Kotek’s $500 Million Housing Bill Addresses Oregon’s Land Use Expansion and Housing Crisis

Oregon Governor Tina Kotek is supporting a $500 million housing bill in the legislative session that could stimulate housing production to meet the state’s development needs.

The bill, Senate Bill 1537, would allocate millions towards middle-income and affordable housing, infrastructure, and incentives for climate-friendly projects. The goal is to construct 36,000 homes a year. Legislators believe, though, that the requested funding is too much, and city officials think that restrictions in the bill could hamper development projects.

The bill would also establish a one-time tool for eligible cities to expand their urban boundaries and establish an accountability and housing production office. While the housing proposal is not perfect, there is consensus that the bill, in some form, will be approved during the short session this year

According to Ariel Nelson, a lobbyist with the League of Oregon Cities, however, even if it generally addresses Oregon’s housing needs, some of the requirements for development may be too strict for most cities to qualify. During the five-week session, lawmakers will also have to weigh competing interests as they work to amend Oregon’s historic drug decriminalization law and expand access to drug abuse treatment.

The state’s revenue forecast will determine the amount of money legislators can allocate this session. According to Rep. Vikki Breese-Iverson, approving the one-time solutions in the bill will be essential to catalyzing housing production without creating too many barriers for the future.

Investment for infrastructure

Kotek’s bill aims to allocate $200 million towards infrastructure projects, such as roads, pipes, and sewers, to support local communities, with shovel-ready projects as a priority. The state needs more funding for infrastructure, which often serves as the last hurdle between development and construction.

The Legislature has asked all cities to submit projects for housing construction, with 85 cities submitting requests for a total of $827.9 million for 225 projects. Ernesto Fonseca said that without plumbing, roads, sidewalks, and electricity, cities may end up with a lack of infrastructure, which is important for housing development. Infrastructure funding is vital for long-term planning for housing.

According to Nelson, the $200 million is seen as a start, but the League of Oregon Cities hopes to discuss a robust infrastructure package for the next biennium.

Investment and accountability for housing

The governor’s proposed bill would also set aside millions of dollars to support developers and make sure cities receive the support they require to speed up the application and permitting procedures.

The bill also proposes $200 million for building affordable and moderate-income housing. It is needed to keep housing prices and rents low. It also purports to encourage development amid the challenging affordable housing market.

Rep. Julie Fahey, a Democrat from Eugene, said that the government also needs to step in with funding to address the challenges faced by affordable housing developers. According to Eric Paine, developers face rising interest rates, supply chain issues, and staff turnover.

The bill would also create a production and state housing accountability office by the middle of 2025 to help local communities understand and comply with state housing laws. This includes a new revolving loan fund for cities for housing.

The office will coordinate with other state agencies and investigate alleged violations of housing laws. The bill also sets aside money to subsidize climate-friendly heating and cooling pumps and other systems to help developers produce more climate-friendly housing.

One-time urban growth boundary expansion

The Kotek proposed bill, regarded as the most controversial aspect, aims to expand urban growth boundaries by 150 acres for cities with populations greater than 25,000 with the one-time expansion tool. Smaller cities are allocated 75 acres for their growth boundary expansion. This would allow cities to build several thousand affordable housing units according to state density classifications.

Last year, a Kotek-backed bill that would have established a similar program died in the Senate due to environmentalists opposing the expansion proposal. Kotek has emphasized that this bill addresses last year’s concerns by providing more stringent requirements. Cities have to submit proof of a lack of land supply and a need for affordable housing. Cities with a high percentage of renter households that are extremely cost-burdened would qualify for the one-time expansion.

The program, according to Oregon Sierra Club director Damon Motz-Storey, inherently discourages the construction of affordable housing because new developments in the expanded area would be far from public transportation, city centers, and other resources. Rather than amending state law outright, Motz-Storey stated that the Sierra Club would rather see the state focus its resources on helping individual cities or streamlining the current process.

Although Kotek argues the bill addresses those concerns, environmentalists claim the proposed bill would allow cities to circumvent the state’s land use laws and build without regard for the environmental impact of low-density housing.

According to Nelson, the lobbyist for the League of Oregon Cities, the requirements are so stringent that fewer than a dozen cities in Oregon will be eligible for the one-time expansion.

Environmentalists oppose the expansion of growth boundaries and point to underutilized land in city centers as a reason. Affordable housing developer Paine argues that building on lots within the existing boundary and expanding it shouldn’t be mutually exclusive.