Eugene’s downtown housing dreams collide with realities

In January, newly sworn-in Eugene Mayor Kaarin Knudson declared a push by the city to build 1,000 new units of downtown housing over five years.

We’re now one year into that effort. And it’s clear something needs to change. 

No new downtown housing is close to breaking ground as the calendar turns to 2026. That’s not the fault of Knudson or any individual policymaker. And it’s not because of a lack of demand: Seven large apartment buildings are in various stages of preconstruction planning, from the downtown core to the riverfront to the 5th Street Public Market. Building all of them would add roughly 800 housing units, leaving the city just a project or two away from its goal.

But five of the seven are currently stalled — including four riverfront projects the city spent more than a decade and tens of millions of urban renewal dollars preparing for.

What should city leaders do to get these projects off the mat? Doing nothing is certainly an option, though not a good one.

Here’s some unsolicited advice to city leaders: Figure out, to what extent, the following three factors are making it so difficult to build housing downtown. Then, figure out what can be done about each.

1. The economy

This is admittedly the easiest one to diagnose, and the hardest one to do anything about. Three years of high interest rates have added significantly to builders’ costs, making market conditions especially crummy for the kinds of small to mid-sized developers planning the downtown Eugene projects.

Funding issues are hampering the local development group that’s been trying for four years to build one of the seven proposed projects: a six-story apartment complex across Willamette Street from the Lane Transit District Eugene Station. Despite the city’s approval of property tax breaks and permit and fee waivers worth millions of dollars, it’s unclear if the project will ever be built.

2. State policies

Here’s where some increased lobbying by city officials could move the needle on downtown housing.

Oregon faces myriad challenges, from home affordability to stagnating wages to the effects of climate change and the state of K-12 education. But I have to wonder if, in an effort to address all these challenges, it’s not addressing any of them particularly well. That’s why Eugene leaders should ramp up pressure on state lawmakers and Gov. Tina Kotek’s office to prioritize Oregon’s housing emergency over all others.

That might include waiving some environmental regulations, like the state requirement that developers whose projects create new parking pay to cover at least 40% of the lot with shade from mature tree canopies. It can cost hundreds to several thousand dollars per tree to have them planted professionally. 

These kinds of regulations seek to address real problems, like the effect of heat islands created by uncovered asphalt. But a housing-first approach to policy setting may have to build in more flexibility. Maybe Eugene leaders could lobby lawmakers for exemptions to some environmental rules? Perhaps local builders, or those with portfolios below a certain size, could be spared some of these additional costs?

Then there’s the Downtown Riverfront project. In October, an attorney for the developers told Oregon labor officials that a state ruling on construction wages made the project “infeasible.” The dispute is over whether the developers should pay prevailing (union) wages to construction workers on the entire project, or just on the public infrastructure, such as streets, sidewalks and parks.

But for Eugene leaders, it’s the planning equivalent of a five-alarm fire. I would like for every worker to earn as much as possible. But Eugene has already spent or allocated about $52 million in Urban Renewal Agency funds to transform the riverfront. With so much at stake, sitting back and waiting to see if the developer or the state blinks first feels like a poor move. The city should be playing an active role in seeking a resolution to get construction back on track.

3. Local policies

Multi-Unit Property Tax Exemption (MUPTE). Accelerated Multi-Unit Property Tax Exemption (Accelerated MUPTE). Urban renewal. Downtown loans. 

The Eugene City Council could, as soon as next month, name a replacement for retiring Eugene City Manager Sarah Medary. Whoever succeeds her will have a chance to give a fresh set of eyes to the city’s toolkit of downtown housing incentives.

A decade ago, the council suspended and recalibrated Eugene’s downtown development property tax waiver, after deep-pocketed national developers took advantage of the tax breaks to build student housing that critics said would have been built anyway.

Market conditions are far different today. Smaller developers are struggling to break ground on projects, even with subsidies like the Multi-Unit Property Tax Exemption, known as MUPTE. The City Council has approved MUPTE waivers for all seven current downtown proposals.

Eugene’s next city manager should closely watch the two newest projects — a proposed 124-unit apartment complex at the northwest edge of 5th Street Public Market, and an 80-plus-unit complex on the “butterfly lot” near the Lane County courthouse — as they progress through the city’s Planning and Development Department.

He or she could also examine if parts of the Planning and Development Department are on the same page with each other when a major project enters the planning pipeline. Within the department, the city’s community development staff crafts its incentive policies, planning staff reviews projects to ensure their specifications meet local and state land-use policies, and building staff reviews building permit applications. Are there communication barriers between each team that could be broken down?

If the 5th Street Public Market and butterfly lot projects struggle to move forward, it won’t bode well for any developer trying to make a dent in Eugene’s downtown housing supply over the next few years.

And even if all seven do eventually get built, it won’t markedly lessen a housing supply and affordability crisis that extends far beyond downtown Eugene.

But regardless of whether you’re rooting for downtown housing, or oppose tax breaks for market-rate projects as developer giveaways, wouldn’t you expect some of them to be further along by now?