Massive Tax Increases to Meet Housing Production Targets Being Considered By Gov. Kotek’s Advisory Council

Comprising housing experts from across Oregon, Gov. Tina Kotek’s Housing Production Advisory Council, set out 59 potential solutions to meet her ambitious goal in a draft proposal that was completed in December. The final proposal will be submitted to Kotek on Wednesday, but there are council members who don’t expect the recommendations to vary from the draft proposal.

The measures are being considered to meet the governor’s housing production goal of 36,000 new homes a year. The experts on the council have suggested that massive tax increases could be required to meet these ambitious targets. The taxes being considered are five recommendations that could collectively raise more than $3 billion as a potential solution to the goals and would fund local infrastructure that is proposed to be completed by 2032.

Spokesperson for Kotek, Elisabeth Shepard, said that the governor will not propose any tax increases during this year’s legislative session. “The governor’s housing production proposal for the 2024 session is separate from the Housing Production Advisory Council recommendations,” she said. Kotek is awaiting the council’s final recommendations which are anticipated on January 17.

The draft recommendations include the following:

• $686 million by doubling the state’s fuel tax.
• $699 million by increasing all personal income tax brackets by 0.5 percentage points.
• $501 million by creating a 0.5% retail sales tax.
• $504 million by establishing a $1 per $1,000 real property tax assessment above Measure 5’s voter-enacted limits.
• $620 million by establishing a 0.5% payroll tax.

CEO of Rubicon Investments Daniel Bunn who is also a council member, reiterated that the tax increases are suggestions and are not intended to be implemented immediately or all at once. Acknowledging that some proposals had little chance of being approved, such as the request for a retail sales tax, he was unsure whether it was the right policy, or even politically feasible.

He indicated the proposals are intended to give lawmakers an idea of how much it will cost to meet the governor’s housing goal. He highlighted that the council will need to look at individual requirements, for example subsidizing system development charges which are the charges levied by local governments on housing developers to cover the costs of streets, sewer lines, parks, and other infrastructure that support new housing.

Vikki Breese-Iverson, Prineville State Republican and member of the housing advisory council does not support new taxes and did not vote in favor of them. She confirmed that most of the recommendations will need to go through the legislative process, but this would be difficult to move forward unless they are already included in the language of a 2024 session bill. Fellow Republican Sen. Dick Anderson of Lincoln City- who is also a council member, issued a joint memo with Breese-Iverson on Wednesday to legislative leaders on the housing committees which set out their priority recommendations.

They see six recommendations as vital housing production policies that they think will enjoy bipartisan support during the short session, including establishing a 90-day requirement for cities to process building permits, directing state funding to infrastructure, changing fee and grant structures to promote affordable housing development, creating new land development and redevelopment incentives and directing the Department of Land Conservation and Development to develop model development codes for different sized cities. “The best way to achieve these goals is to remove government-imposed burdens and increase some supply of land in the system,” the two lawmakers wrote in the memo.

Christine Drazan, the Republican nominee for governor who lost to Kotek in 2022, pointed out that Oregonians across the state are hurting from inflation and high housing costs. Drazan, founder of a centrist political nonprofit A New Direction felt that problems like housing supply and affordability won’t get solved with higher taxes.

Vice-chair of the House Interim Committee On Housing and Homelessness Sen. Mark Gamba- a Democrat from Milwaukie confirmed taxes would have to be addressed at some point not just to boost housing development but also to fund other local services. He is concerned that cities could start to have difficulty even maintaining the services that they currently provide because they just can’t afford to.

The council members hoped lawmakers would take up some of the other proposals more quickly and referred to a recommendation allowing cities a one-time expansion of their urban growth boundary to promote development. Several council members indicated that they are not convinced that new taxes will ultimately be necessary to achieve Kotek’s housing production goals.

Bunn voted for all the recommendations, feeling they’re all worth exploring, even though some are controversial, but indicated that everything on the table should be investigated in light of the fact that the housing crisis is a serious problem.