Changing the Use of a Building Triggers a Hidden Cost

It’s not just projects in Astoria, of course, that are running into challenges in front of the Bureau of Labor & Industries.

In Salem, nonprofit developer DevNW wanted to replace a shuttered church with 18 units of affordable housing. DevNW kept the church’s exterior walls and built the new units inside.

BOLI rejected DevNW’s request for a prevailing wage exemption, ruling in 2022 that the project “did not meet the definition of ‘residential construction’ because the project includes the renovation of a church building, which is neither an apartment building or a single family home.”

In recounting this Kafkaesque denial to lawmakers in 2023, DevNW executive director Emily Reiman said the decision hit the project’s finances.

“BOLI’s denial of this exemption added $870,000 to the project cost,” Reiman said. (That’s nearly $50,000 per unit, a 13% increase.)

The project, since completed, got dinged because the structure in question was originally built for worship rather than as a living space.

The Salem Housing Authority could have warned Reiman what she faced. In 2021, that organization sought a prevailing wage determination from BOLI for the redevelopment of Yaquina Hall, built in 1948 as a dormitory for nurses at Oregon State Hospital.

During the intervening years, the building was converted to offices. The housing authority proposed to convert it into 52 affordable apartments—18 of them reserved for people with serious mental illness.

BOLI’s determination issued May 5, 2021: “While the project will be privately owned and will predominately provide affordable housing, the project does not meet the definition of ‘residential construction,’ because Yaquina Hall is an office building rather than an apartment building.”

“I was shocked,” says the Salem Housing Authority’s Jessica Blakely. “After that decision none of the housing authorities want to touch surplus public properties.”

That issue will also add costs to the conversion of empty office space to affordable housing around the state—based on BOLI’s rulings, any such project will have to pay prevailing wage.