Ritz-Carlton developer may again wriggle free of $7.8 million affordable housing fee

When developers broke ground on a half-billion-dollar luxury hotel and condo highrise in 2019, developer Walter Bowen and local officials boasted the project would contribute the largest investment in affordable housing Portland had ever seen — $8 million.

“Because of the condominiums, this will go to the affordable housing fees that support the Portland Housing Bureau mission,” Bowen said. “Very important, and a very big addition to the city’s coffers.”

Using “Ritz-Carlton” and “affordable housing” in the same sentence may seem like a contradiction, but a city program launched in 2017 made the connection possible — at least in theory.

With recent news of the project’s lender mulling foreclosure, the developer could avoid paying long-delayed fees for good. The foreclosure process could sidestep the end-of-year deadline.

The Ritz-Carlton came to Portland in 2019, just before the COVID-19 pandemic disrupted lives all around the world. As the city’s housing costs soared, along with homelessness, the project faced widespread criticism. It became a symbol of the contrasting priorities between the ambitions of wealthy investors and Portlanders who just needed an affordable place to live.

Low-income Portlanders received some consolation. The city required developers of the Ritz-Carlton project, called Block 216, to build and maintain 26 affordable units, ranging from studios to three-bedroom apartments, as a portion of the building’s 132 condominiums and 251 hotel rooms.

When the city reached its first agreement in 2021 with Block 216, Bowen promised the building would include the affordable units. That meant the developer would not need to pay a fee to meet standards under the city’s zoning code.

By 2023, Block 216 investors opted to take a different route: Pay a fee instead of building the required affordable housing. That fee, calculated by square foot, plus interest, totals nearly $7.8 million. It’s due Dec. 31, 2025, according to the developer’s contract with the city. Under normal circumstances, the city would require a developer to pay the fee at the time construction begins, but since Block 216 switched its plans after construction began, the contract amendments allowed investors to wait six years after the project broke ground.

Now, a bevy of legal obstacles could delay when the city sees the Block 216 money — if it comes through at all. The project’s lenders are threatening to foreclose on its $503 million construction loan, and Block 216 may be exploring new legal avenues to avoid paying the fee.

Ready Capital, Block 216’s construction lender, said it may be forced to foreclose on the building, since the Ritz-Carlton has sold just 8% of the building’s 132 condos and leased only 23% of its office space, as first reported by Willamette Week. The foreclosure creates uncertainty about how the city may collect those funds.

Gabriel Mathews, spokesperson for the Portland Housing Bureau, said the bureau is reviewing the potential impact of foreclosure with the city attorneys.

Brian Owendoff, representative for Block 216 and CEO of BMO Commercial Real Estate, declined to answer Street Roots’ questions asking why Block 216 changed course and refused to build affordable units, how the potential foreclosure impacts payment of the fees, and if he still supports the city’s efforts to build more affordable housing.

“No comment,” Owendoff texted in response to repeated requests for an interview.

As city officials search the couch cushions hoping to find enough change to balance this year’s $93 million budget deficit, a multimillion-dollar bill due at the end of 2025 may look like a goldmine. But even if Block 216 pays up within the fiscal year, the money won’t help with the city’s budget woes.

“Fee-in-lieu funds go to a restricted pot of funding that is used to help fund affordable housing development as well as support administration of the IH program,” Mathews said. “These funds do not go to the general fund.”

Portland’s Inclusionary Housing program started in 2017 as part of the city’s effort to add 63,000 housing units by 2045 for low- and moderate-income households — people making less than 80% of the federally determined median family income. The Portland Housing Bureau administers the program, which requires all new developments with 20 units or more to include either 10% of units affordable at 60% or 20% of units affordable at 80% of median family income.

Since its launch, nearly 1,200 affordable units have been built or are in progress through Inclusionary Housing — units that would otherwise be market rate through private development. Collected fees do not fund Inclusionary Housing units like those Block 216 declined to build, but funds are invested in other Portland Housing Bureau developments. On average, the bureau contributes $150,000 toward each of those affordable housing units, according to Mathews.

The Inclusionary Housing program has faced scrutiny as well. While the program created new housing opportunities for moderate-income households, a May 2024 auditor’s report noted it was not increasing opportunities for people with the greatest income disparities — namely families making closer to 30% median family income, or MFI.

“Because program eligibility and rents are tied to the Portland area’s MFI, if the area continues to get richer, the program’s income limits and maximum allowable rents will rise,” the report said. “The expanded eligibility and rent increases may make Inclusionary Housing apartments less accessible to households whose incomes have not risen at the same rate.”

An August 2024 Street Roots analysis found that 30% of the units built under the program come within $6 of fair market rate. And while the program also allows developers and landlords to save millions of dollars through tax exemptions, the city cannot say how much revenue it has surrendered to developers since the program began.

The Block 216 project is just the second development to forgo the Inclusionary Housing units and pay a fee-in-lieu. The Watermark at the Pearl, a luxury senior living facility which opened in 2023, paid over $4.2 million to bypass building the affordable units. The building, valued at $115 million, is an 18-story structure including 140 units, with rents for those who don’t need medical or other assistance starting at $5,800 per month.

Under Inclusionary Housing, maximum rent for an individual making $50,000 annually is $1,239, and $1,652 for an individual making $66,000 annually.

Since the project’s inception, the city and Block 216 developers agreed the new building would contribute to the city’s affordable housing stock in one way or another, whether on site or with seed money for future projects. Instead, the city may be left holding a 35-story downtown building and a money bag, both empty.

Correction: A previous version of this story failed to distinguish which developments Inclusionary Housing fees pay for. The bureau contributes $150,000 on average to each affordable housing unit it develops, but does not contribute that amount toward each affordable unit built by developers in compliance with the city’s Inclusionary Housing rules. An earlier version of the story also misspelled Gabriel Mathews’ name. Street Roots regrets the errors.

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This article appears in April 16, 2025.