housing market has caused rents to rise at a record pace, increasing homelessness. In January 2015 there were 3,801 homeless people sleeping on the streets, in shelters and in temporary housing in Multnomah County, according to the 2015 Point-In-Time Report.

“Housing is a critical need,” Greathouse says. “We want to be a part of the solution to homelessness and affordability of housing in Portland.”

The church’s dream is starting to become a reality.

The housing will consist of 13 two-bedroom units with 790 square feet, and 13 one-bedroom units with 400 square feet. Every unit will have a washer, dryer and full kitchen.

Justus says the apartments will be rented to people with incomes less than 60 percent of the median family income. Nielsen says she anticipates rents will be around $700 a month.

The housing will fill the current lawn space on the church’s property, as well as take up a portion of the west side of the Errol Stephenson Hall, Nielsen says. There will be some deconstruction to the hall but the place of worship will remain.

“This makes it possible for University Park to connect with their community in a real, tangible way that makes the church relevant and a partner with the community in addressing a real need,” Greathouse says.



Representatives from local CDC’s provided snapshots of their affordable housing efforts.  CDC’s represented were

Rose Community Development CDC

Hacienda CDC

PCRI - Portland Community Reinvestment Initiatives

Below is a site explaining funding and efforts of CDC’s.


Proud Ground – Mission, Vision and Values  A representative from Proud Ground attended the conference.  Proud Ground is a community land trust that was started by the City of Portland.  Here are just a few excerpts from Proud Ground’s website --

Goal of community land trusts:  Utilizing the Community Land Trust model of permanent affordability, expand homeownership opportunities for families, with low to moderate incomes, so they can live or remain in the community of their choice. Serve as a leading strategic partner to improve affordability region-wide, with a focus on areas affected by displacement.

Community Land Trusts are nonprofit organizations that help make homes and other things (such as community gardens, commercial space, affordable housing) affordable and accessible. For most CLTs, affordable housing is the highest priority. There are over 250 CLT programs across the country, serving communities from small towns to large cities.


In exchange for a reasonable purchase price (about $60,000 to $100,000 LESS than a market-rate home), homeowners agree to resale arrangements that provide a seller with a share of the homes equity while ensuring the home remains affordable for another moderate-income homebuyer. This arrangement is guaranteed through a legal agreement between Proud Ground and the homeowner. Homebuyers review these legal agreements with an attorney independent of Proud Ground to understand all the details before buying a home.

Why It’s So Hard to Build Affordable Housing: It’s Not Affordable

Developers struggle to break even on rental projects for the poorest Americans, bPatrick Clark, July 26, 2016, 3:00 AM PDT

A real estate developer wanted to increase affordable housing in Denver, trying to make fiscal sense out of a plan to build rental apartments for people making only 30 percent of the area's median income—the kind of housing America desperately needs. He discovered that, no matter what lever he moved or compromise he made, he was going to need some money from the government to make it work. Then he was going to need some more.

Almost one in four U.S. renters spends more on housing than they can afford, according to a report in June from Harvard University‘s Joint Center for Housing Studies—and the problem gets worse at the lower end of the income spectrum. About 10 million renter households earn 30 percent or less of the area median income, accounting for a quarter of the renter population. The U.S. would need to add more than 7 million cheap apartments to meet demand from such extremely low-income renters, according to a recent report from the National Low Income Housing Coalition.

“If we want to prioritize closing the gap for low-income households, we’re going to need more funding from public subsidy,” said Erika Poethig, director of urban policy initiatives at the Urban Institute, which published an online simulator Tuesday for the purpose of illustrating the challenges to building new affordable housing. Our Denver developer above is fictional, but he's an illustration of what that simulator churns out: No matter how you slice it, creating the affordable housing needed today probably requires government help.

With the interactive tool, users can play developer, toggling their costs and expected revenues in an attempt to make a project "pencil out," a real estate euphemism for profitable, adjusting everything from rent levels and vacancy rates to debt service coverage, administrative expenses, and construction costs. The data underlying the project comes from a handful of recent affordable housing developments in Denver, a fast-growing city in the middle of an apartment-building boom that has increased costs for developers of market-rate and rent-regulated buildings alike.

Building for such poor renters is never an easy task, and in the case of our Denver developer, the job was complicated by the his desire to build near a light rail stop to carry his residents into the center city.  That meant choosing a small site and limiting the number of units to 50, making it hard to count on winning federal tax credits to help fund the deal. He could raise rents so the average tenant is spending half their income on rent, but that would defeat the central purpose of the project. He could try to slash outlays for concrete and steel—but there’s only so far you can pare costs without running afoul of building codes or endangering tenants. Instead, he was forced to hunt for a development site farther from the city center, but also further away from people who needed the housing, not to mention their jobs.

