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1. What’s happening at 1059 Willamette Street?

The building was originally constructed as a Montgomery Ward department store. Lane Community College (LCC) used it as its downtown educational center from 1979 until 2012. LCC vacated the property when it moved to its new building, the Mary Spilde Center, at 10^th Avenue and Olive Street.

The City of Eugene bought the building from LCC in April 2020, with the intent to redevelop it into mixed-income housing. The City has identified resources that could be directed to support project and issued a Request for Proposals (RFP) for mixed-income housing. We received one proposal in response to the RFP. City Council is scheduled to vote whether they would like to move ahead with that proposal at a June 9, 2021 Work Session.

2. What is the proposed project?

The proposed project is a new 6-story building, called the Montgomery. It includes the following:

• 66 rental units are ‘income-qualified’ and available to households at 80% of Eugene’s area median income (AMI), a federally defined criteria.
• 63 rental units that are ‘market-rate’, which means there is no income restriction.
• 10 of the income-qualified units will be set aside for victims of domestic violence, in partnership with Womenspace, a Eugene-based non-profit that provides women-centered services to victims and survivors of domestic and sexual violence.
• Resident services provided by Cornerstone Community Housing through their Healthy Homes program, which supports interventions and services that promote housing access, retention, and stabilization.
• The ground floor, facing Willamette Street and 11^th Avenue will include commercial space, offered at low rents and available to start-up businesses.
• A public gallery, with opportunities for community art displays, and an outdoor mural.
• Pet-care areas, to exercise and wash dogs. The building will welcome households with dogs.

The building will also include green building features and will be certified under LEED Multifamily criteria.

3. What is Affordable Housing?

In this FAQ, when we refer to “Affordable Housing” we are referring to income-qualified, subsidized housing for low-income individuals. This FAQ also generally discusses housing affordability. Housing is considered affordable when a household spends no more than 1/3 of their income on housing.

For information on the different kinds of subsidies used to support Affordable Housing, see Question 7. What are the tools available to support lower-income Affordable Housing?

4. Is this project considered Affordable Housing?

Just over half of the Montgomery’s units (51%) will be affordable to households with incomes at 80% of the Eugene’s area median income (AMI). The federal U.S. Department of Housing and Urban Development (HUD) provides annual updates of income levels and allowed rents for different household sizes. The proposed rents meet the federal definition of affordable for households at 80% AMI.  HUD’s 2020 income definition of 80% of AMI for a single-person household is $39,200, which is the annual earnings for a full-time worker earning $18.84 an hour. The Oregon Employment Department shows that housekeepers, retail clerks, and security guards, and many other job types, typically earn this wage.

This is different from other Affordable Housing projects in Eugene, which are available to households at lower income levels, typically 60% AMI or below. The project at 1059 Willamette targets households with incomes at or below 80% AMI. These households would be ineligible for Eugene’s existing Affordable Housing developments, yet many are housing cost burdened, which means a household spends more than 1/3 of their income on housing.

5. What is the City of Eugene contributing to this project?

City Council will make a final decision about the public investment in this proposed project at a future work session. City Council is considering approving the use of these tools:

• The City would offer the property at no cost to the development team. The City bought the property from LCC in April 2020, through our land bank program, using federal Community Development Block Grant (CDBG) funds. These federal funds require that the property be used for housing, with at least 51% of the units be available to households with incomes at or below 80% of AMI. CDBG rules also require the property be available for occupancy by 2025, or the City risks having to return the funds. The City paid LCC $500,000 for the property. The property was appraised at $680,000 in 2019. 
• The City would offer $1.1 million to cover pre-development costs.The City’s RFP identified these funds as potential financial tools and asked that proposals explain how they would use the funds. The Montgomery proposal asked to use the funds to pay for system development charges, permit fees, and the EWEB connection fee. The funds would come from two sources:
  1. The Downtown Urban Renewal District would contribute $700,000. The Downtown Urban Renewal Plan identifies 1059 Willamette as a redevelopment project eligible for up to $3 million. There are limited funds available in the District, and funds have been committed to other projects, limiting what’s now available to 1059 Willamette.
  2. The MUPTE Moderate-Income Housing fund would contribute $400,000. The City’s Multi-Unit Property Tax Exemption (MUPTE) program expects to collect $400,000 in the fall of 2021.  Those funds are to be made available to support the development of moderate-income housing.
• The project would be eligible for a MUPTE. The City’s MUPTE program offers an exemption on property taxes, up to 10 years, for the assessed value of new residential units in the downtown area. The program’s intent is to encourage the development of housing in the downtown, a long-standing goal of the community. The project would be required to go through the standard MUPTE application process before Council could vote on their application, which includes a community Review Panel, neighborhood engagement, and demonstration that the project meets several public benefit criteria. Visit the MUPTE webpage for more information.

