![Policy and Capital Market Developments Across OR and WA [4/9/26]](https://www.hfore.com/wp-content/uploads/2025/10/1.jpg)
Policy and Capital Market Developments Across OR and WA [4/9/26]
Welcome back to Multifamily Market Watch. I’m Michael Pierce, senior data analyst at HFO Investment Real Estate.
Today’s update is different from your typical market report, instead of focusing on one geography, we’re looking at a series of policies and capital market developments across Oregon, Washington, and at the federal level. Taken together, these stories point to a larger shift in how housing is being approached. It is a shift towards more regulation, more intervention, and at the same time, more urgency around supply.
Affordable Housing Subsidies Under Discussion
Let’s start in Portland and talk about vacant affordable housing and operating subsidies. City leaders are currently reviewing whether to redirect between roughly 21,000,050 $6 million in unspent housing funds to address a growing issue: vacant affordable housing units. The number being discussed is significant. There are nearly 1900 subsidized units sitting vacant across the city. That’s not a demand problem, it’s an operation problem. The proposal would allow funds from the city’s housing investment fund and related programs to be used for rental assistance, eviction legal aid, and potentially rent buy-downs for nonprofit housing providers. There’s been no final decision, but the discussion is ongoing.
For years, the focus on housing policy has been building new supply, but this conversation is different. It’s about keeping existing affordable housing operational.
Nonprofit housing providers are facing rising costs across the board, including insurance, financing, staffing, and regulatory compliance. The result is that the units exist, but they are not functioning as part of the active housing supply.
If Portland moves forward with subsidizing operations or rent levels, it could represent a meaningful policy shift. Instead of focusing only on new development, the city would be directly supporting ongoing operations for market rate owners and investors.
This is something to watch closely, because once operating subsidies become part of the conversation, it raises broader questions about competitive dynamics, policy expectations, and how housing is supported in the long term.
Homeland Security Court Ruling
A federal court recently issued a ruling that touches on housing in a very different way. The court ordered the Department of Homeland Security to stop using tear gas and other chemical munitions in ways that affect residents in a 209 unit affordable housing community near the ICE facility in Portland. The court found that residents were likely experiencing harm from exposure inside their homes, and the injunction will remain in place while the case proceeds. At the same time, Oregon passed House Bill 4138 which requires law enforcement agencies to limit the use of facial coverings and clearly display identification during operations.
This is not a typical housing policy story, but it has some real implications. It forces the idea that residential environments carry legal protections, even when located near government or enforcement activity. For housing providers, especially those near government facilities or high activity areas. This introduces additional considerations for liability exposure, operation disruptions, and potential legal challenges. It’s a reminder that location risk is not just about economics, it can also be a policy or legal exposure. [Note: on Monday, April 27, the orders restricting DHS were paused by a federal appeals court, and federal agents are cleared to use tear gas and chemical munitions again. In a win for the Trump administration, officers can continue to use crowd control weapons outside the ICE facility in Portland without restrictions, at least for now.]
Capital is selective in Oregon and SW Washington
Now, let’s shift to the capital markets. Multifamily investment activity in the Portland metro has slowed as 2026 begins, trailing 12 month volume of approximately 1.1 billion, that’s down 33% year over year. In Vancouver, which is typically one of the most active submarkets, the decline is even sharper, with volume down more than 60% Despite the slowdown, deals are still getting done. One example is the $48 million sale of Terra at Hazel Dell, a 206 unit property in Vancouver. So, capital has not disappeared, but it’s being a lot more selective. So, what is this signaling? Transaction volume is often the clearest indication of investor sentiment, and right now that signal is cautious. Investors are weighing interest rates, operating costs, and policy uncertainty, but they are still active in stabilized assets, suburban markets, and well-located properties with predictable cash flow.
Flood Risk Disclosure Requirement
So, let’s move a little bit north and talk about Washington. Several policy developments are worth watching here. Washington has passed legislation requiring landlords to disclose flood risk to tenants. The law will apply to leases signed after 2026 It also requires landlords to inform tenants that standard renters insurance does not cover flood damage. This matters because it’s part of a wider trend. Disclosure requirements for housing providers are expanding, not just in Washington, but nationwide, and they increasingly cover climate risk, insurance gaps, and property conditions. Individually, these rules are manageable, but collectively they increase operational complexity.
Statewide Residential Development Expansion
Washington also passed one of the most significant housing supply measures in the region. Cities of more than 30,000 residents will be required to allow residential development and commercial and mixed zones. That means housing can be built in underutilized commercial sites without requiring rezoning. This could open 1000s of potential development sites across the state, including markets like Seattle, Tacoma, Spokane, and Vancouver. This matters because it’s a clear supply side policy shift. Instead of restricting development, the state is actively trying to expand it for developers, investors. This creates new land opportunities, more flexibility, and potentially faster timelines on their projects.
Income Tax on Millionaires
Washington is also considering a new tax policy. The governor supports a 9.9% tax on income above $1 million beginning in 2028. The proposal is expected to generate approximately $3.7 billion annually, and tax policy does influence behavior, it affects where they live, where capital flows, and how investment decisions are made for housing that can translate into shifts in demand, particularly at higher income levels.
Department of Housing
And to add another layer onto the bureaucracy, Washington is also exploring the creation of a statewide department of housing. A task force is currently gathering input and will present recommendations later this year, if created, a centralized housing agency could consolidate funding programs, standardize regulations, and potentially streamline development process that could change how multifamily projects are financed and approved across the state.
National Examination of Housing Supply
At the national level, Congress is looking at supply and more scrutiny. Industry estimates that the US will need approximately 4.3 million additional apartments by 2035 They’re looking at incentives for development, redevelopment for underused properties, and regulatory reform. The second proposal would require institutional investors to sell single family rental homes within seven years. While focused on single family housing, the broader signal is clear: there is an increasing attention to large scale ownership of rental housing across Oregon, Washington, and at the federal level.
A final word
Three themes are emerging: First, housing policy is shifting towards supply expansion, particularly through zoning reform and redevelopment. Second, the regulatory requirements for landlords continue to grow, especially around disclosures and operational standards. Third, capital markets remain cautious but active, with investors focusing on stability and long-term fundamentals. The broader signal is clear: policymakers are trying to increase housing supply while increasing oversight of the rental housing industry for owners, developers, and investors. The challenge will be navigating both at the same time, because going forward, success in the market will depend not just on fundamentals, but the understanding of policy. And, as always, continue to listen to Multifamily Market Watch, where we will be updating these stories as they progress. I’m Michael Pearson, thanks for listening.
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