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Developer escapes mandatory Inclusionary Housing by building in southeast suburb Milwaukie

It's official: some developers are setting up huge projects outside Portland's city limits in other suburbs to avoid the Inclusionary Housing affordable residential unit requirement.

On Tuesday Sept. 12, a new large project being developed by Guardian Real Estate Services was approved by a 5-0 vote at the Milwaukie planning commission in the southeast suburb of Portland.

Plans include 110 units, 7,500 square-feet of retail space, 78 parking spaces for cars, a fitness facility and a club room for residents. The building will have 7,190 square-feet of retail and commercial space on the first floor and 110 multifamily dwelling units on the top four floors.

"I'm born and raised in Milwaukie, and spent my first 18-20 years there," said Guardian Real Estate president Tom Brenneke. "I've been out of the city ever since, and kind of returning home to do a significant project."SUBMITTED: GUARDIAN REAL ESTATE, COURTESY SERA ARCHITECTS - The 110-unit Milwaukie project will include affordable units, even though Brenneke sought out a suburban plot to escape the City of Portlands mandatory Inclusionary Housing policy.

The project, so far without an official name, is located at 2036 S.E. Washington St.

"It's on one of the streets I walked every day as a kid, to me that's very exciting," Brenneke said. "I went to grade school at St. John's grade school a few blocks away. My mom worked in downtown Milwaukie, I used to walk to her office after school."

The lot is about 25,000 square feet of land at the old site of the family-owned auto repair shop Bernard's Garage, which closed on May 1.

"The stars lined up here: it feels really good," Brenneke said. "We're seeing gridlock traffic here in Portland, but if you look in a different direction, Milwaukie is a 10-15 minute drive and it seems pretty logical for the path of development."

It's in the historical downtown and so had to meet historic district guidelines.

"It's got housing bonuses for sustainable design, we're meeting all those," Brenneke said. "We're shorter than allowed: we're a five-story building total, so we've requested a variance."

Another detail is a setback of six feet for the top two stories that's required, but Brenneke requested a variance.

"We made a case and the city agreed we met the spirit of intent without actually setting back," Brenneke said. "We have a nice-looking building with lots of interest in it."

He hopes it'll bring new retail to the somewhat sleepy downtown area.

"We think we'll be positive in terms of new retail opportunities and certainly bring some housing to the downtown area, which is in high demand and not there now," Brenneke said. "We'll provide that housing and hopefully a level of activity that will spur additional development — that's our hope."

Why Milwaukie?

"No doubt about it that the inclusionary zoning rules in Portland have caused us, like others, to look outside the city limits for future opportunities," Brenneke said. "There's a disconnect between the land values and the expectation on land pricing, and the economics of the deal have change have changed with inclusionary zoning."

It's definitely easier to develop in the city of Milwaukie than in Portland right now.

"I mean it's simpler, it's more streamlined. I'm hesitant to have any conclusions but the initial signals are you have a generally pro-development culture in Milwaukie," Brenneke said. "They're very welcoming, they've been confident, capable and competent. You know they are excited genuinely about new things happening in their city and so while they have their processes — no doubt about it — the timeline from start to finish is substantially quicker. All in all, it's a substantially different experience."SUBMITTED: GUARDIAN REAL ESTATE - Tom Brenneke, president of Guardian Real Estate.

Brenneke is also developing Block 290, in the Con-way block master plan at Northwest 21st and Pettygrove in Portland, which was approved recently in August. It does have an affordable housing element although it went through the permitting process before the Inclusionary Housing policy took effect.

"I spent three years in the process in design review, iterations to the plan, arguments to the neighbors," Brenneke said of Block 290. "It took me three years versus this one (in Milwaukie) — start to finish, one year."

At Block 290, Guardian Real Estate essentially owns two full blocks there — one will go to the city to become a city park, and one will be the 200-unit apartment project. The neighbors caused Guardian to have to appeal to the City Council to get approval.

"I'm pre-IZ (Inclusionary Housing) on my block here in Portland. I have a three-year-old application so we have that inclusionary zoning, but it doesn't affect me," Brenneke said. "I signed up for the MULTE program here in Portland on my Block 290, I voluntarily went to 10 percent affordable to 80 percent area median household income in return for tax exemptions — I'm happy about it."

The MULTE program, the multiple-unit limited tax exemption, gives tax breaks to developments that include affordable housing, and is a program run through the Portland Housing Bureau.

"I'm all for affordable housing — that's half my business — I'm just not for doing it that way," Brenneke said. "I'm a big proponent of the multi program, the voluntary program. We've participated with that — at the east end of the Burnside Bridge, that 21-story tower (the Yard) was our tower."

He's also planning to include affordable housing units at the Milwaukie project.

"I was planning to do as many as I could with that (MULTE) program — but forced affordable is a different story," Brenneke said. "The proof is in the numbers. All you got to do is look at new intakes for permits since the February date: there's basically nothing."

The project's groundbreaking is anticipated for January 2018, with an expected 14-month build time.

"We should all be very concerned that this (Inclusionary Housing) program is backfiring," Brenneke said. "It's well-intended, but it's not going to do what they want: it's going to be a long period, it appears, of no new applications."

By Jules Rogers
Reporter, The Business Tribune
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