Playing with the simulator, you quickly learn that there are only a few levers that truly affect a developer’s ability to finance a project. Taking a smaller fee or negotiating a more favorable loan can help at the margins; so can making the project so appealing to residents that no one ever moves out. To really reduce costs or raise revenue, though, there are just these options: Spend less on land, materials, and labor, or bring in more money by raising rents or finding new public financing.  But land, materials, and labor can only be cut so much (construction costs are effectively fixed by labor and commodities markets), and raising rents removes the "affordable" from affordable housing.

That leaves subsidies, the biggest of which is the low-income housing tax credit, which Congress funded to the tune of $7 billion last year. Even so, that program is more useful to developers building for higher wage-earners, said Linda McMahon, chief executive of The Real Estate Council, a trade group for Dallas-area real estate companies.  "Below 50 percent of area median income, you're talking about people who can only afford $500 or so in rent, and you really need another layer of subsidy to pay your [commercial] mortgage," she said.

Developers seeking to build for poorer renters sometimes start with low-income housing tax credits, then apply for additional funding from state or local governments.  Poethig also pointed to a new law that would let developers tap rental vouchers to fund new projects, as well as mechanisms by which local governments give builders publicly-owned land or development rights in exchange for a promise to build affordable units.

There's also another way to create housing for the poorest renters, which is to build housing for higher wage-earners, freeing up older, lesser-quality units through a process called filtering.

"It's not always politically attractive, because you're talking about housing that has deteriorated a bit," said Reihan Salam, policy fellow at the National Review Institute.  "That's basically how housing markets have always worked."

The cost of affordable housing: Does it pencil out? 

Internet retrieval – article from the Urban Institute, 2016.  The Assisted Housing Initiative is a project of the Urban Institute, made possible by support from HAI Group, to provide fact-based analysis about public and assisted housing. The Urban Institute is a nonprofit, nonpartisan research organization and retains independent and exclusive control over substance and quality of any Assisted Housing Initiative products. The views expressed in this and other Assisted Housing Initiative commentaries are those of the authors and should not be attributed to the Urban Institute or HAI Group.

Copyright © Urban Institute July 2016. View this project on github


There is not enough affordable housing in the United States. For every 100 extremely low income households, there are only 29 adequate, affordable, and available rental units. That means two parents who both work minimum-wage jobs might wait years to find a safe, affordable place to live with their two kids. With such high demand, why aren’t developers racing to build affordable apartments?

It turns out building affordable housing is not particularly affordable. In fact, there is a huge gap between what these buildings cost to construct and maintain and the rents most people can pay. Without the help of too-scarce government subsidies for creating, preserving, and operating affordable apartments, building these homes is often impossible. This tool helps explain why.

Why is there a gap?

Development costs a lot of money. Developers rely on loans and other sources to fund construction before people move in and start paying rent. But developers can only get those loans and equity sources if the development will produce enough revenue to pay back the loans and pay returns to investors. The gap between the amount a building is expected to produce from rents and the amount developers will need to pay lenders and investors can stop affordable housing development before it even begins, leaving few options for the millions of low-income families looking for safe, affordable homes.

The problem is even more difficult when you consider the poorest residents. In many places, the rent the poorest families can pay is too little to cover the costs of operating an apartment building, even if developers could build that building for free.

To illustrate this problem, we examined data from the Denver metro area, which is experiencing a growth in rental housing demand but is not a traditionally high-cost city. The rental housing conditions in Denver are largely representative of other US cities.


Buildings cost money to build: to developers, those costs are often called uses. The first major use is the land developers plan to build on, called the acquisition cost. In some cases, developers are able to use public land to develop affordable housing. But when that option is not available, there is little a developer can do to lower the land cost.

Simulate donated public land

The next major development cost is construction. While a developer could make some decisions to minimize construction costs, they are largely determined by market forces. Construction costs for the various Denver properties we analyzed ranged from $8.8 million to $17.6 million, making construction the largest single use.

A third use to consider is the developer fee. This fee is built into the calculation of the development costs because a developer uses it to pay all the costs of doing business: hiring staff, running an office, finding new opportunities, and more. After all, developers can't build if they aren’t going to earn any money from the project. Affordable housing developers can choose to defer a portion of the fee, leaving more money to cover development costs. The developers then recoup the deferred portion of the fee as rents are paid over time. This assumes, of course, that the gap is eventually closed, that the building is built, and that it operates successfully for years.

While these are three important uses a developer must account for, other costs include: design fees, construction loan interest, permanent financing fees, reserves, and project management fees.


To cover the costs of building and operating a housing development, developers rely on a number of different sources of money. One important source is debt. Developers borrow money from lenders based on the amount they will be able to pay off over time.