6. Why isn’t this project for households with incomes less than 60% Area Median Income?

Most of the financial tools and subsidies we have to support housing development are only available for housing that is affordable to households with incomes at or below 60% of area median income (AMI). Most of these tools are competitive, which means that each proposed housing development is competing for the funds against other housing developments. The financial demand regularly exceeds the available funds. Additionally, there are few tools available to construct housing for moderate-income households that earn between 60% AMI and 80% AMI—yet those households have difficulty finding housing within their budget.

The 1059 Willamette property is unique in that we had an opportunity to use a resource specific to this location – Downtown Urban Renewal funds. The proposed mixed-income housing project is an innovative use of local resources to create housing for people earning incomes at a level that makes it difficult to find housing that is affordable. This project is not using the limited federal and state resources that are available to lower-income housing, which will allow those resources to fund other housing projects in our community.

See Question 7. What are the tools available to support lower-income Affordable Housing? for information on Affordable Housing tools. See Question 8. Is the City doing anything else to create Affordable Housing? to learn more about how the City supports development for households with incomes less than 60% AMI.

7. What are the tools available to support lower-income Affordable Housing?

Affordable (rental) Housing is typically available to households with incomes at or below 60% of AMI and receives federal, state, or local development resources or ‘subsidies’ to be able to offer rents at that level.   In the Eugene area, some examples of Affordable Housing providers are St. Vincent de Paul, Homes for Good, Cornerstone Community Housing, and DevNW. The developers apply for public resources and leverage private funds to make developments happen.  It takes many partnerships and many funding sources to create new Affordable Housing.  The City provides specific subsidies to support housing development serving households with incomes at 60% AMI and below.  Rents in Affordable Housing are restricted so they are more “affordable” to low-income households, which generally means the household would spend less than 1/3 of its income on housing. The owner of the housing development collects less rent than in a market-rate housing project—however, the cost of construction is the same. In order to make Affordable Housing financially feasible, some financial subsidy must fill the financial gap between the cost of construction and the income generated from rents. If there is a gap, construction is not financially feasible, and the project will not move forward.

There are a variety of tools available to fill the financial gap. There are federal, state, and local programs. Most new Affordable Housing developments typically use multiple tools. A summary of the typical available tools is below:

Program	Description	Eligible Income Level
Low-Income Housing Tax Credits	A federal program that creates a tax incentive to construct or rehabilitate Affordable rental Housing for low-income households. Individual projects compete to receive these funds through Oregon Housing and Community Services (OHCS) and not every proposed project is awarded.	Available to projects targeting households at or below 60% AMI.
HOME Investment Partnership Program	A federal program that is administered through the Eugene-Springfield HOME Consortium, led by City of Eugene.  These federal funds can be used for acquisition of existing residential and non-residential building for conversion to Affordable Housing, or for new construction. The Eugene-Springfield Consortium awards funds through an annual Housing Request for Proposals.	Available to projects targeting households at or below 60% AMI.
Housing Development Grant “Trust Fund” Program	A federal program administered by OHCS directly to housing developments. The maximum funding amount for any one project is $500,000 per funding cycle. Individual projects compete to receive these funds and not every proposed project is awarded.	Supports development for households at or below 30% AMI.
General Housing Account Program (GHAP)	A State program offered to housing developments in partnership with other OHCS administered funding sources.	Supports development for households at or below 80% AMI.
Community Development Block Grant (CDBG) - Land Acquisition (Land Bank) program	A federal program administered by the City, the City uses part of its CDBG allocation to buy land for Affordable Housing developments.	Available to projects targeting households at or below 80% AMI.
CDBG Rental Rehabilitation program	The City uses part of its CDBG allocation to offer low interest loans to rehabilitate affordable rental housing.	Available to developments serving households at or below 80% AMI.
Low-Income Rental Housing Property Tax Exemption (LIRHPTE)	This local program offers a 20-year property-tax exemption for qualified rental properties.	Available to projects targeting households at or below 60% AMI.
City of Eugene Systems Development Charge (SDC) Exemptions	This City program offers exemptions for SDCs for Affordable Housing developments. There is an annual cap on available funds.	Available to rental housing developments targeting households at or below 60% AMI, and homeownership developments targeting households at or below 80% AMI.
Affordable Housing Trust Fund	The City of Eugene established this fund in 2019, funded by a Construction Excise Tax on new residential and commercial construction.    The funds for development are awarded through a competitive Request for Proposals process.	Available to projects targeting households at or below 100% AMI.

