Despite dozens of approved projects and strong demand for new housing, several major developments in Portland are stalled as rising construction and financing costs collide with the city’s inclusionary zoning ordinance, developers and city officials said during a November 6 panel hosted by the Portland Regional Chamber of Commerce.
The ordinance, approved by voter referendum in 2020, requires housing projects with 10 units or more to set aside 25 percent of units for lower- to middle-income households or pay an in-lieu fee of $182,830 per unit. Combined with higher construction prices and interest rates, panelists said the mandate has made some projects financially unworkable.
Jonathan Culley, principal of Redfern Properties, said his company has roughly 800 units currently on hold, including a 327-unit project on Washington Avenue and a 500-plus unit development planned for Kennebec Street. Redfern, which has built nearly a thousand apartments and condominiums in Portland since 2013, completed its most recent project, the 263-unit Casco building, in 2024.
Culley said neither of the newer projects will move forward under current conditions.
“It would cost us $15 million to the city right off the bat,” he said of the Washington Avenue development.
City planning director Kevin Kraft said Portland has approved more than 45 housing projects since 2020, including approvals for about 1,300 units this year. He pointed to recent zoning reforms under the city’s ReCode effort that allow greater density, height and flexibility for multifamily housing and accessory dwelling units.
“So ReCode has unlocked a lot of potential,” Kraft said, referring to the ordinance at the center of the debate.
Still, Culley predicted few new projects will break ground in 2026 or 2027 unless the inclusionary zoning ordinance is changed. The soonest the ordinance can be reviewed is early 2026, under terms of the referendum. Kraft said a state grant will support a data-focused review of the rule.
Panelists also cited ballooning financing costs as a significant barrier. Culley noted that when his firm closed on the Casco project, it secured a 12-year loan at 3.5 percent interest. Today, similar financing would be at more than 6 percent.
“That’s over a million dollars a year just in interest rate costs,” he said, adding that it would require a rent increase of roughly $350 per unit per month.
Other challenges include regulatory costs, building code requirements and rising pressure from neighborhood groups opposed to large developments. Todd Morse, president of the Urbanist Coalition of Portland, said changes to building codes, including allowing more single-stair designs and increased use of mass timber, could help reduce expenses.
Culley, who serves on the city’s Social Housing Task Force, said Portland will continue to see strong housing demand driven by factors such as climate migration and growth associated with the Roux Institute. He characterized the shortage of affordable and available housing as both an economic and humanitarian issue.
“We have people sleeping outside,” he said. “And it’s affecting our downtown business community. We’re actually hurting the people we’re trying to help.”
