Portland advances design review reforms and housing strategy amid sharp Q3 construction drop—especially in Multnomah County—and permitting bureau job cuts.
Low-angle view of the 1900 Building in downtown Portland, home to the Bureau of Development Services. Photo: Portland Appraisal Blog (CC BY-SA 4.0)
The Portland region’s housing market remains cautious entering late 2025, with new construction activity down sharply and permitting challenges persisting. Against this backdrop, local and state leaders are advancing targeted reforms to ease regulatory barriers and incentivize production—though staffing reductions at the city’s permitting bureau highlight short-term friction.
Market Challenges and Permitting Strain
Third-quarter data for the Portland region showed new construction sales falling 25% year-over-year, comprising just 9% of total single-family transactions—with a steep decline in Multnomah County, where sales dropped roughly 48% (from 91 to 47).
Builders retreated amid financing constraints and longer marketing times, with average days on market rising to nearly 52 and luxury segments seeing extended exposure. This slowdown directly impacted the Portland Bureau of Development Services, which relies almost entirely on permit fees for funding. Reduced construction activity led to revenue shortfalls of approximately $3 million per month earlier in the year, prompting cuts of 72 positions—about 15% of staff. Fewer reviewers and inspectors risk further delays in approvals, creating a challenging cycle just as reform efforts aim to accelerate entitlements.
Portland’s Design Review and Unified Strategy Advances
In response, the Portland City Council unanimously approved a resolution in December directing the city administrator to study reforms to the design review process, including potential moratoriums and exemptions for housing projects. The 120-day report—due by April 2026—will analyze economic impacts over the past and next five years, review overlay zones and guidelines, and propose code changes to balance efficiency with design standards.
These steps align closely with the city’s Unified Housing Strategy outlined in a December memo, which prioritizes permitting improvements: streamlining user experience, consolidating processes under a single authority, expediting affordable projects, and exploring funding model reforms. The strategy also emphasizes production goals through incentives like Inclusionary Housing expansions, rezoning for capacity in corridors and centers, and support for office-to-residential conversions.
Statewide Support and Broader Momentum
State-level actions provide reinforcement. The 2025 legislative session extended Oregon’s Vertical Housing Tax Exemption program through 2031, continuing partial property tax relief for mixed-use vertical projects with affordable components. Gov. Tina Kotek has also called for broader permitting and land use streamlining, including fast-track options for job-creating developments and clearer timelines to reduce appeals and delays.
Complementing these, recent state zoning progress—such as the new OHNA model code adopted earlier this month—offers cities tools for neighborhood-scale multifamily development. (See yesterday’s brief for details.)
Appraisal Implications
For appraisers in the Portland metro area, these layered reforms signal potential shifts in development pipelines over the coming years. Short-term, bureau staffing reductions may extend entitlement timelines, affecting feasibility analyses for proposed construction or renovation assignments. Longer-term, successful streamlining and incentives could gradually increase multifamily and mixed-use supply, influencing comparable selection—particularly for vertical or conversion projects qualifying under the extended tax exemption. Monitoring implementation will be key, as market caution persists and measurable production gains may lag into 2026–2027.
Sources & Further Reading
Portland design review reform resolution and study approval: DJC Oregon (Dec 9)
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Oregon’s new OHNA model zoning code removes barriers to small-scale neighborhood apartments in Portland-area cities, with gradual changes expected where market conditions support them.
Three-story, 16-unit apartment building on a standard Portland residential lot, illustrating potential density under middle housing reforms 11 NE 55th Ave, Portland, Oregon – December 2025 Photo: Abdur Abdul-Malik, Certified Residential Appraiser
New Statewide Model Zoning Code for Middle Housing
Oregon’s Land Conservation and Development Commission unanimously adopted new rules under the Oregon Housing Needs Analysis (OHNA) framework on December 4, 2025, establishing a statewide model zoning code to accelerate housing production in cities that underperform relative to peers. The amendments build on prior middle housing reforms by moving away from strict unit counts per building toward form-based regulation—controlling height, footprint, lot coverage, and floor area ratios instead.
