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Oregon’s 2026 Housing Legislation [05/07/26]
Welcome back to Multifamily Market Watch from HFO Investment Real Estate. I’m Michael Pierce, and today we’re breaking down Oregon’s 2026 legislative session and what it means for apartment owners, developers, and investors.
Oregon’s 2026 Short Session
The short session ran from February 2 to March 6. Lawmakers passed several housing bills, including one reshaping inclusionary zoning and another reducing land use appeal risk, but the session also highlighted ongoing tensions between housing goals and the system that makes it more difficult.
Lawyers: Cautiously Optimistic
HFO partner Greg Frick spoke with land use attorney Ezra Hammer, who described the outlook as cautiously optimistic. Progress is happening, but building housing in Oregon remains expensive and complex.
What Did Not Pass This Session
First, let’s talk about what didn’t pass. SB 566 which aimed to clarify prevailing wage exemptions, failed in the short session. This is significant because prevailing wage rules can increase labor costs by roughly 30% making some projects infeasible, especially affordable housing. Ezra noted that the Oregon Bureau of Labor and Industries has taken a more aggressive and less predictable approach recently, expanding when these rules apply. That uncertainty has already stopped projects, from coastal housing to large redevelopment plans. The broader issue, Ezra said, is the lack of alignment across state agencies. Housing goals exist, but implementation can work against them. This bill is expected to return in a future session.
Bills That Passed in 2026
SB 1521 – Inclusionary Zoning Reform
Now, let’s talk about what did pass. SB 1521 inclusionary zoning reform. This is one of the biggest wins. It requires jurisdictions in Portland metro area to fully offset the cost of inclusionary zoning mandates through incentives like fee waivers and tax abatements. Inclusionary zoning requires below market units and new developments, which developers argue acts like a tax on construction. This bill doesn’t eliminate the policy, but forces cities to account for the cost. The market response has been immediate, including interest from out-of-state investors who had previously avoided Oregon. The bill could help improve feasibility and restore confidence to the region.
HB 4035 – Urban Growth Boundary Expansion
Next up is HB 4035. It expands eligibility for cities to grow their urban boundaries and lower rent burden thresholds. It also increases allowable acreage and permanent expansion onto farm or forest land when necessary. This is especially important for smaller cities constrained by surrounding land designs. The bill aims to simplify a process that has historically been costly and time-consuming.
HB 4036 – Acquisition of Existing Affordable Housing
Next up is HB 4036. It creates a fund to acquire and preserve existing affordable housing, with new construction often too expensive. The focus shifts to maintaining current units. Older properties face rising costs, expiring affordability restrictions, and the program could help support acquisitions and preservation efforts.
HB 4082 – 55 Plus Housing
HB 4082 is a 55 plus housing pathway. It creates a path for senior housing through the urban growth expansion process, including manufactured housing communities with long-term affordability requirements. With Oregon’s aging population, this could open up new opportunities for developers and more strategic mastermind in communities.
HB 4037 – Housing Development Appeals Limited
Next up is HB 4037 Section 17, and this may be the most consequential change. Section 17 limits who can appeal certain housing developments that meet clear standards. It reduces notification requirements, removes mandatory public hearings, and eliminates most third-party appeals. This could significantly reduce delays, often by a year or more, and increase certainty for developers. However, legal challenges are likely, and some cities are already pushing back on this one. Oregon hasn’t solved its housing crisis. The costs still remain high, and challenges persist, but this session introduced meaningful structural reforms, especially SB 1521 and HB 4037 that address feasibility and timelines. Investor interest may now be returning, but outcomes will depend heavily on how cities and agencies implement these changes.
Key Takeaways
The bottom line is that we are seeing mixed results here, but some of the most significant housing reforms in Oregon has seen in years. For investors and developers, the key bills to watch are SB 1521 and HB 4037 If you’d like to see the full interview with Greg Frick and Ezra Hammer, it’s available on our website. I’m Michael Pierce, and thanks for listening to Multifamily Market Watch. Talk to you next week.
About HFO
HFO’s entire office specializes in multifamily real estate, making us the largest multifamily brokerage in the Pacific Northwest. Your success is our passion. Like and subscribe to Multifamily Market Watch videos on YouTube, articles on LinkedIn, and podcasts on all major streaming markets. Build your legacy with HFO. Call 503-24 1-5541 or visit our website at HFORE.com for more information. HFO is a partner of the Global Real Estate Advisor Network.
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