Portland Legalized 'Missing Middle' Housing. Now It's Trying to Make It Easy to Build.

This month, the city passed a number of liberalizing reforms that legalize more types of housing and make already-legal homes more practical to build.

Oregon was the first state in the nation to end single-family-only zoning. Now its largest city is trying to make that reform stick.

This month, the Portland City Council unanimously approved a long list of seemingly technical zoning tweaks that ease the city's rules on construction of "missing middle" housing types like townhomes, fourplexes, and cottage clusters.

Portland legalized many of these housing types citywide in the summer of 2020 when it passed its Residential Infill Project. That program permitted duplexes in all formerly single-family zones and three- and four-unit homes almost everywhere. It also made it easier to add backyard cottages, granny flats, or other accessory dwelling units (ADUs) on single-family lots.

The program got hearty praise at the time as the nation's most ambitious low-density zoning reform. It's spawned an infant industry of developers building smaller, more affordable "missing middle" housing.

Nevertheless, the results thus far have been fairly modest, producing only about 100 additional units since the program went into effect in August 2021.

In response, the City Council is now coming back with a series of even more liberalizing reforms that allow larger buildings and even more types of housing to go in neighborhoods that were once exclusively single-family. The hope is that these reforms will make a wider range of housing options not just legal to build but practical and economical as well.

"I feel like a dam has broken in Oregon housing policy, and it's because we started getting things done," says Michael Andersen, a Portland-based housing researcher at the Sightline Institute. "I'm surprised that things that would have seemed unthinkable a few years ago, but awesome, are now on the table."

Portland has been considering changes to single-family neighborhoods since 2015. Things were kicked into overdrive in 2019 when the Oregon Legislature passed a bill requiring larger cities to allow up to four units of housing on single-family zoned properties by 2022.

To meet the state's new requirements, Portland passed the Residential Infill Project in August 2020, which legalized the construction of two-, three-, and four-unit developments on almost all single-family-zoned properties. It also created a system of density bonuses that allows duplexes to be larger than single-family homes and three- and four-unit homes to be larger than duplexes.

The city also went above and beyond state law by allowing the construction of two ADUs—colloquially known as granny flats or in-law suites—on single-family lots and eliminating the requirement that new homes come with off-street parking.

That prompted builder Eric Thompson to shift the business model of his company, Oregon Homeworks, from building larger, single-family homes to taking on these newly legal missing middle projects.

The ability to build more units on a single plot means that the city's high land costs can be spread across a larger number of homes, he says. Rather than selling a single-family home for $1 million-plus, Oregon Homeworks can produce a fourplex with each unit going for half that or even less. That's created a win-win of more revenue for the developer and more affordable units for individual buyers.

"We're able to maintain profitable projects while hitting price points that the vast majority of the buying public can afford," Thompson says.

Oregon Homeworks has constructed about 12 individual homes using the new Residential Infill Project code, including a mix of ADU projects, fourplexes, smaller homes, and remodels.

Numbers from the Portland Bureau of Planning and Sustainability show that from August 2021 to February 2022, permits have been issued for 297 units in the city's low-density zones. Of those, 127 were made possible by the Residential Infill Project, with 91 one of those units being newly legal duplexes, triplexes, and fourplexes. The rest are ADUs.

That makes Portland's abolition of single-family zoning modestly more successful than other cities that have done the same.

Minneapolis, the first American city to abolish single-family-only zoning, has allowed two- and three-unit homes to be built on residential land citywide since January 2020. Despite implementing its reform over a year before Portland, it's seen the construction of only 104 newly legal duplex and triplex units in single-family zoned areas.

One reason for the more muted effect of Minneapolis' reform is that while the city legalized duplexes and triplexes, it only allowed modest density increases for these new units in some zoning districts and under certain conditions. Portland, in contrast, permitted more liberal density increases to two-, three-, and four-unit homes across more of the city. That slightly more permissive approach is enabling slightly more housing construction.

Portland didn't do everything perfectly. While its Residential Infill Project legalized multiunit housing everywhere and created a system of density bonuses for those projects, it also shrank the maximum allowable size of structures in single-family zones.

So, while you can now build a fourplex, and that fourplex can be larger than a single-family home, both have to be smaller than a single-family home that was allowed in Portland prior to the 2020 reforms.

Portland's 2020 reforms also don't allow four-unit structures to be larger than three-unit structures. That's prevented fourplexes from including three-bedroom, family-sized units, thus limiting their appeal to developers and buyers alike.

The reforms that the City Council passed earlier this month, known as Residential Infill Project 2, attempt to rectify that. The new rules increase the maximum size of four-unit structures enough to allow for modest, family-sized units, says Thompson.

Additionally, the city legalized cottage clusters—smaller detached homes that open up onto a common yard. The state reforms that Oregon passed in 2019 require larger cities to allow these clusters but gave them until June 2022 to implement the change.

Portland has technically allowed these already, says the Sightline Institute's Andersen, but required developers to go through a heavily conditional process that gave both the public and city officials lots of input and the ability to demand changes.

In a more technical change, Portland's Residential Infill Project 2 has also made it easier to divide individual lots into multiple properties. That doesn't necessarily increase the amount of housing that can be built in an area, but it does make it easier for individual homeowners to get in on the home development business.

Andersen says that it's often difficult for individual homeowners to obtain the financing necessary to build an ADU, given how unfamiliar banks are with the product. Homeowners also often don't want to play landlord to whoever occupies the unit.

Giving property owners the ability to divide their lots more easily solves both problems.

"You can refinance your mortgage, subdivide the lot, and then sell a developable parcel in the backyard; that's something the bank knows how to deal with," says Andersen. "You don't have to be a landlord to make that happen, you can just be a neighbor. If you don't want to worry about your tenant's refrigerator after you do this project, you don't have to."

Similarly, Portland's Residential Infill Project 2 has now also tweaked its code to more easily allow townhomes—single-family attached homes that share a wall.

These can likewise be sold off as individual properties, which adds more flexibility for buyers and builders alike. Multiunit structures on the same property, in contrast, either have to be operated as rental housing or joined in a condo association.

The changes in Residential Infill Project 2 go into effect next month. Hopes are high that this will accelerate missing middle housing production. There's some evidence they already are. Thompson says his company already has three soon-to-be legal cottage cluster projects ready for the permitting process, and they expect to complete 70–80 "missing middle" housing units within the next year.

Any new private development is good news. Nevertheless, Portland is expected to add an additional 100,000 households by 2035. Meeting that growing demand will require higher rates of housing production still.

Not all of that could be met with "missing middle" housing.

The city could get a lot more apartment buildings if it got rid of its supply-crushing inclusionary zoning ordinance that mandates larger projects come with below-market-rate units. Getting rid of Metro Portland's urban growth boundary would allow more suburban development on the urban fringe.

The lesson from Portland's single-family-zoning reforms, however, is that the more rules you peel back, the more housing you'll get.

State and city officials seem to understand this as evidenced by the follow-up, liberalizing reforms they adopted this month. They could serve as a model for the rest of the country.