SOLUTIONS TO INCREASE HOUSING PRODUCTION IN OREGON
The Housing Innovation Partnership has developed the following recommendations for the Oregon State Legislature’s 2023 session.
The above organizations have signed on in support of HB 2980 and HB 2981. These bills and their promise of sustained and targeted funding for middle income housing are widely embraced by entities across Oregon. See one-pagers on each of these bills here.
Oregon’s Housing Problem
Oregon’s dramatic housing shortage is a threat to our residents, communities, and economy. ECONorthwest estimates that the state has a deficit of 140,000 homes statewide. Current housing production is not keeping up with demand, much less making progress on the deficit.
Approximately 30% of this shortfall is for housing serving households earning 60-120% AMI. Without subsidy, housing developments serving these households are not economically feasible. Even with successful improvements to regulatory barriers such as zoning approvals and permitting timelines, a financial gap will prevent production at scale. Currently, no sustainable gap funding resource exists. HB 2980 is designed to fill that need and rapidly boost housing production.
The Revolving Loan Fund
HB 2980 establishes a state revolving loan fund to fill housing financing gaps. Local jurisdictions access the fund to boost development of needed housing in their communities. Eligible housing can be rental or homeownership, multi-family or single family. The goal of this fund is housing production that could not otherwise be produced.
Local jurisdictions control project selection and borrow from the fund to make grants to local developments. These grants fill critical project funding gaps. The jurisdictions then pledge the amount of revenue from a fee based on the improvements to repay the loan over 10 years. After loans are repaid, full property taxes are retained by local jurisdictions.
To accommodate technical challenges of our property tax system, this program will use a 10 year tax abatement on the improvements and add an equivalent fee that will repay the loan.
- Revolving Loan Fund: $300 million
- Units Produced: 12,000 (plus ongoing from reinvestment)
- Target Population: 60-120% AMI
- Subsidy per Unit: $15,000-$35,000 (est.)
- Project Control: Local jurisdictions with State support
- Eligible Housing: Single and multi-family; rental or ownership
- Fire Districts: Fully funded
- Fund Leverage: $4.5 billion* in other funding
*Assumes $400,000/unit cost and $25,000/unit subsidy averages.
Set aside in the Governor’s Emergency Homelessness Response Package was a fund ideated by HIP members, $20 million to provide grants or loans to entities to begin or expand production capacity for the development of modular housing and components. This is hopefully just one of many steps to be taken in the direction of employing unique construction methods to increase housing production in our state.
Workforce Housing
Housing production can be spurred through the development of innovative financing models serving those with incomes that do not allow them to access public assistance but who need housing the market is not able to provide at affordable prices. Workforce housing is not recognized as critical housing type in Oregon and is not currently supported through any public incentives.
The creation of an Infrastructure Grant and Loan Fund, Oregon Land Fund, and Construction Loan Guarantee Fund are proposed.
- Create an Infrastructure Grant/Loan Fund—
Create an Infrastructure Grant/Loan Fund (IGF) for public improvements associated with new workforce-income housing developments. Such an IGF would allow public and private developers to develop sites that require costly public street and utility improvements.
- Develop Funding for an Oregon Land Fund—
Allocate funding for an Oregon Land Fund (OLF). The new OLF would provide the early capital for acquisition and predevelopment of sites for workforce -income housing developments.
- Create a Workforce Housing Construction Guarantee Fund—
Create a Workforce Housing Construction Guarantee Fund (WHCG). Access to construction financing is a challenge for workforce housing developments. This guarantee, jointly pursued by developers and local jurisdictions, would incentivize private capital to support these projects at beneficial borrowing costs.
Local Capacity
Solving the current housing crisis will require a strong collaboration between the State of Oregon and its local government partners. Increasing the capacity and ability of local governments to carry out community development and housing construction activities is essential to increasing the state’s overall production of needed housing. In order to deal with Oregon’s dramatic deficit in needed housing, the following legislative solutions are proposed to build sustainable funding capacity and accountability for Local Governments to process permits and make modifications to plans and ordinances that will result in housing production.
Technical Experts – Most Local Comprehensive Plans were adopted over 45 years ago and need to be updated in many cases. To achieve an increase in Oregon’s production of needed housing by at least 50%, Oregon’s cities and counties need staff that is not currently present. The Office of Economic Analysis estimates that approximately 450 on-the-ground technical experts in the areas of land use planning, community development, construction inspections, and infrastructure will be needed. This legislation would add that capacity over time.
Housing Coordinators – Provide each of Oregon’s 12 regions with sustainable funding to recruit and hire a housing coordinator. These regional housing coordinators will, at a systems level, partner and consult with local governments, developers, financiers, and other interested partners to bridge any information gaps, identify and secure needed resources, and enable local governments to develop needed housing. Grants under this program will be administered by the Oregon Department of Administrative Services in consultation with DLCD and OHCS.
Education Programs – Create a statewide education program designed to explain Oregon’s unique land use system, as well as the causes of Oregon’s housing crisis and the potential solutions to overcoming it. Understanding Oregon’s land use system, as well as the housing crisis, requires specialized education, the provision of which is not readily available to local government officials across the state of Oregon. The program would be administered by AOC and LOC in consultation with DLCD.
State Liaisons – Provide The Association of Oregon Counties and League of Oregon Cities each with sustainable funding to recruit and hire their own State Housing Liaison. The two state liaisons will serve as a conduit between their respective local government members, housing coordinators, the housing production team, state agencies, the governor’s office, and the legislature.
Accountability & Outcomes – To ensure that process costs are tracked for the purpose of identifying opportunities and informing efforts for cost reduction and production time acceleration, a report from the Office of Economic Analysis shall be prepared in consultation with DLCD and OHCS on an annual basis. The report should detail staff time required to complete housing permits; conditional use permits; building inspections; needed comprehensive plan revisions; needed zoning ordinance changes; and time taken to process appeals of local decisions.
The purpose of the capacity increases in this bill are to dramatically increase housing production. While initial investments can be made in local government capacity, they should only be continued at the level that produces results in reducing Oregon’s housing deficit. These investments should also result in the acceleration of permitting and the streamlining of local process which can reduce processing time for local developers and homebuilders.