Will Oregon's Housing Reforms Spark a Building Boom or Be a Bureaucratic Bust?

Lawmakers are considering giving state officials the ability to rewrite NIMBY cities' restrictive zoning codes.

Oregon has one of the country's most centralized systems of land use planning, and some of the tightest local regulations on homebuilding. State lawmakers are now proposing to use the former to overcome the latter.

Working its way through the state Legislature with bipartisan support this year is H.B. 2001. It would require cities and counties to hit state-set housing production goals for both market-rate housing and subsidized affordable housing.

If localities don't hit those targets, the state could impose a wide range of remedies to boost homebuilding, from providing more infrastructure funding to making city hall issue building permits faster. Cities could even be required to adopt state-drafted model zoning amendments.

The bill's premise is twofold; the state should be building lots of both market-rate housing and subsidized housing. And because local governments like to oppose both, nudges and mandates from the state government are necessary to ensure building happens on a scale that will make sufficient room for future residents.

"The person who has almost no voice in fights about housing today is the person who doesn't yet live in the homes that aren't built yet. Because those people don't have a vote yet," says Michael Andersen of the Sightline Institute, a Seattle-based urban policy think tank. "The result is we've put one barrier after another to housing, driven up the cost of building it, banned it outright in some cases."

Oregon already has a rudimentary system for requiring communities to plan for more housing. Cities of 25,000 people or more must ensure they have enough buildable land to support projected household growth for the next 20 years. Cities can meet that requirement by expanding urban growth boundaries to allow more suburban housing, reforming their zoning codes to allow more dense infill housing, or both.

That sounds simple enough. Despite this arrangement, Oregon is one of the least affordable places in the country for both renters and homebuyers. Researchers estimate the state has underproduced somewhere between 86,000 and 111,000 housing units.

"It's become impossible to expand the urban growth boundary," says Dave Hunnicutt, president of the Oregon Property Owners Association, meaning new, cheap land isn't opened up for development at the pace it needs.

Additionally, he says, cities have largely been left to their own devices when it comes to approving housing they're supposed to be planning for. The result is absurdly long and expensive permitting processes.

"In a lot of cities, it's taking two to three years from the time you submit an application before you can get approval," he tells Reason. "Two or three years and seven figures of application costs and engineering and development costs."

Meanwhile, fair housing advocates criticize Oregon's current land use planning system for letting wealthy enclaves stay wealthy enclaves by having zoning laws that only allow for very expensive housing.

"If you have a community that is built on 10,000- and 15,000-foot lots and has 'X' number of homes and you're expecting 'X' amount of growth, they might say, well, we need 'X' number of 10,000- or 15,000-foot lots," says Allan Lazo of the Oregon Fair Housing Council.

Enter H.B. 2001, which would massively increase the state's oversight of local land use laws with the purpose of building more housing that's affordable to people up and down the income ladder.

To do this, it would create the Oregon Housing Needs Analysis (OHNA) system.

Under the envisioned OHNA system, the state's Department of Administrative Services (DAS) would conduct an analysis of housing needs based on projected regional job growth, population growth, and an "equitable statewide distribution of housing for income levels."

DAS would then use that needs analysis to hand down housing production targets to localities for both overall housing production and subsidized affordable and supportive housing for lower-income residents and the homeless.

Oregon localities would then have to come up with a housing production strategy for meeting their state-assigned targets. Their progress would then be posted on a public dashboard, which would also measure housing affordability and availability for a range of protected classes.

The framework bears close resemblance to California's cumbersome Regional Housing Needs Assessment (RHNA) system, which likewise requires local governments to continually adjust their land use laws and practices to meet state-set housing production quotas for both market-rate and below-market-rate housing.

California's RHNA has been on the books since 1969 and it's basically been a bust at facilitating new housing production. For decades, neither the state nor cities took it very seriously.

Cities would produce totally unrealistic housing elements predicting that profitable grocery stores and cemeteries would be imminently replaced by new housing. Bureaucrats in Sacramento would rubber-stamp these plans.

If a city did accidentally turn in a housing element that called for housing on a developable site, it could still erect all sorts of barriers to stop it from actually getting built.

There also never ended up being actual consequences for anti-development cities that had their housing elements rejected by the state either.

Sacramento never exercised its authority to strip housing and infrastructure funding from jurisdictions without an approved housing element. Nor did developers end up using their powers under the "builder's remedy"—which forces cities without state-approved housing elements to approve projects provided they contained some affordable units—to get their projects permitted.

