UCP’s Proposal for Midtown: Don’t Sell
Ground-Lease Some of the Land, and Keep the Rest for Social Housing
Portland is currently weighing the future of the “Midtown” properties, a stretch of city-owned land along Somerset Street in the Bayside neighborhood. We believe redevelopment of Midtown presents a critical opportunity. The Urbanist Coalition of Portland recommends that the city retain ownership of the land and prioritize social housing.
Here’s our proposal at a glance:
Ground-lease parcels between Elm Street and Chestnut Street
Select lessee based on the following criteria:
Minimum of 120 housing units per acre
Target of 200 units per acre
Otherwise, select the proposal with the greatest number of homes
Set a rate around 3-6% of of property value annually, recalibrated to the property value every 15 years
Lease is terminated if project timeline goals are not met:
Planning approval: 2 years
Construction start: 5 years
Certificate of occupancy start: 7 years
Social housing on the parcels between Chestnut Street and Pearl Street
Construct in phases
Finance initial construction with a general obligation (GO) bond
After first phase of construction, pay back GO bond, replace it with a long-term loan, and reuse GO bond for second phase
The land should not be sold. It’s more valuable under public control.
Portland residents deserve a return on the investment that’s been made into the Midtown properties. Selling the lots would fetch an estimated price of just a few million dollars. Since the city spent $15 million to litigate and eventually reacquire the land, a sale would result in a net loss of public assets and funds.
Instead, we believe the best strategy for Portland is to retain the property under public control, ground-lease some of the land for immediate development under a long-term lease, and use the remainder for the public good, specifically social housing.
Our recommendation for Portland is as follows:
#1 Ground-lease parcels between Elm Street and Chestnut Street.
Under this plan, a developer would sign a decades-long lease – something like 75 years – and pay annual rent to the city of Portland. This rent can be negotiated for optimal usage. In exchange, the developer would construct a building on the land, which they would own and profit from during the lifetime of the lease. But after the lease ends, ownership of both the land and the building would revert to the city.
In addition to preserving public ownership, a ground lease would enable the city to better influence what can be done with the land being leased. Like a deed restriction placed on a private sale, a ground lease allows the city to stipulate specific uses. However, deed restrictions come with legal liability. We believe a long-term lease can provide private partners with the confidence and return they desire without limiting the self-determination of future Portland leaders and residents.
To encourage organic development and faster project realization, developers could have the option of proposing buildings on portions of the land, rather than leasing the entire lot.
#2 Private partners should be prioritized by how much housing they can provide and how soon.
With a ground lease, the city has the power to select lessees based on specific criteria. We suggest a target of 250 units per acre for the lots, in alignment with the original Midtown proposal of 800 units for the 3.25-acre site. We also propose a conservative minimum of 120 units per acre, based on numbers from other successful Bayside projects like the Armature (129 units per acre) and the Daymark (109 units per acre). More ambitious applications should be prioritized, and the city can choose the developer that proposes to build the greatest number of homes.
We recognize the need to build as soon as possible. This area of Bayside has long remained vacant, and the opportunity cost of missing housing has had a negative impact on the Greater Portland community. Therefore, we recommend timeline and land-use goals that, if not met, can terminate any future agreement. Our early recommendation is planning approval within 2 years, construction within 5 years, and certificate of occupancy within 7 years of project approval.
As for the rate that the lessee would pay, we propose around 3% to 5% of the property value annually, recalibrated to the property value every 15 years.
We believe that a ground lease model offers the best of both worlds. It allows the city and its residents to gain short-term revenue through rent, while maintaining invaluable equity in the land. It leverages private money in the near term to build housing that will eventually become city-owned apartments. It places immediate construction into the practiced hands of private developers, which helps ensure that something gets built soon. But, crucially, it doesn’t give up public ownership or public control.
#3 Reserve the parcels between Chestnut Street and Pearl Street for social housing.
We urge the city to reserve a portion of the land for publicly owned housing. We suggest the lots between Chestnut Street and Pearl Street for this purpose. By “social housing,” we mean that the city would own both the land and the buildings. We recommend hiring a developer to build this on our behalf, financed through a combination of private debt, general obligation (GO) bond debt, and private and public grants. Because GO bonds carry lower interest rates than market-rate construction loans, using this funding mechanism would allow the project to achieve greater affordability.
The GO bond would only be used to cover initial construction. To stretch our money as far as possible, we could construct expandable or smaller, densely spaced buildings in phases. Once the first building is complete, the GO bond would be paid back and replaced with a long-term loan similar to a mortgage, and the bond money could be reused for the next phase of construction.
We envision a mix of incomes including 100% AMI and 80% AMI. While it’s difficult to predict exactly how many units would be feasible and what income mix would be optimal, some recent analysis from Portland’s Social Housing Task Force shows that we could build a 60-unit project with an 80/20 split between 100% AMI and 80% AMI with a bond of around $20 million. The money from this bond could be cycled into new projects once this one is completed and the city retains ownership, creating a sustainable long-term source of affordable housing. Though 100% of AMI is relatively high, the more permanent affordability of social housing will make the units more affordable over time.
#4 Develop and lease the land with a focus on the greater urban fabric.
Housing is our number-one priority, but we strongly advise investment in sidewalks, bike lanes, and people-scaled development across the entirety of the parcel. Developers should be encouraged to incorporate street-accessible commercial space, placemaking, and urban greenery. The substantially sized Bayside Trail lots should be improved in conjunction with development. The city should ensure that Somerset, Elm, and Chestnut Streets embody complete streets for all users. In addition to improving the residents’ quality of life, these improvements would increase the land’s economic impact on the greater Portland area. When residents, regardless of their car access, have easy mobility within the city’s urban fabric, residents, private businesses, and tourists benefit. The people who live on this land tomorrow will be the people who patronize and operate the businesses across the entire peninsula and beyond. Residents and visitors alike will value the desirability & livability of these features.
Conclusion
It would be shortsighted and misguided to sell this valuable plot of land at an enormous loss. Rather, the city should take this as a golden opportunity to invest in publicly owned housing for Portland’s long-term future. As city residents and taxpayers, we would all benefit from the economic returns of annual ground lease payments, appreciating land value, and city-owned apartment buildings — both through direct social housing units and those we’d get as part of a ground lease. Beyond this, of course, there is also incredible public value to be gained from housing families on this land and creating a vibrant community over vacant lots. Portland shouldn’t give up this land for short-term revenue when we can invest in our long-term future.