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Strategies to Support Oregon’s Affordable Rental Housing Portfolio |
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Dear Partners,
We know that affordable rental housing owners and operators are under real financial strain right now, both here in Oregon and across the country. When expenses rise this sharply, owners and operators can be forced into impossible choices: deferring maintenance, cutting resident services, raising rents, or selling properties. Each of these outcomes undermines housing stability for the very people whose lives we aim to make better and more affordable.
We know that each of us is committed to getting this right for the communities we serve. Finding ways to bring down costs and protect homes by strengthening our rental housing portfolios so that we can serve the next generation will not be easy. We are hopeful we can make it happen.
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Last summer, Oregon Housing and Community Services (OHCS) published a portfolio financial analysis covering 748 properties and more than 47,000 units, which confirms challenges many of you have been working through. These pressures are not isolated. They highlight fiscal and structural challenges that worsened in the wake of the COVID pandemic and call for both short-term interventions and long-term strategies.
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Operating costs increased by 20% from 2021 to 2023, almost four times what was planned for by the industry. These cost increases are driven by inflation, labor shortages, and insurance premiums. Maintenance costs alone rose by more than 25% from 2021 to 2023, and tax and insurance expenses spiked nearly 17% just in 2023.
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Meanwhile, rental income only grew about 11% over this same time period, nowhere near enough to keep pace with the rising costs of operations. As growth in wages lag other costs of living, tenants who are already stretched thin fall behind on rent. This escalates evictions and leaves owners with rent arrearages that make an already challenging financial balance impossible to sustain.
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Loss of rental income from vacant units nearly doubled over these years. These trends are exacerbated in the Portland Metro area and reflect operating pressures that have driven decline in market rents, necessitating a downward adjustment on affordable rents and further challenging operational viability. Additional challenges in tenant referral processes, particularly for coordinated entry system referrals, are reflected in elevated income loss rates at permanent supportive housing properties.
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We will conduct this financial reporting analysis annually to provide ongoing insight on the financial and operational performance of affordable housing properties.
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Identifying pathways to solutions |
OHCS is accountable for ensuring taxpayer resources are delivering quality services and outcomes that Oregonians deserve. As partners, we are committed to meeting this challenge like every other challenge we’ve confronted – together.
OHCS is focused on understanding these challenges to identify actionable and impactful strategies. To be direct, there will not be enough resources to address all challenges with new funds, so we must pursue all potential means of support.
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- Resources: We have built out Property Stabilization Investments as a fund of last resort designed to support projects at risk and activate pathways to financial stability. We are excited to see this work progress and the material impact it will have on preserving affordable homes for thousands of units statewide.
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Reducing administrative burden: OHCS believes there is more we can do to further reduce administrative burden, beyond the flexibilities that currently exist. For example, we have heard from property owners and operators that:
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Waitlist requirement waivers would be welcome to support faster lease-up processes when there is a vacant unit. We see that projects already have flexibility in controls and approaches to their waitlist through the Tenant Selection Plan (TSP) adopted by the owner for a property. This means that properties are empowered to revise their TSP for waitlist management at the property level. Through the TSP, a property can design an approach that works best to support the property’s needs in balance with meeting applicable Fair Housing laws for waitlist management. We can provide technical assistance and training for TSPs to support this.
- Income verification flexibility would be helpful to lessen the cumbersome impact of these requirements. OHCS does not mandate a single method and follows U.S. Department of Housing and Urban Development (HUD) Housing Opportunity Through Modernization Act (HOTMA) hierarchy, which allows for alternatives such as pay stubs and self-certification. We are able to provide training on HOTMA standards for property managers to reduce confusion.
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Tenant recertifications can be costly, and it is challenging to require full income certification at the first anniversary as well as upon initial move-in. OHCS can do something about this. We will work to adopt a change to our policy for state programs and Low-Income Housing Tax Credits (LIHTC) so that full income certification will only be required at initial move-in, unless it is otherwise required by a federal funding source (including HOME and TBRA). The previous requirement for a full certification at the first anniversary will be eliminated, allowing self-certification thereafter for most 100% affordable projects. We will be sharing a Technical Advisory providing more information on this update for property managers and owners.
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Thank you all for engaging conversations that have helped identify these areas where policy change and additional training and technical support can provide meaningful ways to reduce administrative burden for properties. We will continue to support and evaluate pathways to right-size operating cost impacts across the state’s affordable rental housing portfolio.
As for next actions, we will be sending a Technical Advisory email on the policy update for income certifications. This update and other training for property management to support revisions to TSPs will be discussed at the monthly Portfolio Connect Call with owners and operators.
Your partnership and input are essential as we navigate these challenges together. Thank you for your continued commitment to providing safe, stable, and affordable housing for Oregonians.
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Andrea Bell, OHCS Executive Director
Natasha Detweiler-Daby, Director of Affordable Rental Housing
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Affordable Rental Housing Quick Links
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Accommodations
OHCS is committed to providing meaningful access. For additional accommodations, including translation, interpretation, or information in an alternative format, please contact us at 800-453-5511 or email housinginfo@oregon.gov.
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