Developer, staff outline utility, cost and permitting barriers to middle housing in Milwaukie

Milwaukie developers and planning staff on Wednesday laid out practical obstacles that can make middle-housing projects — such as cottage clusters and small multiunit infill — hard to deliver at an affordable price.

The discussion centered on utility connection rules that can force expensive sewer-main extensions, one-off water taps and stormwater work; site-preparation costs on tight lots; and city tree and parking rules that both raise upfront costs and complicate project design.

Jamie Stangelman, a Milwaukie resident and owner of ITG Construction who described a recently completed cottage-cluster project, said the city’s utility requirements nearly made a land-division plan infeasible. Stangelman said engineers told him a sewer-main extension estimate ran “around $60,000,” and that excavation and site-preparation for an 85-by-155-foot parcel cost “about $104,000” before later citing a figure of roughly $140,000 for the overall excavation/infrastructure work. Stangelman said those costs pushed his per-unit build cost to about $200,000 before financing and profit and that land-price increases further reduce feasibility.

“I thought this is pretty cool,” Stangelman said of the cottage-cluster rules, but added that “when you start having to add the actual cost of the land…you can’t do that” if the utility and subdivision costs are added per unit.

City staff and project interlocutors said some of the pressure comes from how the engineering and permitting process treats multiunit buildings on a single lot versus separate fee-simple lots. Stangelman said the city initially told him separate lots would require separate sewer laterals and separate water taps for each unit, which can be impractical on a compact site and drive tens of thousands of dollars in added cost for every unit. He said he avoided the main-line extension by keeping six units on a single parcel, rather than subdividing into saleable individual lots.

Staff member Ilya (planning staff) told the council the city is working to interpret state middle-housing requirements while balancing utility access and future homeownership paths. Ilya said condo-style ownership is an option that avoids individual water/sewer taps but requires other condominium association arrangements. Joseph (moderator/staff) noted the council has expressed interest in more homeownership options and cautioned the different ownership forms (condo vs. subdivided fee-simple lots) trigger different utility and engineering rules.

Speakers also raised non-utility costs: the council and Stangelman discussed the city’s tree-ordinance requirements and associated mitigation fees. Stangelman said a single large protected tree could trigger thousands of dollars in mitigation or planting requirements and that the cumulative tree rules on small infill lots can make projects unworkable or very costly. Stormwater rules were discussed as well; Stangelman said his site’s dry-well stormwater approach failed during a heavy rain event and that stormwater fees charged monthly were a persistent operational cost.

Parking and neighborhood impact were another recurring theme. Stangelman said the city’s approach of allowing lower minimum on-site parking can lead to spillover parking in nearby blocks: “You’re gonna find those people who put the 6 inch overhangs on, they stuff them together 5 feet apart… That’s what's gonna happen,” he said, arguing that off-site parking pressure is a predictable outcome of dense infill when households still own cars.

Multiple council members and planning staff acknowledged the permitting and review timeline is a major friction point. Developers said plan intake, completeness reviews and subsequent correction cycles can take months, increasing holding costs on purchased land. Staff said organizational changes and increased staffing are underway to improve turnaround but conceded the process remains slow in many cases.

Why this matters: Milwaukie, like many cities, is trying to expand housing choices and speed construction of smaller, more affordable units. The session illustrated that state-level middle-housing directives intersect with local engineering standards, utility rules, tree and stormwater requirements and local review processes — and that those intersections can produce steep, often non-obvious costs that undermine affordability goals.

The council asked staff to bring options back in future work sessions — including potential adjustments to the tree code and further analysis of System Development Charges (SDCs) and permit-process timing — and staff outlined a July town hall on middle housing to present baseline information and collect community questions.