Available data from the U.S. Census Bureau indicates that Oregon is not meeting Gov. Tina Kotek’s housing production goal of 36,000 new homes per year, nor is it on pace to address the need identified by the 2024 Oregon Housing and Community Services report to add half a million units in the next two decades. In 2023, 17,697 residential construction permits were issued, according to Census Bureau data. In 2024, the number of residential permits issued fell to 14,270. This year, through February, only 1,864 residential permits were issued; that puts Oregon on pace for a total of 11,184 permits in 2025.

Given the clear need for more housing, House Bill 2138, currently proceeding through the Oregon House, would adjust HB 2001, 2019’s middle housing bill. HB 2001 requires local governments to allow duplexes, triplexes, quadplexes, cottage clusters, or townhouses in all single-family zones. HB 2138 seeks to build upon HB 2001 by clarifying and in many cases strengthening Oregon’s commitment to construct more middle housing.

A key purpose of the bill is to clarify that middle housing development opportunities include properties that are already developed. This was unclear under HB 2001. Properties improved with a single-family dwelling would now be explicitly allowed to add middle housing developments. Existing units on property proposed for middle housing may remain and be sold separately from proposed multifamily units. HB 2138 would also expand the allowance for middle housing to urban unincorporated lands within the Metro area — notably the large urban unincorporated areas of Washington and Clackamas counties. 

Other features of the bill consist of an allowance of up to three times the maximum dwelling unit density for single-room occupancies in multifamily zones, subject to certain exceptions, and the requirement that tree preservation and planting regulations applied to housing development must be “clear and objective.” It also eliminates appeals of middle housing and other expedited land divisions except any submitted by the applicant.

The bill adds bonuses related to the development of accessible or affordable middle housing units. Qualifying accessible units are those that comply with accessibility requirements in the state building code, and affordable units are those subject to an affordable housing covenant enforceable for at least 10 years and available to families with incomes below 120 percent of the area median income.

Builders of duplexes and triplexes with one or more accessible or affordable units are allowed one bonus market-rate dwelling unit. Builders of townhouses, quadplexes, or cottage clusters with one or more accessible or affordable units are allowed two bonus units. To make it easier to determine sales or rental price limitations, the Oregon Department of Administrative Services will be required to publish maximum sales prices and income affordability requirements. The bill also requires cities to allow appropriate increases to the developable area, floor area, height, or density requirements to accommodate these bonus units.

The bill would apply to any city with a population of at least 25,000 throughout the state, 1,000 or more within the Metro area, and certain coastal cities regardless of population.

Notable, too, is the new legislative mandate for the Department of Land Conservation and Development to adopt rules that address the more complicated areas that HB 2001 did not cover. These rules would create allowances for manufactured or prefabricated middle housing, establish parameters for “unreasonable cost and delay” currently prohibited under Oregon law, refine the criteria for middle housing design and discretionary criteria adopted for certain types of housing developments, and propose model system development charge ordinances. All of this must be done with an eye to increasing housing production and improving efficiency of the development process.

The bill has gained several amendments since introduction, but it currently remains on track to pass. It’s currently before the House Committee on Housing and Homelessness, which is expected to refer to a floor vote.

HB 2138 comes at a time when the state finds itself at a critical juncture. Recent legislatures have passed laws aimed at creating more housing and are either coming into full effect or waiting to achieve the desired impact. For example, SB 1537, enacted last year, created the new Housing Accountability and Production Office (now being set up) to allow one-time expansions of urban growth boundaries, and provided housing developers with certain statutory adjustments to development regulations. When these new tools have been fully combined, proponents argue, the days of large-lot mandates and a nightmarish approval process will be well and truly over. Only time will tell if they are correct.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.

Column first appeared in the Oregon Daily Journal of Commerce on April 18, 2025.