In practice, the model code re-legalizes neighborhood-scale apartment buildings (typically three to four stories) that have long been prohibited in low-density residential zones. It permits duplexes, triplexes, fourplexes, townhouses, and cottage clusters outright, with bonuses such as additional height or reduced courtyard sizes when projects include accessible units or deeper affordability. Parking requirements are significantly reduced or eliminated for many of these housing types.
Affected cities—primarily Oregon’s larger municipalities, including Portland, Beaverton, Gresham, Hillsboro, and others in the metro area—must align zoning with the model code if they fail to meet production targets, though implementation timelines vary by jurisdiction and can extend several years.
Appraisal Implications
Residential Properties
These rules expand as-of-right development options on residential lots, particularly corner or larger parcels in single-family zones. Highest-and-best-use analyses may now reflect stronger redevelopment potential for small multifamily or middle housing types in cities subject to the model code.
Although the model code removes unit-count caps, form-based limits on height, coverage, and floor area ratio keep development firmly neighborhood-scale—typically supporting 6–12 units on a standard lot, not the higher densities seen in multi-dwelling zones. While larger projects, such as a 16-unit building, are now more feasible, it is important to remember they remain a different undertaking: they involve more complex regulatory review, commercial-grade construction requirements, specialized financing, and contractor expertise that many local rehabbers and small builders are not equipped to handle. Market activity will likely continue to favor rehabilitation of existing homes alongside gradual small-scale infill.
New construction of even single-family homes remains a regular occurrence in Portland despite years of higher density allowances—often with an ADU added. Many builders are primarily set up for that work and not much else. While residential appraisers need to be mindful of what is possible with the new zoning allowances, they must analyze what the market is actually doing.
Income-Producing and Multifamily Properties
Form-based standards and reduced parking mandates lower barriers to feasible small apartment or townhouse projects. Affordability and accessibility bonuses provide quantifiable density incentives that investors can underwrite with greater certainty. Over time, this may broaden comparable selection for emerging middle housing product.
These changes simply remove long-standing barriers to the creation of small-scale apartment buildings in cities that previously had hostile zoning laws for such structures. It does not mean they will sprout on every street, but we may gradually begin to see more of them where it makes economic and market sense.
Portland’s Temporary SDC Exemption for New Housing Units (2025–2028): PortlandAppraisalBlog
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CODA
Are you an agent in Portland and wonder why appraisers always do “x”?
A homeowner with questions about appraiser methodology?
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And if you’re in need of appraisal services in Portland or anywhere in the Portland Region, we’d be glad to assist.
Fannie Mae’s SEL-2025-10 expands ADU eligibility to up to three per single-unit property and enhances renovation financing—relevant implications for Portland metro appraisals and housing flexibility.
Detached guest house on a residential property, illustrating expanded ADU eligibility Via Canva Pro
Fannie Mae issued Selling Guide Announcement SEL-2025-10 on December 10, 2025, introducing updates to renovation lending programs and property eligibility guidelines.
These changes support greater flexibility for home improvements and accessory units in conventional financing.
Renovation Lending Updates
HomeStyle Renovation loans now permit upfront disbursements of up to 50% of total renovation costs at closing for materials, permits, architectural or design fees, and borrower deposits.
For manufactured homes, the previous $50,000 renovation cost cap has been removed; costs may now reach 50% of the as-completed appraised value, aligning with site-built properties.
Limited cash-out refinances under this program can include buying out a co-owner’s interest—such as in inheritance or divorce scenarios—alongside renovations, with no cash back to the borrower.
HomeStyle Refresh, rebranded from HomeStyle Energy and effective for applications received on or after March 31, 2026, finances up to 15% of the as-completed appraised value for cosmetic or functional upgrades, disaster resiliency improvements (e.g., storm barriers or wildfire-resistant roofing), and environmental remediation (lead, asbestos, or mold).
Energy reports are often not required under this streamlined option.
Interior renovation work on a residential property Via Canva Pro
ADU and Manufactured Housing Expansions
Effective March 31, 2026, and requiring compliance with UAD 3.6, Fannie Mae broadens accessory dwelling unit (ADU) eligibility.
Single-unit properties may now include up to three ADUs if permitted by local zoning.
Two- to three-unit properties qualify for ADUs provided the total unit count does not exceed four.
