PORTLAND, Ore.-The rental market here is so depressed that something almost unthinkable is now commonplace: Six-figure earners are paying some of the same rents as lower-income residents who qualify for subsidized housing.

Market rents in Portland have stagnated at the same time that rent limits for government-subsidized affordable apartments have risen. That means rents for affordable housing are growing faster than the prices for market-rate apartments. Rarely has the city seen such a narrow price gap between market-rate and affordable units.

The trend has produced unexpected outcomes for lower-income renters like Ruth Haddox. She spent months sleeping on her sister's couch last year before putting her name on an affordable-housing wait list. A single mother with three children and no job at the time, she expected to be a shoo-in for a low-income apartment. She heard nothing for days.

Weeks went by, then months. More than a year later, Haddox has a new job at a doughnut shop and is renting a $1,600 three-bedroom home that she found on an apartment listings site.

The rent isn't capped but it is around the price of some of the city's subsidized apartments. The average rent of an income-restricted three-bedroom in the Portland metropolitan area hovers around $1,800, according to Yardi Matrix. Haddox's new place didn't require months of paperwork or administrative bottlenecks. She applied and moved within a week.

"I couldn't wait anymore," Haddox said. "This was way easier because the market had gone down."

Portland's rental market stalled out in recent years as an oversupply of new housing collided with an economic slump. It is an astounding turn for a city once known as rapidly growing and notoriously unaffordable.

Now, Portland is experiencing a rarely seen housing competition, where higher-end apartments vie for some of the same tenants as income-restricted units.

Often, those renters would rather upgrade to market-rate units with gyms and pools than wait around for the rent-regulated option. About 40% of Portland's market-rate housing supply competes with affordable units, meaning that their prices are within 15% of each other, a Yardi Matrix report found in July.

The figure is similar or even higher in a few other big cities, including Washington, D.C., Seattle and Austin, Texas. In these areas, a glut of apartment construction leftover from the pandemic has helped push down market rents. Meanwhile, affordable-housing landlords have been able to raise their rents because the federal government's estimates of the median income in their area skew higher.

Affordable-housing providers say the phenomenon is temporary. Portland's market rents are expected to rebound as apartment supply tightens again and when that happens, affordable units should get their discount back.

But meanwhile, the financial pressures are eroding a prized segment of the city's housing stock. About 2,200 income-restricted apartments, or 8.3% of the city's affordable housing stock, are sitting empty, according to CoStar. It is the highest rate since 2000 when the firm started tracking.

Portland's affordable-housing sector was already stressed. Owners are dealing with rising costs for insurance, utilities and mortgage payments. But they also have higher rates of tenants who are behind on rent. As Portland's downtown declined and crime rose, some owners say they have spent tens of thousands of dollars a month for private security around their buildings.

"We've all been struggling for years," said Sarah Stevenson, executive director at the nonprofit affordable housing provider Innovative Housing. The nonprofit is keeping up with its mortgage payments, but it is in violation of certain loan covenants on multiple properties. The group cut 30% of its staff this year and is planning to sell some buildings.

Lenders "could foreclose," Stevenson said. "But they won't because I don't think they want the properties."

The distress in the affordable-housing sector is raising pressure on a city that has been in a self-declared housing emergency for more than a decade and that has devoted hundreds of millions of public dollars to building income-restricted apartments.

The 2010s were a heyday for affordable housing production in Portland. It was an era of Nike and Intel's expansion in the city, Fred Armisen and Carrie Brownstein's "Portlandia" television show and a yearslong population boom. Portland couldn't build homes fast enough to keep up with its growth.

Homelessness accelerated, rents surged and local residents were priced out. Pouring money into affordable housing looked like a safe bet.

"Portland circa 10 years ago, we were the 'It City,'" said John Tapogna, president of the Oregon Business Council. "We were just building a ton of stuff."

Many of the apartments were financed with the Low Income Housing Tax Credit, a decades-old federal tax incentive. Developers that use the program must cap their rents so that they are affordable to tenants of a certain income status-typically those who make 60% of the area's median income, or about $77,000 for a family of four in the Portland metro area.

Over the years, that 60% benchmark has become the default affordability setting for many of these homes. Now, developers and public officials are questioning whether the 60% standard is too high if those apartments effectively lose their discount as soon as market rents stall. After all, apartments that cater to the lowest-income residents aren't facing pressure from market-rate rivals.

Portland leaders didn't think enough about "the range of affordability most needed," said Rukaiyah Adams, a former Wall Street investor who is now leading the redevelopment of Albina, Portland's historically Black district. "As a result, our market has become a cautionary tale."

In June, Mayor Keith Wilson sent a letter to the City Council warning that the city's affordable-housing portfolio was on the brink of "financial insolvency" and that "major housing assets may cease operations in as little as six months."

"Everybody says we need to re-evaluate," Wilson said in an interview.

The city is spending $10.6 million to help affordable-housing owners pay their mortgages, improve their properties and keep their rents low, partly so they can maintain a pricing advantage over market-rate units.

Affordable-housing providers are now competing for tenants in ways they never have before. They are hosting open houses, launching social-media marketing campaigns, adding amenities to their buildings, offering rent deals and sometimes cutting their prices.

"Units used to fill themselves because there was such a discount to market-rate," said Brian Shelton-Kelley, director of real-estate development at the Portland-based Hacienda Community Development Corporation. Now, "TikTok seems to be the thing."

On a recent Sunday afternoon, a wealthy part of Portland called Goose Hollow became an arena for the housing showdown. At the neighborhood's annual street fair, Mary Trujillo, the property manager at the affordable-housing development Tiller Terrace, went to work.

She set up a large green tent at the block party with a table of fliers. To drum up traffic, she recruited one of the tenants at Tiller Terrace to draw free henna tattoos.

A few booths away, leasing managers were handing out brochures for the Byline-a new luxury apartment building. Trujillo stopped by their tent to ask how business was going. Like many apartments in the area, the Byline is offering months of free rent to attract tenants. They told her they were only 70% occupied after a year of leasing.

"You would think that they would have it pretty easy," said Trujillo. "But I consider that struggling."