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Governor Unveils Ambitious Housing Production Bill

Written by Rick Metsger on Feb. 8th, 2024
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Ambitious, comprehensive, complicated. Three words that define Gov. Tina Kotek’s effort this legislative session to help address Oregon’s decade-long failure to meet housing goals critical to Oregon’s societal and economic future.
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The second-year governor has made it clear from day one of her term that moving the housing debate from conversation to actual construction was her top priority.  She has also signaled a willingness to confront long-time allies head-on if necessary to meet her housing objectives. Stalemates between homebuilders and environmental land-use advocates have calcified the pace of development in Oregon, especially in the Willamette Valley, for years. A recent Oregon Housing Needs Analysis indicated that Oregon needs to construct 555,000 more housing units in the next twenty years. 

Kotek introduced SB 1537 on the first day of the 82nd Legislative Assembly’s 2024 session. Her laser focus on moving the needle on housing production in the state was punctuated by her declaration that this was the only bill she would be introducing in this session. Her message to her entire administration staff was clearly ‘All hands on deck’.

“Salem, like all cities across the state, is facing a severe housing crisis. I appreciate the Governor’s willingness to address this issue head on, and to try some out-of-the-box solutions. We need to remove barriers at all levels of government if we are going to see more housing built that is actually affordable,” said Julie Hoy, Salem City Councilor. 

Kotek has set a target of building 36,000 housing units annually to address the current shortage and meet the state’s long-term needs. That ambitious goal represents about an 80 percent increase over today’s construction pace.
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“Decades of underbuilding have left Oregon with a severe housing shortage that is driving up rents, home prices, and worsening our homelessness crisis,” Kotek said in unveiling her proposal.

“People that are ready to transition out of homelessness struggle to find housing. Meanwhile, employers-both public and private-in Oregon struggle to hire due to a lack of workforce housing for rent or purchase, harming local economies across the state,” Kotek added. 

The governor has a grasp on the current housing landscape and the surgical tools necessary to intervene and restore it to health.  There is a triangle of basic components impacting the cost of housing. Land availability, regulation, and construction costs, as defined by materials and labor. Kotek understands that the government can do little if anything on the third leg of that triangle but can recognize the role government actions play in the other two in escalating housing costs by artificially restricting land supply and the ever-increasing costs of building infrastructure to support housing.

The bill creates the Housing Accountability and Production Office (HAPO). The office will be jointly established by The Department of Land Conservation and Development and the Department of Consumer and Business Services. Its primary purpose is to support housing production in local communities, address issues to help local governments and developers meet state housing laws, and provide a more definitive structure to address complaints or concerns.

One controversial element of the bill allows cities to expand their urban growth boundaries to bring more land into housing production. Environmental interests believe this will lead to urban sprawl, while housing advocates say that concern over time has been a major contributor to restricting land supply with the consequence being ever-increasing price pressure, eroding housing affordability.

Hoping to assuage opposition concerns, the bill does impose a few requirements on cities to qualify for the one-time exception. Cities have expressed concern that those requirements may, themselves, be impediments to moving on the opportunity as quickly as the governor would hope.

Sen. Deb Patterson (D) Salem, says she appreciates all the hard work that has been done on the bill. “ I still have some concerns about the UGB expansion. I would also like to see more accessible housing to help people age in place,” Patterson said. “ But I know that all parties are working hard to find a path forward,” she added.

The governor’s bill includes one-time site additions to the Urban Growth Boundary to jump-start production. Portions of the new land added will be subject to affordability requirements.

The bill is strategically focused on two levels of housing affordability. The first is the needs of low-income individuals, usually defined as those earning less than 80% of the median income and often assisted by state and federal subsidies. The second level, often overlooked when addressing housing needs, is for those earning between 80-120% of the median income. They don’t qualify for state subsidies but do not earn enough to afford market-based housing costs close to their place of employment. This subset is where many first-time homebuyers find themselves trapped. Many of these individuals then look to find homes further away from their places of employment, driving up housing costs there and adding to the state’s transportation problems.

Jump-starting the plan is a provision asking for a $500 million investment by the legislature. $400 million of that sum is targeted at housing infrastructure financing and moderate-income housing financing. Additional dollars are allocated for projects such as infrastructure planning, technical assistance, site mitigation and acquisition.

Legislators have expressed some queasiness about the size of the ask, but there appears to be enough support behind the bill’s primary objectives to ensure a substantial portion of the request can obtain the votes necessary for passage. The governor’s greatest challenge will be to prevent opponents from reducing the bill’s effectiveness by watering down key provisions. Kotek, it appears, is ready for the challenge.

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