8. Is the City doing anything else to create Affordable Housing?

While the City does not own, operate, build, or manage housing, we collaborate with nonprofit and other partners to assess the City’s housing needs, determine strategies to address priority needs, and identify resources to implement the strategies. The City has worked with Affordable Housing providers to create and maintain Affordable Housing in the Eugene-Springfield metropolitan area.  As of April 2021, the City is supporting 9 recently completed or upcoming affordable housing projects with the use of federal HOME funds, SDC exemptions, or LIRHPTEs.

These 9 projects represent the creation of 385 new Affordable Housing units in Eugene in the past year or the near future: 100 units were completed in the last year, 115 units are under construction, and 170 are in the pipeline. Of these 385 Affordable Housing units, 126 are Permanent Supportive Housing (PSH), a model designed to provide housing and supportive services on a long-term basis to people who are experiencing homelessness. Of the 126 PSH Eugene units, 66 have been completed, 15 are under construction, and 45 are in the pipeline. The TAC report recommended adding 350 PSH units in Lane County (Eugene’s prorated share is 263 units) in five years with a focus on single adults.

Affordable Housing Project	Number of Units	Status
Market District Commons (6th/Oak)	49	Completed
Commons on MLK (2411 MLK Jr. Blvd)	51	Completed
Iris Place (1531 River Rd.)	52	Under construction
Sarang (1604 Taney St.)	48	Under construction
Keystone (13th/Tyler)	15	Under construction
The Nel (11th/Charnelton)	45	In the pipeline
Lincoln St. Apartments (11th/Lincoln)	59	In the pipeline
The Lucy (850 Hunsaker Ln.)	35	In the pipeline
Royal Ave. homeownership project (5220 Royal Ave.)	31	In the pipeline

Information on the City’s programs to address Affordable Housing can be found on the Community Development webpage. The City’s strategy to address Affordable Housing development using federal funds is guided by the Eugene-Springfield 2020 Consolidated Plan. See Question 7 What are the tools available to support lower-income Affordable Housing? for information on the City’s tools.

9. What are the proposed rents and how were they calculated?

The proposed Montgomery project is a mix of income-qualified and market-rate units. Because the City used federal CDBG funds to buy the property from LCC, at least 51% of the units must be offered at Housing and Urban Development (HUD) income and rent levels for 80% Area Median Income (AMI) households. HUD identifies income levels for different household sizes and the proposed rents are based on these income levels. The rents for the income-qualified units below are based on 80% AMI incomes for 1- and 2-person households.  For example, the 2020 income limit for an 80% AMI 1-person household is $39,200. For that person to not be cost-burdened, they must pay no more than 1/3 of their income on rent and utilities, which is $980 per month. The income-qualified rents below reflect the 2020 federal HUD income limits, minus an allowance for utility costs.

The proposal shows estimated rents for the market-rate units. These rents will ultimately be what renters in the market are willing to pay. The rents presented in the proposal are consistent with current rents for comparable properties in and near the downtown, also shown in the table below.

Proposed Units and Rents

Unit Type	Income-qualified units		Market-rate units		Current Rents In and Near Downtown*
	# of Units	Monthly Rent	# of units	Monthly rent
Studio	65	$894	0	n/a	$925-1,570
1 Bedroom	1	$956	58	$1,530-$1,590	$1,195-1,855
2 Bedroom	0	n/a	5	$2,300	$1,575-2,020

*Source: Apartments.com, April 2021

10. How do we know only households at or below 80% of Area Median Income will be able to rent the income-qualified units?

Income qualification is a standard process for Affordable Housing projects. All the households in the income-qualified units would have their incomes verified by the property manager at 80% of AMI or less at the time of moving in to qualify to live there. The development team includes both Cornerstone Community Housing and Affinity Property Management, who both have experience verifying income levels. As with other Affordable Housing developments, the City of Eugene would monitor the process to qualify the residents using the most current CDBG income limits.  

11. How long will these 80% AMI rents be maintained?

Because the City used Community Development Block Grant (CDBG) funds to acquire the site, the project is required to maintain 80% AMI income restrictions in at least 51% of the units for at least 20 years. This is called the ‘affordability period.’ The development team has committed to maintaining the affordability period for 35 years.

12. Who is the team that proposed the Montgomery?

The City received one proposal to redevelop 1059 Willamette. The team consists of:

• deChase Miksis: Developer based in Eugene, they have recently partnered with both Edlen and Cornerstone on Affordable Housing projects in Eugene and elsewhere in the northwest.
• Edlen & Company: Affordable Housing developer based in Portland with a long history of developing Affordable Housing at various low-income levels, and experience with mixed income housing.
• Rowell Brokaw: Architecture firm based in Eugene.
• Cornerstone Community Housing: Affordable Housing and resident services provider, based in Eugene.
• Affinity Property Management: Property management company based in Portland.

