Loan Forgiveness: Office to Apartment Conversions in Portland
Portland has officially launched a new loan forgiveness program designed to transform the city’s glut of vacant offices into much-needed housing. It’s a highly focused initiative aimed at revitalizing downtown and addressing Oregon’s housing shortage. This initiative could potentially attract previously overlooked developers.
The Core of the Program
The city’s Office to Residential Conversion Loan Program provides low-interest (2%) loans for eligible downtown and Old Town projects. Notably, there is forgiveness over ten years if key affordability and sustainability benchmarks are met.
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Up to $60,000 per unit is available for projects that demonstrate embodied-carbon savings by reusing existing structures.
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Up to $25,000 per unit can be added for energy-efficiency or electrification upgrades.
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Projects that comply for a decade—keeping units in residential use and meeting affordability standards—can have the loans fully forgiven.
That’s potentially millions in public subsidy for projects that would otherwise struggle under today’s high construction costs and tight lending environment.
Added Perks and Streamlined Pathways
To sweeten the deal, the city is layering in complementary incentives:
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System Development Charge (SDC) waivers worth up to $3 million per project for seismic retrofits and residential conversion work.
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Expedited permitting and technical guidance for qualified applicants.
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Priority focus on the Central City Plan District, including Downtown, Old Town/Chinatown, and the Broadway corridor—areas hit hardest by remote work vacancies.
The Market Context
Downtown Portland’s office vacancy rate sits north of 30%—a historic high—while regional housing demand continues to outpace supply. Adaptive reuse has long been discussed as the logical fix, but feasibility hurdles kept most plans on paper. By reducing capital outlay and offering a clear forgiveness path, the city hopes to nudge those projects from “maybe someday” to “let’s go.”
What Developers Should Watch
The program is a pilot with limited funds, so timing matters. Developers and property owners should evaluate now whether their buildings qualify under the city’s definition of “underutilized office” and whether partial conversions (mixed-use or vertical stacking) are eligible. Lenders and investors should note that the city’s involvement may reduce perceived risk for projects that otherwise couldn’t pencil.
Bottom Line: For developers and investors exploring adaptive reuse or multifamily infill, this program deserves a serious look. With the forgivable loan structure, SDC relief, and expedited approvals, Portland is testing a rare combination of financial carrots. This aims to accelerate its downtown turnaround. Click here for additional details.
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