August 24, 2023

Nibbling at the edges of the housing crisis: A 2023 Oregon legislative update


How well did the 2023 Oregon legislature nibble at Oregon’s crisis of availability and affordability of housing? Below is a survey, as well as some broader context and thoughts for consideration, of recent legislative bills from which readers may draw their own conclusions about the progress made.

Housing has been a priority issue for state and local politicians of late, being inextricably linked to Oregon’s homelessness crisis. As has been exhaustively reported, Oregon Governor Tina Kotek has set an ambitious target for housing production: 36,000 new housing units over 10 years. Meeting this target would require an 80 percent increase in production over historical volume produced by the private sector (i.e., homebuilders, apartment builders, etc.).

Less-than-ideal market conditions at the moment – high construction costs, labor issues, high cost of financing, softening rents – make even maintaining historic production levels challenging for private housing developers. Will they be getting a shot in the arm from major legislative changes, incentives and initiatives to spur housing production?

Interesting and thoughtful legislation has been passed, to be sure. But, at the end of the day, the same variety of conflicting political voices, perspectives, interests, and objectives pressing upon Oregon land use law and policy still exist, and so rapid and drastic change is a big ask.[1] And so, as the Oregon Home Builders Association rather succinctly put it, their members are still looking for “immediate change to boost production on the ground now.”

Commercial to Residential Conversions (HB 2984)

Converting un-used office buildings into housing has been a popular, but at times divisive, discussion topic in development and housing circles. HB 2984 requires that cities in an urban growth boundary, with a population over 10,000, must allow conversion of buildings from commercial to residential use, without requiring zoning changes or conditional use permits. Land zoned for heavy industrial use is exempted from this bill, of course, because industrial space is another endangered species in the Oregon land use environment. The bill also (1) allows for system development charges to be levied against such conversions under specific circumstances identified in the bill, and (2) prohibits minimum parking requirements that are greater than those in place for existing commercial or residential uses.

Context and Questions: This bill effectively removes a material hurdle that stands in the way of office-to-residential conversions. (Rebalancing our largest urban areas’ use mix away from office and toward a more needed resource is laudable in my opinion; this is not a bill that will affect suburban or rural communities.) Ultimately, the “success” of this conversion effort will come down to two issues that aren’t (and to some degree can’t be) addressed in the bill: (i) exactly how many housing units these conversions will actually yield in a city like Portland is a complete unknown, and (ii) can the state and City of Portland make these conversions economically feasible for developers? Cost issues, rather than zoning law concerns, will drive the ultimate success of this movement.[2]

Click here to also read an analysis of HB 2984, “ADAPTIVE REUSE: A POWERFUL TOOL TO REIMAGINE DOWNTOWN PORTLAND” by Ezra Hammer

HB 2001 (and HB 2889) Oregon Housing Needs Analysis

The bill is quite broad (in terms of the scope of details it touches upon), but the overarching goal was to bring a greater degree of specificity and measurability to the way that statewide Land Use Planning Goal 10 (Housing) is implemented by the state’s agencies and departments. Among a host of other matters covered, the bill addresses: (i) establishment of the methodology for conducting the Oregon Housing Needs Analysis, with respect to projecting a 20-years housing needs and proportionately allocating such production burden across the counties and cities (while also establishing targets); (ii) tracking housing availability across the entire income range in the state, as well as implementing other housing equity analyses; (iii) efforts to focus the Land Conservation and Development Commission (LCDC) on urbanization by setting a variety of clear principles that LCDC must follow in establishing housing rules, while also directing LCDC to create greater flexibility and certainty to local governments in meeting rules established under state land use Goals 10 (Housing) and 14 (Urbanization); and (iv) outlining new frameworks for evaluating housing production progress and holding cities accountable for underproduction.

Context and Questions: The state government bureaucratic structure that exists around the Oregon land use system is well known, for better or worse. The state agencies tasked with overseeing and implementing the land use system established under ORS 197A will invariably need directing or re-directing from time to time, along with firm guidance about the state’s ultimate goals. And this bill carries out that under-the-hood work at the state level. It will take a material amount of time to see whether these policy and agency level adjustments trickle down to on-the-ground level housing development in the future. Optimism around the potential effectiveness of this legislation will likely rest upon the reader’s political views about the effectiveness of top down management of land use, in contrast (to some degree) with trying to influence “market forces” by reducing governmental approvals and restrictions and incentivizing private sector development of housing via incentives.

(HB 3395) Housing Omnibus Bill

As the name implies, another broadly ranging bill establishing various policy changes around residential development. Highlights include: (i) requiring non-Metro cities with populations over 2,500 to allow duplex development on single-family zoned land (expansion of HB 2001 (2019)); (ii) directs local governments to allow housing in commercially zoned areas (within the Urban Growth Boundary) for households making 60 percent of area median income, and mixed use structures using ground-floor commercial for “moderate income” households (80 percent to 120 percent AMI); (iii) amends the definition “needed housing” under ORS 197 to include single room occupancy development; and (iv) requires approval of single room occupancy development (up to 6 units) on each lot zoned for single family detached housing (and for zoning allowing development of 5 or more units, such single room occupancy must be allowed up to the underlying density standards.

Context: This bill leans further into one of the philosophies underlying earlier land use legislation in Oregon: that housing issues will be addressed, not by large volume development of housing, but small infill development of duplexes and 6 (or fewer) single room occupant users.  For certain specific sectors of the private housing development sector, these sorts of development opportunities will prove quite useful. Whether or not the state can almost double its housing production by adding an additional 1 (or even 5) units per infill project, however, is a question that requires further consideration.

[1] To wit:

– “Given all the chaos and drama at the Capitol this session, it’s still looking like we’re going to come out of it with some long-term housing supply changes,” – Cameron Herrington, policy and advocacy director, Oregon Housing Alliance

– “Frankly, how we got to where we are didn’t happen overnight. It happened over decades. No one thinks we’re going to meet these numbers tomorrow, but (the bills) will help us meet that goal and make sure we don’t fall back in those patterns.” – Mary Kyle McCurdy, deputy director of 1000 Friends of Oregon



Tags: Construction, Homebuilding, Construction and Development

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