What’s Ahead for Oregon’s Affordable Housing Shortage? Ernesto Fonseca Weighs In

In 2017, Ernesto Fonseca moved from Arizona to become CEO of Hacienda Community Development Corporation (CDC) in Northeast Portland. Since then, he has made a visible impact on Oregon’s affordable housing supply and statewide conversations about how to increase it. Hacienda, a nonprofit, has developed 13 apartment communities throughout northwest Oregon; serves more than 3,000 residents and clients with services for youth and families, first-time homebuyers and small businesses; and recently opened a mortgage-lending division. In 2023, Fonseca received the Portland Business Journal’s Landmark Community Champion Award for “significant service in advancing affordable housing and community building in our region.”  

Hacienda’s mission — to provide not only affordable housing but also the educational and economic opportunities that low-income families and individuals need to thrive — is personal to Fonseca, who grew up in poverty in central Mexico. He came to the United States in 1998, where he received a doctorate in environmental design and planning from Arizona State University. He is optimistic that in 2024, Oregon will make tangible progress to tackle its housing challenges but says that won’t happen without greater urgency: “This housing crisis is never going to go away if we don’t do more production. That’s the bottom line.”  

This interview has been edited and condensed for space and clarity.  

OCF: Portland families who are eligible for affordable housing (typically, those earning 60% or less of the area median income, or $67,680 for a family of four) will wait 1-2 years before a unit becomes available. This lack of supply creates instability for adults and kids and helps explain why Oregon has the nation’s second-highest rate of unsheltered homelessness. What keeps us from building more housing, faster?  

Fonseca: I say this with a lot of caution and respect for planning professionals. I am a planner myself. But I would say that we rely in the state of Oregon on process, and process is not always your friend. Process can be a serious handicap when we’re trying to tackle an issue that is really an emergency — in this case, housing.  

I have been on several committees, including the Governor’s (Housing Advisory) Production Council and the (Portland) Central City Task Force committees on housing and homelessness, and process continues to be, for me, one of the biggest challenges to deal with. Not because I don’t want other people to give us input or to make decisions, but when everything becomes about consensus, it’s just very complicated. I cannot get my two kids (ages 16 and 18) to agree on a restaurant when we’re in the car. Imagine (getting) 20 people to agree to something — what level of care, or housing, or this or that. 

In this state, many (government officials and employees) haven’t taken this issue seriously. Everybody says the housing crisis is a big issue. But we haven’t acted like that.  

We have to...avoid all of these kinds of childish issues of, “zoning doesn’t allow it, we need to apply for a variance, we have to do this and that.” I know this comment is not going to be popular, but it’s true.  

You worked with OCF as a Community Advisory Board member for Project Turnkey. What was the biggest lesson from its success? 

The biggest lesson was that OCF and many organizations can be lean, can be fast. And we can make decisions without extending our process into a huge, convoluted, complicated decision-making matrix. We allocated those funds immediately. And we created (1,382 shelter units) in record time. I would say to the state, and OCF and Meyer (Memorial Trust) and Murdock (Charitable Trust) and anybody else paying attention, we should do this a lot more. We should allocate the resources to those that can deliver the resources in time when they’re most needed. 

What needs to happen to reduce the barriers that slow housing production?  

The biggest issue with planning codes is they are developed locally, so it’s one case at a time. And it’s very, very problematic for us to be able to change those systems...I haven’t seen a lot of movement on that. I am hoping that with incentives (from the state) and the plan that we’re rolling out with the Governor’s (Housing) Production Council, there will be a lot more cooperation. Obviously, government officials want to see it. I don’t see our elected (officials) as part of the issue, although they could be pressuring the planning departments to make changes. And then we can start production in a more significant way. 

Oregon has a current shortage of about 140,000 units of affordable housing. Apart from your planning and process concerns, what do you see coming in 2024 to alleviate the shortage? 

Modular housing and mass timber take center stage: In the affordable housing world, traditional construction takes us about four years to build...For Oregon to make a dent in the housing shortfall, we need to think about different solutions (like) mass production — and that that’s where modular housing comes into play. We’re going to see it taking center stage this year as a tool to make a big dent in this issue.  

The Legislature allocated $20 million during the 2022 session for support for mass production of modular housing. They are not calling for any specific kind of materials, they just want to see modular housing. However, mass timber is a material that we’re trying to expand consumption of, so we can reactivate the timber industry a bit in Oregon and the Northwest.  

(Hacienda has developed mass timber modular homes and) is one of the applicants for that funding. Once we know if we have received the award, we’re going to get into implementation of those houses and refining those designs, based on the lessons we learned (from Hacienda’s Mass Casitas pilot project). 

Market rate developers move into affordable housing: I think we’re going to see a slowdown on market rate production and an uptick on affordable housing, which will be impeded a little bit by a lack of funds for long-term financing.  

For many market rate developers, those apartments are not penciling for them because interest rates are quite high...We’re seeing more private developers approaching us and other nonprofit affordable housing developers to help them turn those (market rate) units into affordable housing. But in order for us to turn these products into affordable housing, we need some kind of subsidy. Not for construction — the construction cost is the same whether it’s market rate or affordable housing. But subsidy for the long-term financing of subsidized rents. So, we’re hoping that the Legislature will allocate significant resources (for that).  

