Atomic Orchard funds affordable Portland rents by halving its investors' dividend to 4%

Fast Company reported in November 2021 on the Atomic Orchard Experiment, a 58,000-square-foot, 49-unit building planned for a former car-repair and parking lot in Portland, Oregon. Kevin Cavenaugh, founder of developer Guerrilla Development, said: 'All you have to do to make affordable housing is charge less rent.' He argues that building austerely lowers the mortgage, and that just because a unit could rent for X does not mean it has to.

The financing is the trick. Skipping the federal subsidies developers usually use avoids bureaucratic hurdles that slow projects and add expense. He got impact-minded investors to accept a 4% dividend instead of the usual 8%; about $200,000 goes back into the building, subsidizing 12 of 49 units, with more converted each year as income grows. Market-rate units may rent for about $1,700, affordable ones for $950 or $1,000. There is no parking, which Portland does not require.

Cavenaugh planned to rent to low-income workers doing critical jobs, such as frontline social workers, which he checked with his lawyer is legal. The project was to break ground the following February. The article cautions there is no guarantee that future owners will not raise rents.

Subsidy programs come with approvals and rules that add months and cost, so skipping them keeps the build cheap.

Investors who value social impact will accept a lower yield, and that gap is real cash.

Building austerely means a smaller mortgage, so lower rents still cover it.

With no parking, the project avoids a cost the city does not require.

If investors will take a smaller return, affordability can be financed inside the building's own cash flow, with no subsidy approval to wait for.

As of the report the building had not yet been built; groundbreaking was planned for February after publication. The article notes the affordability is not locked in if the building is sold or its owners change policy. It also reports that the firm's earlier 2020 crowdfunded single-room-occupancy building was built with a homelessness nonprofit, with another under construction.