Real estate professionals should be aware that substantial change to residential development in Oregon is on the horizon. House Bill 2564 remains alive in the Oregon Legislature. This bill will repeal the existing prohibition on inclusionary zoning regulations in Oregon. Inclusionary zoning is a fancy term for regulations that require developers of single-family and multi-family residential developments to set aside a portion of their projects for low-income housing. These regulations are typically enforced by requiring to build a certain percentage of homes for low-income housing together, record restrictive covenants prohibiting market rate sales, and sometimes even granting the local municipality options to purchase the property at the affordable housing rate.
Inclusionary zoning measures have been in place in the state of California for many decades, and therefore proponents of inclusionary zoning and the Oregon development community were closely watching the Supreme Court of California in regards to their decision in California Building Industry Association v. City of San Jose. This decision was published yesterday, June 15, 2015. It held that California’s inclusionary zoning system is constitutional under the United States Constitution. The Court reasoned that there need not be any proportionate relationship between the costs to the developer incurred by developer’s compliance with the regulations and the developer’s specific impact on the overall lack of affordable housing stock. This decision reversed in part California’s case law that had previously required such proportionality.
If the Oregon legislature passes House Bill 2564, developers and advocates for affordable housing will need to monitor which communities in Oregon will subsequently adopt inclusionary zoning regulations, and upon challenge to the Oregon Court of Appeals and the Oregon Supreme Court, whether or not the Oregon courts will follow this California precedent.
Please feel free to contact us if you have any questions regarding inclusionary zoning or other potential regulations of development in Oregon.