Herald Square, 385 Congress St., Portland rendering
A rendering of the nearly $300 million Herald Square project proposed for 385 Congress St. in downtown Portland. It would occupy an entire block between Congress, Pearl, and Myrtle streets, and Cumberland Avenue, and have almost 400 upscale condos and more than 150 hotel rooms. (Courtesy Reger Dasco Properties)
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Members of the city’s planning board want to ensure that developers behind a massive multiphase hotel and condo project near City Hall adhere to the city’s affordable housing policy. 

Last week, the Planning Board unanimously approved a site plan for the first phase of a proposed development, a 12-story building at 385 Congress St. The first phase of the development would include a 179-room hotel with nine condominium units. 

But the proceedings triggered a larger discussion about inclusionary zoning, and how developers in the city have been able to find workarounds to affordable housing requirements. 

The project proposed for the block near City Hall is proposed in subdivisions. In total, it will include a hotel, 297 condominium units, seven retail units, a 5,100-square-foot restaurant, a recreation center and 330 parking units. The first phase of the development came in at nine housing units, one fewer than would trigger the inclusionary zoning requirement. Fathom Companies is slated to build the hotel units, while Reger Dasco Properties will build other phases of the project, including the nine condo units in phase one.

Planning Board Vice Chair Brandon Mazer raised a concern during the Feb. 14 meeting that dividing development into separate phases could absolve developers from adhering to the inclusionary zoning laws. The Board has previously discussed trying to ensure that developers can’t skirt the ordinance by subdividing lots with several nine-unit buildings, and Mazer wants to ensure the city and Planning Board are uniform in how they apply inclusionary zoning. 

“What I question is when and if the next phase of the project comes forward, whether or not they need to account for those nine units,” Mazer told the Phoenix in a subsequent interview.

The city’s inclusionary zoning ordinance requires any new development of 10 or more housing units to set aside 25 percent of total units as “workforce housing,” an industry term applied to units for renters whose income levels do not exceed 100 percent of the area median income. That requirement had been 10 percent until voters passed stricter standards as part of a 2020 referendum.

Despite this requirement, developers are allowed to pay a fee-in-lieu as an alternative to meeting workforce housing units. Those fees go into the Jill C. Duson Housing Trust Fund, which currently has $4.2 million in its coffers. That fund, which was created in the early 2000s, has a stated goal of increasing rental and homeownership opportunities for middle- and low-income individuals. 

But the trust fund is rarely used. It was last sought to help Avesta Housing purchase 48 units of housing for a housing project near Veranda Street, though that deal fell through

Since the ordinance was adopted in 2015, 14 out of 51 inclusionary zoning development projects in Portland, including hotels, have opted to pay into the fund rather than create workforce housing. Another eight projects that have indicated they would rather pay the fee, according to Mary Davis, the city’s acting director of housing and economic development.

Because Fathom Companies and Reger Dasco Properties have not submitted the next phases of the development, Mazer said it was possible the next phase could change, and therefore the number of housing units they propose could also change. The master plan was approved last summer.

Mazer has asked the city to put its interpretation in writing when the next phases of this project come forward. He wants to ensure the nine units that have been approved are included toward the total number of housing units in the next phase. 

Mazer is “not a huge supporter of inclusionary zoning,” but sees the job of the planning board is “to apply the standards whether we agree with them or not.”

City staff do not see a problem. The city’s planning and urban development office considers each phase of the project to be distinct, so these nine units won’t be factored in for future phases. The hotel at 385 Congress Street is required to meet the City’s Hotel Inclusionary Zoning requirements and will be required to contribute approximately $700,000 to $800,000 towards the City’s Housing Trust Fund, according to Kevin Kraft, the city’s deputy director of Planning and Urban Development.

Kraft said that the city’s recommendation for this phase of the project was consistent with their calculation of inclusionary zoning requirements. 

“We’ve looked at this extensively and we are okay with the determination we’ve landed on,” he said at the Feb. 14 board meeting.

Subdividing parcels is common and not specific to hotel projects, he told the Phoenix. There was some confusion created by the fact there is a master development plan for the entire site, but it is at site plan review where the housing units are considered for inclusionary zoning. The parcels are subdivided and have different ownership groups, Kraft said, so each phase warrants its own site-plan review.

Kraft said that the city would bring additional information forward for the next stages, per Mazer’s request.

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