In her victory speech on election night, newly reelected Gov. Tina Kotek said she will focus her second term on making key services, particularly housing “more available and more affordable.”
Yet one month earlier, the nine-member panel Kotek appointed to oversee billions of dollars in state housing funds approved what appears to be the most expensive subsidized housing development in Oregon history.
Specifically, the Oregon Housing Stability Council voted Oct. 2 to spend $30 million more on a project it first funded in 2022. That brought the project’s total cost to $56.2 million, or almost $1 million per apartment, for an affordable housing development in North Portland formerly known as Minnesota Place and now called Monarca.
At completion, the building’s 57 apartments, which will rent to households making 60% or less of area median income, will cost an average of $985,513 each.
For comparison: The median sale price this year for a single-family home in North Portland, where Monarca is located, is $481,000. That means the state could have purchased 116 detached homes for less than the 57 Monarca apartments will ultimately cost.
Approval of the added funding for Monarca on Oct. 2 came over the objections of two members of the council, which oversees Oregon Housing and Community Services, the state agency that funds low-income housing.
Council member Ed McNamara, a retired Portland affordable housing developer, registered his objection by abstaining from the vote, but not before saying: “It’s extraordinarily expensive…it’s astronomical.”
Another member, Javier Mena, the affordable housing manager for the city of Beaverton, also abstained. “It’s just way overpriced,” Mena said.
Despite the two abstentions, the other members of the council voted to support the project. Of those, three said they were concerned about the cost but voted to fund it anyway. Three others voted yes without objection, and one member, chair Mary Ferrell, was absent.
Every housing development is different, but the story behind Monarca is a yet another example of how, as OJP has reported, the state under Kotek’s leadership, has failed to meet housing goals, in part because it hasn’t met its own construction cost targets and continues to overspend.
The cost of building subsidized apartments is something over which the state has significant control because it writes the checks. OHCS has a biennial budget of $3.7 billion and employs more than 450 people whose primary job is to finance the construction and renovation of affordable housing across the state, with forgivable loans, tax credits, grants and federal funds.
It’s been four years since ground broke on Minnesota Place, which at the time was budgeted to cost $26 million, or $361,000 per unit. The project was half complete when work stopped in 2024 over a wage dispute.
The issue? Prior to the start of construction, the Oregon Bureau of Labor and Industries determined that the developer, Minnesota Place LLC, would have to pay prevailing (union) wages, which are significantly higher than nonunion wages.
But according to court records, that information was not conveyed to the general contractor, Lorentz Bruun Co., until midway to completion. That communication breakdown meant that Lorentz Bruun bid the project based on nonunion wages, leaving a multimillion-dollar shortfall when the company eventually learned of the BOLI decision.
The developer asked BOLI to reconsider. The answer was still no. The developer also asked OHCS to fund the difference between prevailing and nonunion wages. The agency said no. The project then became the subject of two lawsuits in Multnomah County Circuit Court embroiling BOLI, the developer, Lorentz Bruun and its subcontractors. As the parties have battled in court for the past two years, the building has stood unfinished and vacant.
In the meantime, wind and rain have whistled through the sections of the eight-story building shell at 1220 N Jessup St. that are open to the air.
Water that entered the building trickled down on thick floor plates made of mass timber, the engineered wood product Oregon’s forest products companies hope can buoy their industry. In addition, thieves visited the stalled project regularly, stealing whatever they could carry.
“It’s been nightmarish,” said Daniel Young, 43, who owns a home across the street from Monarca.
Mark Miller, an OHCS spokesman, disputed that the building has stood vacant because the state turned down an opportunity to make up the wage difference. Miller said the Monarca is a unique case: “The prevailing wage issue was one issue among many.”
Last year, OHCS decided to move forward and found a different developer, Hacienda Community Development Corporation, to finish the project.
Hacienda, a Latino-led nonprofit in Portland, reconfigured the space in the building and reduced the number of apartments from 72 to 57, in order to provide more two- and three-bedroom units. A new design brought the revised total cost to $56.2 million, which the council approved last month, over the objections of Mena, who worried that the deal was a “bailout” of a project the state might be better off abandoning. “If this project was coming in right now for funding under the current costs, there’s no way we would fund it,” Mena said.
McNamara, the other councilor who abstained from voting on Monarca, said the total construction costs would be “three times as much as we’re putting into other projects,” according to a recording of the meeting.
Mena and McNamara’s abstentions in the go-along, get-along culture of the Housing Stability Council constituted a jarring rebuke.
“I can’t believe they’re spending a million dollars a unit. […] To me, it’s a just crazy amount of money.”
Miller, the OHCS spokesman, said the agency sought to make the best of a bad situation “as the alternative was walking away from the investments that had already been made in this development, leaving it unfinished.” (OHCS officials expect the litigation over the stalled project to settle soon, which is a condition of Hacienda finishing the project.)
To be sure, the council faced a difficult choice. But the underlying issues are larger than just one troubled development; the original point of legal conflict was prevailing wage. As OJP reported, Lorentz Bruun has argued in court that Oregon law exempts affordable housing from prevailing wage requirements and that BOLI, under elected Labor Commissioner Christina Stephenson, has been misinterpreting the law. BOLI disagrees and said in court and to OJP it interprets the law as written.
Several affordable housing developers agree with Lorentz Bruun. They say BOLI has broadened its interpretation of projects subject to prevailing wage. Those critics have implored Kotek and the Democratic supermajorities that control the Legislature to address the effects of BOLI’s rulings, which drive up the costs of projects and yield less housing. Their pleas have so far fallen on deaf ears.
“I can’t believe they’re spending a million dollars a unit,” said Young, the homeowner who lives next to the Monarca. “To me, it’s a just crazy amount of money.”
Lucas Bezerra, a spokesman for Kotek, insists the governor wants to ensure the state spends housing dollars efficiently: “The governor plans to work with OHCS in the coming year to examine current costs of funded projects and further prioritize more impact with state dollars with regard to new housing production.”