In short, RHNA has failed to prevent California's current crippling housing shortage.

(A lot of California's housing reformers are bullish that this most recent RHNA cycle is actually getting cities to take their responsibilities to plan for more housing seriously, and failing that, some builder's remedy projects might actually happen. Still, getting to this point has required a flurry of new state laws amending the RHNA, the creation of whole new housing accountability units at the state level, and a statewide YIMBY revolution.)

Given RHNA's legacy of failure, one might think Oregon is crazy for trying to copy its southern neighbor's planning framework. The bet Oregon lawmakers are seemingly making is that they can learn from this history to get their own system right on the first go.

OHNA is "aspiring to learn from RHNA's mistakes," says Andersen.

Under H.B. 2001, cities that don't have a housing production strategy, aren't implementing their strategy, or are falling behind in meeting their housing production goals will get placed in a "housing acceleration program."

DAS will audit the cities in the program to determine what's impairing housing production. The city and the state will then ink an agreement to adopt measures to overcome whatever is gumming up homebuilding.

Importantly, these audits will be a routine part of the OHNA system. Contrast that with California, where it wasn't until last year that the state initiated a first-of-its-kind audit of San Francisco for its habit of shooting down housing projects in violation of state laws.

"Those accountability measures don't have to be punitive," says Hunnicutt, noting they could include things like funding for the infrastructure necessary to support new development. "The agency will have a wide range of tools in their toolbox."

But if a city doesn't abide by that agreement or demonstrates a pattern of adding "additional, unnecessary cost or delay" to homebuilding, the state could bring in the big guns. Oregon's Land Conservation and Development Commission would be empowered to order bad-acting jurisdictions to adopt state-developed model zoning ordinances, approve housing projects by right, expedite permitting times, forfeit state grants, and more.

That sweeping power lowers the potential for the OHNA to become a meaningless planning exercise. If a locality won't liberalize its development-killing zoning code, the state will go ahead and do it for them.

If the premise of the law is that cities have an incentive to fight new housing, this is a very direct way of overcoming their anti-growth biases.

But for free market types, these sweeping state powers come with a lot of risks too.

Given the equity and affordability goals in the law, there's the real possibility that the state could end up encouraging (or forcing) local governments to adopt policies that make housing production harder.

For instance, imagine a city that ends up being put in the state's housing acceleration program because it's not building enough new, subsidized low-income housing.

One possible outcome is the state requires the city to adopt an inclusionary zoning ordinance whereby new market-rate apartment buildings have to come with some below-market-rate affordable units. Since inclusionary zoning acts as a tax on new development, this remedy could mean less overall housing, not more.

H.B. 2001 also gives the state the power to force cities to adopt "anti-displacement" policies. If those include things like demolition controls or more limits on evictions, that could also impair housing supply.

"I could very easily see a scenario where an agency and a city create an enforcement situation where it becomes more difficult to build housing instead of less difficult," says Hunnicutt. Whether that happens, he says, will come down to how supply-minded staff at state agencies enforcing the law are and how courts interpret the law.

Andersen is less worried, saying H.B. 2001 is pretty clear that the goals of more subsidized housing and more housing generally are supposed to work in tandem. "The machinery of the bill is such that there would be a lot of pressure to not advance one goal at the cost of another," he tells Reason.

Libertarians may well blanch at the exceedingly bureaucratic system Oregon is proposing, with its state-determined housing needs, calls for subsidized housing construction, and plans on top of plans.

In a Rothbardian paradise where no zoning existed, none of this would be necessary, and the free market would be left to build the housing people want at prices they could afford.

We don't live in that world, however. For all its bureaucracy, H.B. 2001 offers the possibility of using state bureaucracy to overcome binding local regulations on housing construction.

Ultimately, how the bill works in practice will be determined by state agency rule making that'll take years after the bill's passage to happen. It won't be until the end of the decade that we could see the state taking enforcement actions against recalcitrant localities.

For Hunnicutt, that's the bill's main flaw.

"This bill does nothing to address our short-term issues," he says. Cities are still stuck with little ability to expand urban growth boundaries. Design review and public meeting requirements will continue to stop new housing where it's already allowed.

Other bills introduced into the Legislature do include more short-term fixes. H.B. 3414 would require local governments to grant requested variances from construction regulations for residential projects in residential zones (provided the variance doesn't endanger health and safety or ask for additional density allowances.)

Still, even if Oregon's proposed planning system manages to avoid the pitfalls of California's similar RHNA process or creating new problems of its own, it's still a far-off solution to a here-and-now housing crisis.