13. Why is Council only considering one proposal for this site?

The City received only one submission in response to the Request for Proposals. Given the challenges of redeveloping the site and meeting the rent requirements, it is not surprising that the City did not receive multiple proposals. This is a unique, challenging, and complicated project. There are challenges working with a constrained L-shaped site with a vacant, unmaintained building. It is difficult to construct buildings downtown, due to the tight physical space. In addition, the mixed-income housing model is complex. It requires an understanding of both the market-rate and Affordable-Housing development realms, including the knowledge of how to navigate federal Affordable Housing requirements.

Other developers in Eugene expressed interest in the RFP, and we asked why they did not submit a proposal. We learned that some had a lack of capacity to take on additional work. Others reported that they would be interested in the project if it had included the corner lot, but they were unable to acquire that parcel.

14. Why is the City pursuing a mixed-income housing project?

Eugene is facing a housing crisis and there is a need for housing at all income levels. By adding new, more affordable, below-market housing options, housing mobility is encouraged, which can relieve pressure on the stock of lowest income housing options that have the highest demand in our community. Additionally, the project provides a more affordable option for rent-burdened residents paying more than 1/3 of their income on housing, allowing them to reduce costs, save money, and work towards greater financial stability.

• Households at 80% of AMI are underserved.  There are very few available housing options for households earning between 60% and 80% AMI. In most cases, they do not qualify for existing Affordable Housing options. It is difficult to find market-rate housing that is affordable, leaving many at this income level housing-cost burdened. The proposed Montgomery project will create 66 new housing units for this income range, expanding the supply of moderate-income housing.
• We have a flexible financial resource to help meet this under-served need.  Affordable Housing projects, including mixed-income housing projects, face a financial gap due to the below-market rents. It costs more to construct the building than the revenue from rents can support. There are a number of Affordable Housing tools that can help close these gaps, but these tools require rents to be affordable to households earning 60% AMI and below. As described in Question 6. Why isn’t this project for households with incomes less than 60% Area Median Income?, most financial tools support housing for households at 60% of AMI. This project is using local financial tools that are not limited to closing the financial gap for Affordable Housing that is for households at or below 60% AMI. The City is using an innovative mix of financial tools to support a first-of-its kind housing project in Eugene. See Question 5. What is the City of Eugene contributing to this project? for a description of the financial resources proposed to support the project.
• Downtown Eugene has very little moderate-income housing.  There are Affordable Housing projects in the downtown (Aurora, West Town on 8^th, Olive Plaza, and Market District Commons) that serve households at or below 60% of AMI, there are student housing projects (Titan court and 13^th and Olive) and market-rate housing (Broadway Place, High Street Terrace, Gordon Lofts, and the Tate). But there are few opportunities to find housing that is affordable for moderate-income households. This project will create an opportunity to diversify income levels in the downtown. The Montgomery will create an opportunity for individuals who work in downtown restaurants, stores, or hotels to live close to those jobs and have easy access to the transit network.
• The City does not have financial resources to support the creation of housing with only income-qualified units at 80% AMI. Just under half of the units will be available at market-rate rents. The development team will use the revenue from the rents to cover the cost of construction. The rent from the moderate-income units will not generate enough revenue to cover the cost and would not be financially feasible.

15. Is it true that the City is giving $10 million to this development team?

No. The City is contributing public resources to the project, as described in Question 5. What is the City of Eugene contributing to this project? If City Council chooses to move forward with this proposal, the City would transfer the land to the development team at no cost and would apply $1.1 million to cover pre-development costs.

There is some confusion about the value of the property that would be transferred to the development team. The City had the property appraised in 2019 by Duncan and Brown, a real-estate appraisal firm located in Eugene. They estimated the value of the property at $680,000. That appraisal stated that the structure added negative value to the property—that is, the property would be worth more if it were a vacant lot.

The Lane County Office of Assessment and Taxation shows the property had an estimated real market value in 2020 of about $6.9 million. It estimates the land at about $0.9 million and the structure at about $6.0 million.  The Office of Assessment and Taxation reported that they last analyzed the building in 1994. Since that time, the property’s estimated real market value has been pegged to average commercial values across the county. Commercial property values have increased since 1994, and the Office of Assessment and Taxation simply applies the average growth rate to all commercial properties to this property. The property has been in public ownership since 1979 and is therefore tax exempt. The Office of Assessment and Taxation has not made it a priority to re-assess the value of a building that does not generate tax revenue. Because the building has not been re-assessed, the County’s real market value does not take into account the current state of the unmaintained building, the asbestos in the building, and the amount of investment needed to re-use the existing building. The Duncan and Brown appraised value is an accurate assessment of the building’s property value.