Greater focus on behavioral health housing: (We have a lot of) residents being housed in affordable housing (without the) behavioral health services that can help them succeed. We need to see more resources allocated to this space so we can actually be of some benefit to people that are suffering from issues (that can come from) leaving homelessness, or mental health issues, or addiction issues.  

Most of the residents that we are receiving through Multnomah County, who they are trying to house with good reason, most of these are acute cases that are difficult for us to understand because we’re not medical service providers. I would say that many of these future residents of affordable housing are no longer residents; they are patients. And if you have patients and you’re not a medical facility, it is extremely complicated for us to create a healthy environment for them and for the families living around them, who are struggling with poverty or some other economic issue.  

To give you an example, you have somebody overdosing on your hallway, and then a little girl comes out into the hallway in the morning with her parents and sees that, that is absolutely a traumatic experience for this family. It’s difficult for those parents to work and try to support their family in that environment, and at the same time, it’s difficult for us to provide the level of care that these patients need.  

(The government) needs to invest much more in assessing these future residents, so we can provide them with what they need — whether it is housing or a medical facility, or transitional housing of different types. 

Why should Oregonians care about housing instability if it doesn’t directly affect them?  

We need to provide stable housing if we are actually going to have a state that has a future that can be enjoyable for anyone. Providing stable housing can have significant positive impacts in terms of economic development, public safety, and overall community health and stability.  

When poor people or people with no resources do well, everybody does better. You can have a city where you can go out on the streets and be safe. My daughter, who is 18, doesn’t want to go into downtown (Portland) by herself. She doesn’t want to take the light rail there. All of these issues are impacting people with or without resources. 

Hacienda was founded in 1992 to provide housing and supportive services to the low-income, predominantly Latino/x community in Northeast Portland’s Cully neighborhood, but today it serves communities of color and low-income families and individuals, broadly. How has OCF contributed to Hacienda’s work? 

Hacienda CDC and Oregon Community Foundation have been partners, friends, collaborators and advisors for forever, and certainly that did not change when I arrived. Oregon Community Foundation has been supporting some of our after-school programs, they have been supporting us with some operating funds consistently. But beyond the funding, OCF has been a significant thought partner to finding solutions to many of the issues that we’ve been facing. I have to give big kudos to Megan (Loeb, OCF senior program officer for economic vitality and housing), who has been not only a good partner, but also a collaborator in inviting others to make decisions through the Foundation to fund many of these projects; (President and CEO) Lisa (Mensah); and many others across the ecosystem of OCF, including the many people who invest in OCF to bring solutions to the housing and homelessness crisis. I am hoping that we will continue to expand this relationship, not so much as funder and (grantee), but as collaborators and partners in finding solutions. 

What more can Oregon’s philanthropic organizations do to help the state overcome its toughest challenges, including housing?  

Philanthropy has a huge opportunity to become not only a funder but a thought leader and a convener in these spaces. It has a big microphone that can be expanded significantly...I am not suggesting that philanthropy gets into the business of policymaking. But a little bit of proactive, solution-driven advocacy around issues that pertain to everyone, that are affecting the entire economic development and social cohesiveness of the state, I think that is very, very appropriate... And OCF in particular has the great advantage of being the “community” foundation, right? You have people representing different sides, all corners, of the state. OCF can convene all of them, and then you can work with other foundations. By utilizing that power, not just of money, but of that voice that OCF has across the state, it could play a significant role to change things for the better. 

Is Oregon still a place of opportunity?  

Absolutely. It’s not simple to see that opportunity when times are difficult. But I can tell you that, at least from the Latino point of view, that’s all we see. When you come from a place with a lot more scarcity, when you come from poverty, when you have a struggle — including myself— for years to become something, all you can see is opportunity.  

Oregon is a beautiful state that has offered me that platform to succeed. That doesn’t mean that I haven’t done my part. Opportunity is not something you take. It is something you earn. You show up for others, they will show up for you. And I think that that happens in every stratum of our economic engine in this state and for that matter, across the United States.  

We had to reschedule the original date for this interview because you had to respond to a devastating fire at the Portland Mercado, a hub and incubator for small Latinx-owned businesses, which Hacienda developed. What should we know about the damage, and how can people help?  

The damage is terrible. Inside, everything is destroyed.  

Right now, our main priority is not the market (building) itself, but to stabilize the small businesses that were left basically business-less. The Portland Mercado supports over 100 people directly, from the (commissary) kitchen that provides the opportunities for people to cook, package and deliver their goods, to everyone that owns a business at the Portland Mercado and their employees.  

Our goal is to help all of these individuals to not vanish, to stay solvent, to relocate them for some time, and to reopen the food court with the food carts as soon as possible [Editor’s note: The carts reopened for take-out on Jan. 26]. 

(Later) we are going to focus on the actual building...It will take us about a year to rebuild from redesign to structures to permitting, and then construction. We’re going to bring the Mercado back. And bigger and better and stronger than ever.  

We’re going to need the support not only of philanthropy but the greater community for us to see that come to fruition. The insurance claims won’t cover what we need to do. We will be engaging in a greater fundraising effort once we have a solid plan of what the Mercado needs to be. 

What gets you up in the morning?  

I wake up every single day thinking about how we can make things a little better or fix something. I enjoy it. My family tends to think that I like crisis. Maybe I do (laughing). But I do enjoy this work tremendously.