Cities could require affordable housing

Summary#

SB 1521 is an enacted Oregon law that creates new provisions and amends existing housing and land-use laws. Its stated goal is to set rules for local requirements that make some new multiunit housing affordable. Most changes start January 1, 2028; changes to the Portland-area offset rules start January 1, 2029.

• Cities and counties may require new multiunit housing to include homes for sale or rent at affordable prices. The rule applies to buildings with 20 or more units statewide, and to buildings with 10 or more units in the Portland metropolitan area, except within the City of Portland.
• The law removes the previous 20% limit on the share of units a local requirement could designate as affordable. It also requires developers to have the option to pay an in-lieu fee instead of providing the required affordable units.
• In the Portland metropolitan area, local rules covering rental housing must offer qualifying developers offsets (payments, property-tax exemptions, or certain fee reductions) based on an economic analysis. Starting in 2029, this requirement also covers rules affecting homes for sale.
• The law changes how Oregon’s existing construction-tax revenue is allocated and changes rules for residential design standards. It also updates references in laws covering Metro, publicly supported housing, and specific development sites.

What it means for you#

• Cities and counties: They may adopt these affordability requirements, but are not required to. If they do, they set the in-lieu fee and may offer other incentives, such as density increases or faster permitting. A local rule generally cannot apply to a project with a complete permit application or building-permit application submitted before the rule takes effect.
• Developers: For a covered project, a local requirement may mean providing affordable units or paying the local in-lieu fee. In the Portland area, a developer that does not pay the fee must be offered the required offsets. The law does not promise an offset equal to a developer’s actual, project-specific loss.
• Renters and homebuyers: The law allows local governments to require some new homes to be affordable under local rules. It does not itself set rents or sale prices, guarantee that affordable homes will be built, or create a direct housing benefit for any particular person. For rentals, the law defines affordable housing as affordable to households earning 80% of area median income or less, unless the city or county sets a lower income limit. Local governments set the income restrictions for affordable homes for purchase.
• Applicants with projects already underway: The new requirements do not apply if the specified permit application was submitted before the local rule’s operative date. The relevant statewide changes start in 2028, with the Portland-area expansion starting in 2029.

Money#

No cost estimate is included in the available material.

• Portland-area cities and counties subject to the offset rule must offer payments, property-tax exemptions, or certain fee reductions to qualifying developers. They must first adopt an economic analysis of the expected loss in value.
• The law directs 50% of certain existing construction-tax revenues to developer incentives or offsets. It does not create a new construction tax or state a new tax rate.
• The analysis, offset, and appeal requirements may involve local government costs, but no estimate is given.

What is unclear#

• The law leaves the in-lieu fee amount to each city or county and does not set a maximum.
• It does not set a statewide minimum share of units that must be affordable, or specify how long affordability must last in all cases.
• The law gives cities and counties discretion over purchase-income restrictions. It does not set one statewide income limit for homes for purchase.
• The available material does not show how local governments will fund or calculate offsets, or how many projects will be affected.
• The law removes several requirements from the prior statute, including its specific clear-and-objective standards for these local affordability rules. How other land-use laws apply is not established by the supplied material.

Case for#

• A possible argument for the law is that it gives local governments a way to require affordable homes in larger new developments, while letting developers pay a fee instead.
• The Portland-area offset rule could help address the cost to developers of providing below-market homes, using a local economic analysis to set the amount.
• Local governments retain choices about fees and incentives, so they can adapt requirements to local conditions.
• The permit cutoff protects projects that had already reached specified application stages before a new local rule took effect.

Case against#

• One concern is that the law removes the former 20% cap without setting a replacement limit, leaving the required share to local decisions.
• Offsets can require public payments, tax exemptions, or reduced fees. The law gives no estimate of their cost or how local governments will pay for them.
• An in-lieu fee may result in fewer affordable homes within the development itself; the law does not specify how the fee must be spent.
• The law gives local governments discretion over key details, including fee amounts and some affordability terms. Developers may appeal certain decisions, but the appeal rules limit who may appeal and, for some decisions, allow only seven days.