A new issue faces Portland. City Hall is considering waiving development fees for developers of market-rate housing in the Old Town Chinatown district. Chinatown is Portland’s oldest neighborhood and has earned an unpleasant reputation. City Hall claims that waiving these fees, which cover a project’s impact on urban infrastructure, can stimulate building in Chinatown. In the past, only developers of so-called “affordable housing” have been granted this waiver.
Critics argue that this is an expensive subsidy for big businesses which aren’t providing affordable housing. However, they assume that market-rate rent is permanent, no matter how much housing is built. This may not be true. As the supply of market-rate apartments increases in Chinatown, the market rate can be expected to decrease. Essentially, housing is made affordable by supplying more of it.
Waiving fees deprives certain city bureaus of funds; but perhaps these funds could be better spent, in this case, by private developers. If the City wishes to revitalize Chinatown, it needs to encourage more people to live there, and the best encouragement is lower rent. This can be accomplished by decreasing development fees and encouraging construction. More housing and lower rents could be good for Portland.
Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.
