Portland housing officials have proposed reviving a property tax break for developers who include affordable housing in their projects.

It's an effort to squeeze units with restricted rents from a landslide of development proposals that came in before the city started requiring such units in all large developments. That inclusionary zoning policy took effect last year, but a pipeline of about 10,000 apartments proposed ahead of the mandate aren't subject to it.

The incentive officials are seeking to bring back provides for a 10-year property tax exemption on all of a development's residential units in exchange for making 20 percent of the units affordable to households making 60 or 80 percent of the median family income. The developers still pay taxes on the land and any commercial space in the building.

Commissioners put off their decision until next week, but Mayor Ted Wheeler and two commissioners signaled their support for the proposal as one way to promote the types of affordable units that private developers haven't created on their own.

"We're actually helping them create units that will be rented," Commissioner Chloe Eudaly said. "Anything we can do within reason to help them deliver the housing we actually need is worthwhile."

The city, and other property-tax funded jurisdictions, would forego about $1.5 million a year in tax revenue if it finds enough takers in the development pipeline.

It's not clear how many developers would take advantage of the program; city housing officials estimate it could result in 100 to 300 discounted units based on earlier trends.

The MULTE program appeals to policymakers because it creates affordable units in market-rate developments. It does so at a lower cost per unit than building with public funds, and it uses tax dollars that haven't been collected yet. And the units give low-income households access to desirable neighborhoods.

But the units are only required to remain affordable for 10 years, compared to the 99-year affordability requirement baked into the city's inclusionary zoning policy, or the of up to 30 years under federal tax credits for low-income housing.

The MULTE program was had been popular among developers. Some had pushed for an expansion of the voluntary program as an alternative to a mandatory inclusionary zoning policy.

But it's not clear how many developers might be enticed into opting into the program now.

Mark Madden of WDC Properties has used MULTE in five apartment developments totaling 160 units, 32 of them with reduced rents. Madden doesn't have any projects in development that would qualify, but that the effort could promote more affordable housing units -- and perhaps boost some market-rate projects that otherwise wouldn't pencil out financially.

"I believe it's the best program, allowing developers the real estate tax abatement to make a project pencil for lenders," he said.

But another developer who has a pending application for development under the MULTE program suggested it might be less enticing today because the climbing price of construction materials, labor and land had narrowed developers' margins.

"Two years ago, we felt it was probably a net positive. We weren't getting fat on this, never have," said Guardian Real Estate President Tom Brenneke. "Today, it's a net neutral."

The city council will take up the issue again next week. It will also need the approval of the Multnomah County commissioners.

-- Elliot Njus

enjus@oregonian.com

503-294-5034

@enjus

Gordon R. Friedman contributed reporting.