Though the current market affects the terms of the loan, it’s unlikely developers will ever get a loan big enough to close the gap.

To demonstrate this, we look at vacancy rates, generally an indicator of market strength. In a weak market, it might take longer to fill an apartment after a renter moves out, so you’d expect a higher vacancy rate. Repairs to an apartment in between occupants and other factors can also lengthen vacancy. Since the size of the loan is based on the future rent a building is expected to bring in, lower vacancy rates—and the resulting increase in income—should increase the size of the loan. Below, you can adjust the vacancy rate to see its effect on the gap.

Vacancy rate

Besides the loan, developers might fund development through tax credits or grants. These sources come with caveats, however. The tax credits a building is eligible for depend on how much it costs to create the property and on how much rent the developer plans to charge relative to the average income in the area. Additionally, federal, state, and local governments have limited amounts for tax credits and grants, so even if a development qualifies, funding is not guaranteed.

Closing the gap

Can we close the gap...with bigger loans?

It’s fair to ask at this point: if there aren’t enough grants or tax credits out there, why don’t developers just take out bigger loans to get the building off the ground?

In short, the lenders won't (and shouldn’t) let them. The size of the loan a bank will make depends on the project's net operating income (NOI), or the amount of money it expects to bring in from rent after accounting for operating expenses.

Lenders use NOI to calculate how much debt a developer will reasonably be able to pay off, accounting for interest and recognizing the developer still needs to have some cash flow to cover unexpected expenses.

But if the rent is set at rates that a working family can afford, that NOI is going to be quite low. It might even be less than zero if operating costs exceed revenue. The lower the NOI, the lower the size of the loan.

Can we close the gap...with more apartments?

So if you need a higher NOI to get a bigger loan, why not add more apartments to your building to increase the NOI? Though this will increase construction costs, some costs, like the acquisition cost and project management fee, may remain the same or increase more slowly, helping close the gap. You can see this to your right: the gap for the 100-unit building is proportionally smaller.

There are, however, some caveats. The first is a matter of economics. One of the big benefits of developing a building with more apartments is that tax credits might be more cost effective. But just because your project is eligible for tax credits doesn’t always mean you get them. Click the button below to see what happens when you don’t have the tax credit.

Tax credits for 100-unit building

The other caveats are practical ones. Consider, first, that adding more apartments is only useful if developers can fill them, which might be possible in larger cities but harder as you move farther away from dense urban areas. Additionally, creating large communities of affordable housing has its social and economic downsides, particularly if it unintentionally segregates low-income families from the rest of a community. It all depends on the scale and shape of the particular place.

Can we close the gap...with higher rent?

Charging residents more in rent might seem like an obvious solution, since it means higher property revenue, which leads to a larger loan. But when does affordable housing stop being affordable?

For a building to qualify for tax credits, the apartments must be affordable to families earning no more than 60 percent of the area median income (AMI). Additionally, many rent subsidies are targeted to extremely low-income families, or those earning less than 30 percent of AMI.

The current standard is that a family should pay no more than 30 percent of its household income on rent. Anything more is no longer affordable.

To make a unit affordable to an extremely low-income family of three, you could charge no more than $540 a month. You could charge up to $1,081 for a family of three and still qualify for tax credits, but now you risk shutting out extremely low-income residents, like a parent of two children earning $21,125 as a retail cashier.

Consider that in Denver, the AMI for a family of three is $72,100, so earning 60 percent of AMI means a family takes home $43,260; earning 30 percent of AMI means a family earns $21,630. A married telemarketer would earn $36,544 in Denver—slightly less than 60 percent AMI for a family of two. A person working full time but earning minimum wage, which in Colorado is slightly above the federal minimum, would be just above 30 percent AMI but still well below 60 percent.

Use the toggles below to see the effects of raising rent. You can choose to raise rent by either targeting higher-income (but still low-income) renters, asking renters to pay a larger portion of their income toward rent, or both.

60% AMI renters

50% of family income goes towards rent can we close the gap?

Subsidies are essential to closing the gap.

Changes to land use, to regulations, or in what and how we build all will help close the gap, but we won’t get where we need to be without subsidies.

Subsidies come in different forms. Some, like vouchers or rental assistance, help pay the rent, leaving tenants enough income to pay for other needs and making the property operate sustainably. Others, like tax credits, HOME funds, Community Development Block Grants, and housing trust funds help pay the costs of construction, development, or major repairs. No one subsidy can solve the affordable housing problem. Rather, a combination of programs including federal tax credits, state housing trust funds, local zoning decisions, and public land contributions can help affordable housing get built. To close the gap for affordable housing, especially for the lowest-income households, there almost always has to be assistance for both development and rental income over time.