Standard manufactured homes, including single-wide models, are eligible for one ADU classified as real property.
MH Advantage properties support multiple ADUs, with the overall unit total capped at four.
These expansions also extend eligibility to two- to four-unit and multi-story manufactured homes.
While a small subset of the overall market, the Portland Region sees about 300 sales a year of manufactured homes on owned land. These provisions will materially expand options for manufactured home owners.
In the Portland metro area, where local policies already encourage middle housing and ADUs to address supply constraints, these guidelines complement recent incentives such as the temporary SDC exemption for new housing units.
Appraisal Implications
The updates increase reliance on as-completed appraised value for determining loan-to-value ratios, renovation limits, and eligibility.
Appraisers serving the region may see growing demand for projected-value analyses on properties with multiple ADUs, manufactured home additions, or significant renovations.
Highest-and-best-use conclusions will need to carefully reflect local zoning allowances and market acceptance of these configurations.
Lenders and homeowners exploring alternatives to jumbo financing may find added flexibility here, especially alongside the recently announced higher FHA 2026 loan limits in the Portland metro.
Sources & Further Reading
Fannie Mae Selling Guide Announcement SEL-2025-10: Official Document
Portland’s Temporary SDC Exemption for New Housing Units (2025–2028): PortlandAppraisalBlog
The 2024 Portland Region Manufactured Housing Market in Review: PortlandAppraisalBlog
Thanks for reading—I hope you found a useful insight or an unexpected nugget along the way. If you enjoyed the post, please consider subscribing for future updates.
CODA
Are you an agent in Portland and wonder why appraisers always do “x”?
A homeowner with questions about appraiser methodology?
If so, feel free to reach out—I enjoy connecting with market participants across Portland and the surrounding counties, and am always happy to help where I can.
And if you’re in need of appraisal services in Portland or anywhere in the Portland Region, we’d be glad to assist.
This week brought a mix of developments in the Portland region’s housing landscape, from persistent vacancies in affordable units to new grants aimed at community outreach, transit adjustments, cost-relief measures for developers, and a modest expansion in FHA financing options. While no single overriding theme tied every story together, the updates highlighted ongoing efforts to address supply barriers and accessibility—whether through administrative support, infrastructure trade-offs, or buyer eligibility—against a backdrop of stubborn affordability pressures in the metro area. Appraisers tracking these shifts see subtle influences on valuation approaches, particularly in multifamily stability and development feasibility.
Sunday, December 7: Affordable Housing Vacancy Paradox
Empty interior of an income-restricted apartment unit in Portland, symbolizing the region’s persistent vacancies in affordable housing programs Via Canva Pro
Portland’s affordable housing efforts face a stark contradiction: despite progress in producing income-restricted units through inclusionary zoning, 1,863 apartments remain vacant across the region’s subsidized stock—a 7.4% vacancy rate in a portfolio of over 25,000 units. Funding shortfalls at Home Forward, including deep federal voucher cuts, combined with administrative delays and rising costs, have paused voucher issuances and extended waitlists, leaving units unoccupied even as homelessness climbs.
This bottleneck undermines the pipeline from new construction to actual occupancy, with broader implications for market stability. In the Portland–Vancouver–Hillsboro MSA, where the FY 2025 median family income stands at $124,100 for a four-person household, these vacancies highlight how policy successes in unit creation can falter at the activation stage.
Appraisers encounter direct risks here, particularly in multifamily and mixed-income assignments. Vacancies exert downward pressure on potential gross income and net operating income, necessitating careful adjustments in the income approach—longer projected absorption periods, elevated vacancy allowances, and potentially higher capitalization rates to account for stabilization delays. For highest and best use analyses, extended lease-up timelines due to voucher bottlenecks may shift underwriting assumptions toward more conservative horizons.
Certified General appraisers handling investment-grade properties must segregate deed-restricted comparables rigorously from market-rate sales, as the growing inventory of restricted units introduces pricing disparities that could lead to incomplete analyses if not addressed. In submarkets with concentrated affordable projects, these factors amplify risks of overvaluation if administrative hurdles are overlooked.
