SB 1533B allows cities to require a certain portion of new housing units are rented or sold as affordable (a policy known as “inclusionary zoning”), subject to parameters set out in the bill, and allows cities and counties to enact a Construction Excise Tax. The following is a summary of the key provisions of this bill by section.

The Housing Alliance supports inclusionary zoning but does not have a position on this version of the bill.

Section 1: Inclusionary zoning

Local governments – cities or counties — may adopt land use regulations, functional plan provisions, or permit conditions that establish the sale or rental price of housing units within the following parameters:

  • May require that up to 20% of units within a multifamily structure are sold or rented as affordable
    • “Affordable housing” is defined as housing units affordable to households with incomes at 80% of the area median income or above
    • Applies to for sale or rental units in multifamily structures of 20 units or more
      • “Multifamily structure” is defined as a structure with three or more contiguous units
  • Must provide the option of an in-lieu fee, in an amount determined by the city or county, that developers can pay instead of building the required affordable units
  • Must offer at least one of the following incentives
    • Whole or partial fee waivers or reductions
    • Whole or partial waivers of systems development charges
    • Other finance-based incentives
    • Full or partial property tax exemptions
      • Property tax exemptions created under state statutes for units under 60% AMI will apply to any locally mandated affordable units sold or rented at 80% of AMI or less.
  • May offer optional incentives:
    • Density adjustments
    • Expedited permitting
    • Modification of height, floor area, and other site-specific requirements
    • Other incentives

Local governments can still adopt voluntary incentives to increase the supply of affordable units, including incentives to increase the number of affordable units or deepen the affordability of units that are required under mandatory inclusionary zoning policies. Policies enacted under this section shall only apply to new developments that have not already submitted a permit application. “Clear and objective standards” regulating affordable housing units shall apply to all jurisdictions outside of Metro.

Sections 2 through 7: Clarifies, modifies, and adds language to ORS 320.170 to 320.189, the section which allows cities and counties to impose a Construction Excise Tax (CET). SB 1533 maintains: school districts’ current authority to impose a CET, the grandparenting of CETs existing in 2007, including Metro’s, and the moratorium on local government CETs except as provided in ORS 320.170 to 320.189.

Section 8: Construction Excise Tax

Establishes a new authority for cities and counties (not Metro) to impose a Construction Excise Tax on construction of new structures or construction adding square footage to an existing structure. Cities and Counties may impose a CET on:

  • Residential construction, at a rate of 1% of the value of the permit value of the construction
  • New commercial and industrial construction, with no cap on the rate of the CET

Section 9: CET revenue allocation

The local government imposing the CET may retain 4% of CET revenues as a fee for administering the tax. After this fee, the residential CET revenues are to be distributed as follows:

  • 50% to developer incentives as set out in Section 1 of the bill
  • 15% to Housing and Community Services Department to fund homeownership programs that provide down payment assistance
  • 35% for affordable housing programs and incentives as defined by the local jurisdiction

For a CET imposed on commercial or industrial development, 50% of revenues after the administrative fee must be expended on programs related to housing.

Section 10: Repeals Section 9, Ch. 829, Oregon Laws 2007.

Section 11: A city or county must wait 180 days after the effective date of this act to enact any regulations under this act.

Section 12: The act takes effect on the 91st day after adjournment of the 2016 legislative session.