Monday, December 8: East Portland Housing Capacity Grants
Via Canva Pro
Building on the challenges of vacant affordable units, the Portland Housing Bureau opened a new RFP for $180,000 in grants targeted at building community and housing capacity in East Portland—areas east of I-205 that often face higher displacement risks and outreach gaps. Up to two nonprofits could receive $90,000 each for activities like resident education, leadership development, and engagement in housing planning processes.
This funding emphasizes flexible support for organizations already working in underserved submarkets, aiming to improve access to existing resources rather than fund large-scale development. By strengthening nonprofit infrastructure, the initiative seeks to bridge administrative and informational barriers that contribute to underutilized housing stock.
For appraisers, these grants signal potential enhancements in neighborhood stability over time. Improved outreach could gradually reduce vacancies in income-restricted units by facilitating better matches between households and available programs, indirectly supporting occupancy assumptions in multifamily valuations.
In highest and best use considerations for properties in East Portland, heightened community engagement may bolster arguments for resilient, accessible residential uses. However, appraisers should remain cautious of persistent displacement pressures; overlooking outreach deficiencies could lead to overly optimistic projections in market stability analyses for transit-oriented or affordable-focused submarkets.
Tuesday, December 9: Oregon DOJ Settlement on Home Liens
Via Canva Pro
The Oregon Department of Justice reached a settlement resolving liens placed by MV Realty on hundreds of Oregon homes, clearing title encumbrances for affected properties across the state, including the Portland region. The agreement removes restrictions that had clouded marketability for homeowners who entered long-term listing agreements.
This resolution restores clear title for participants, eliminating potential barriers to sale or refinancing. In a market where title issues can delay transactions or affect perceived value, the settlement provides relief for individual residential properties previously impacted.
Appraisers reviewing assignments involving formerly encumbered homes must verify the settlement’s application to ensure no lingering clouds on title, as unresolved liens could otherwise trigger scope limitations or require extraordinary assumptions. For broader market analyses, the clearance reduces minor frictional risks in the sales comparison approach, though the overall impact remains limited given the settlement’s scope.
Wednesday, December 10: TriMet Evening Bus Reductions
TriMet FX2–Division bus at the OMSI SE Water station in Southeast Portland. Photo: Truflip99 via Wikimedia Commons (CC BY 4.0)
TriMet rolled out the first phase of targeted evening service cuts on several bus lines, responding to a projected $300 million budget shortfall as operating costs have surged over 50% since 2019 while ridership lingers at roughly two-thirds of pre-pandemic levels. Reductions affect low-ridership hours on routes like FX2–Division and others, shifting frequencies to hourly in many cases.
These changes introduce subtle frictions for transit-dependent residents, particularly evening-shift workers or families in outer submarkets, potentially influencing tenant preferences and renewal patterns.
Appraisers focused on multifamily properties should monitor for emerging effects in affected corridors. Reduced evening access could translate to minor softness in occupancy or rents for assets serving low-vehicle households, warranting adjustments to income projections or closer scrutiny of location amenities.
In highest and best use evaluations for transit-oriented developments, ongoing fiscal pressures on public transportation raise risks of diminished connectivity advantages, potentially favoring car-oriented alternatives in certain submarkets and complicating long-term valuation stability.
Thursday, December 11: Temporary SDC Exemptions for New Housing
Via Canva Pro
Portland implemented a temporary waiver of system development charges (SDCs) for most new residential units through 2028, foregoing an estimated $63 million in revenue to spur production of around 5,000 additional homes. Average per-unit fees often exceed $20,000—sometimes reaching $35,000 for single-family—representing a meaningful slice of development costs.
The exemption applies automatically to eligible permits, with early indicators showing strong developer interest, including hundreds of inquiries skewed toward single-family projects alongside larger multifamily proposals.
This policy directly lowers barriers to new supply in a region where new construction sales have lagged. Savings scale with project size, offering substantial relief for multifamily developers and potentially accelerating inventory in constrained submarkets.
Appraisers benefit from adjusted cost approach inputs: lower replacement costs for under-construction or proposed residential properties can support higher feasibility conclusions, particularly in marginal locations. The waiver strengthens highest and best use arguments for residential redevelopment, improving projected returns.
Yet trade-offs merit attention—foregone funds delay infrastructure upgrades, including transportation improvements that intersect with transit challenges. The waiver introduces long-term risks against near-term production gains.
Friday, December 12: RSO Reallocation and HUD Policy Updates
The paradox of empty apartments amidst a backlog of applications Via Canva Pro
A significant $20.7 million reallocation emerged in the context of local rental assistance and stabilization programs, accompanied by reversals of previously approved rent increases for certain covered properties and a temporary pause in new HUD policy implementation that impacts subsidized housing operations in the Portland area.
These adjustments reflect responsive shifts in funding priorities and regulatory oversight, potentially stabilizing expenses for tenants in assisted units while altering short-term revenue projections for landlords and investors in affected multifamily assets.
The reallocation redirects resources toward immediate rental support needs, while the reversal of rent hikes—tied to earlier administrative approvals—restores lower allowable increases, providing relief amid ongoing affordability strains but introducing uncertainty in cash flow forecasting.
A HUD policy pause further delays changes that could have influenced contract renewals or compliance requirements for project-based Section 8 and similar programs, giving operators additional time to adapt but prolonging ambiguity in long-term planning.
For appraisers valuing rent-stabilized or subsidized multifamily properties, these developments demand heightened vigilance in the income approach. Sudden reversals in allowable rents necessitate conservative growth assumptions and thorough verification of current versus projected expense ratios, as policy volatility can elevate perceived risk.
Certified General appraisers must incorporate these pauses and reallocations into capitalization rate selections—potentially justifying higher rates to reflect regulatory uncertainty—or risk overvaluation in assets reliant on public funding streams. In highest and best use analyses, frequent policy shifts underscore the importance of stressing scenarios that account for administrative reversals, ensuring robust support for conclusions in a regulated environment.
Saturday, December 13: 2026 FHA Loan Limits in Portland Metro
Single-family neighborhood in Portland, Oregon–representative of homes affected by 2026 FHA loan limit of $701,500 Via Canva Pro
The FHA announced its 2026 loan limits, raising the one-unit ceiling in the Portland–Vancouver–Hillsboro MSA to $701,500—a modest $5,750 increase from 2025. This adjustment expands low-down-payment eligibility to roughly 48 additional detached homes sold in recent quarters that previously sat just above the prior threshold.
While the bump is small, it broadens 3.5% down-payment options for mid-range buyers in core metro counties, with minimal change for higher-priced segments where FHA usage remains low.
In addition to developing an opinion of value, appraisers on FHA assignments focus primarily on identifying property deficiencies or conditions that could render a home ineligible for financing—lenders handle the loan-to-value calculations against the limit using the appraised value alongside borrower qualifications. Lenders handling FHA assignments with case numbers assigned on or after January 1, 2026, will apply the new $701,500 ceiling across the core Portland metro counties.
Taken together, the week’s stories paint a picture of incremental policy responses to Portland’s entrenched housing challenges—vacancies despite production gains, targeted grants to improve access, cost relief to boost supply, and financing tweaks to aid buyers—all while navigating fiscal constraints in transit and infrastructure. Appraisers see recurring themes of administrative and funding hurdles that demand careful risk adjustments in income and cost approaches.
These developments underscore the need for nuanced analyses that account for policy-induced variables, from vacancy drags in affordable segments to feasibility boosts via fee waivers. In a market still grappling with supply shortages, such measures offer guarded optimism for added inventory and stability.
Thanks for reading—I hope you found a useful insight or an unexpected nugget along the way. If you enjoyed the post, please consider subscribing for future updates.
Question: Which of this week’s updates—whether the SDC waivers, FHA limit adjustment, or affordable vacancy insights—do you see having the biggest impact on your next appraisal assignment or investment decision in the Portland region?
CODA
Are you an agent in Portland and wonder why appraisers always do “x”?
A homeowner with questions about appraiser methodology?
If so, feel free to reach out—I enjoy connecting with market participants across Portland and the surrounding counties, and am always happy to help where I can.
And if you’re in need of appraisal services in Portland or anywhere in the Portland Region, we’d be glad to assist.
Julia West House, a 12-story mass timber tower in downtown Portland, opens with 90 units (89 regulated) of supportive housing for seniors amid ongoing regional affordability challenges.
Julia West House, Oregon’s tallest mass-timber affordable senior housing building, viewed from the street corner in downtown Portland. 580 SW 13th Ave, Portland, Oregon – December 2025 Photo: Abdur Abdul-Malik, Certified Residential Appraiser
Julia West House Opens in Downtown Portland
The Julia West House, a 12-story mass timber apartment tower in downtown Portland’s West End, officially opened in late 2025, delivering 90 units of permanent supportive housing targeted at formerly unhoused seniors. Located at 580 SW 13th Avenue on a former surface parking lot owned by First Presbyterian Church—the site of a historic home previously used for church programs—the project provides 90 total units: 89 regulated affordable units (60 studios and 30 one-bedrooms) reserved for individuals earning 30% or less of area median income, with the remaining unit serving as an unrestricted on-site manager apartment.
The tower retains the name Julia West House in honor of Julia West Lindsley, wife of the church’s first pastor, continuing a legacy of community service at the address. Situated directly across SW 13th Avenue from the Sam Galbreath Alder House—a renovated income-restricted single-room occupancy building also offering supportive services—the location creates a concentrated hub for permanent supportive housing in the West End. This focus addresses a critical segment of need: nearly a quarter of Portland’s unhoused population is age 55 or older, with BIPOC communities disproportionately represented.
Before-and-during views of the Julia West House site at 580 SW 13th Avenue in downtown Portland: pre-demolition historic structure (2023, top) and cleared site (2024, bottom) Image: Google Street View (composite screenshot)
On-site wraparound services, delivered by Northwest Pilot Project, Native American Rehabilitation Association of the Northwest, and Community for Positive Aging, include case management, health support, and programs to promote aging in place and housing stability. As Oregon’s tallest mass timber residential structure at 145 feet, the building utilizes cross-laminated timber floors and glulam beams above a concrete podium, enabled by Type IV-B heavy timber provisions. This construction method reduced embodied carbon, shortened the schedule by approximately 14 weeks, and incorporates biophilic and trauma-informed design elements—such as exposed wood ceilings—for resident well-being.
Financing combined public and private sources, including 4% Low-Income Housing Tax Credits and contributions from the Portland Clean Energy Community Benefits Fund, demonstrating a viable model for deeply affordable urban infill.
The Julia West House, a modern multistory building in downtown Portland, stands tall with its grid of windows and light brick facade—captured from a low angle that emphasizes its architectural presence. 580 SW 13th Ave, Portland, Oregon – December 2025 Photo: Abdur Abdul-Malik, Certified Residential Appraiser
Appraisal Implications
Residential Properties
Developments like Julia West House expand the supply of deeply affordable and supportive rental housing in the Portland metro area, where single-family inventory remains limited. These projects provide market evidence of ongoing efforts to address affordability and homelessness in central locations with strong transit access, informing highest and best use considerations for nearby properties and enhancing neighborhood marketability.
Multifamily Properties
Mass timber construction in high-density supportive projects sets emerging precedents for sustainable building practices, potentially affecting future replacement costs, capitalization rates, and development feasibility in urban zones. Restricted affordable units, supported by Low-Income Housing Tax Credits and similar programs, require appraisers to carefully isolate restricted interests from fee simple value. While challenges persist—as illustrated by the 1,863 vacant regulated units reported earlier this week—successful openings like Julia West House highlight effective delivery models for mission-driven housing with integrated services.
Market Context
Q3 2025 median prices for detached single-family homes stood at $600,000 regionally and $555,000 in Multnomah County, reinforcing the ongoing need for affordable alternatives beyond the for-sale market. Purpose-built supportive housing adds targeted supply that supports broader regional stability without directly competing in the single-family segment.
Sources & Further Reading
Julia West House opening and supportive housing overview: CoStar News
Thanks for reading—I hope you found a useful insight or an unexpected nugget along the way. If you enjoyed the post, please consider subscribing for future updates.
CODA
Are you an agent in Portland and wonder why appraisers always do “x”?
A homeowner with questions about appraiser methodology?
If so, feel free to reach out—I enjoy connecting with market participants across Portland and the surrounding counties, and am always happy to help where I can.
And if you’re in need of appraisal services in Portland or anywhere in the Portland Region, we’d be glad to assist.