Summary
Oregon lawmakers passed SB1521, requiring cities to fully offset the costs of inclusionary zoning with direct payments or incentives—a move intended to boost multifamily housing construction and address the state’s housing shortage. The bipartisan legislation comes in response to declining development under Oregon’s 2017 inclusionary zoning (IZ) law and aligns with Portland’s recent efforts to incentivize new projects.
The Upshot
Oregon’s SB1521 fundamentally changes the landscape for multifamily housing development by requiring cities to fully offset costs imposed by inclusionary zoning. Developers can now expect direct financial incentives, fee waivers, or tax abatements, making projects more viable and potentially reversing years of stalled housing production. With bipartisan support and strong momentum from Portland's recent incentive programs, Oregon is signaling a robust commitment to increasing housing supply for working families. The new law, paired with ambitious statewide goals, means that developers and investors should reevaluate project pro formas immediately to take advantage of these sweeping changes.
The Bottom Line
SB1521 marks a pivotal shift for developers, builders, and real estate investors in Oregon—making multifamily projects more financially feasible by mandating that local governments fully offset the costs of inclusionary zoning. This change removes a major barrier to new construction and opens opportunities to take advantage of direct financial incentives, fee waivers, and tax abatements. Stakeholders should reexamine their project pipelines and pro formas to leverage these legislative changes.
Ballard Spahr’s Zoning and Land Use Team can help you navigate the new IZ landscape, assess project impacts, update contracts or agreements as needed, and maximize benefits from emerging programs and incentives.
On March 4, 2026, the Oregon Legislature passed House Bill 1521 (SB1521), a groundbreaking measure that requires local jurisdictions to fully offset the cost of their inclusionary zoning (IZ) requirements. IZ requires private developers—at their cost—to set aside a percentage of new residential units for tenants making no more than 60 - 80% of the area medium income. Under this new law, cities must provide direct cash payments, fee waivers, or tax abatements to account for lost revenue stemming from IZ mandates.
SB1521 passed with overwhelming bipartisan support in both chambers of the Democratic-controlled legislature. This marks a significant policy shift: strict guardrails have now been placed around the state’s original 2017 IZ law—long recognized as a key factor behind Portland’s steep decline in multifamily construction. The change reflects a growing consensus on the need to prioritize housing production for working-class Oregonian families; even former champions of IZ advocated strongly for SB1521’s passage.
The legislation builds on recent City of Portland efforts to spur new development through incentives such as:
- Waivers of tens of thousands of dollars in impact fees
- Relaxation of certain zoning regulations
- Direct cash payments from Prosper Portland (the city’s economic development agency)
These combined measures aim to address critical shortfalls identified in Oregon’s Housing Needs Analysis, which found that over 50,000 units were “underproduced” statewide. Governor Kotek has responded with an ambitious new housing production goal designed to close this gap and meet future demand.
Ballard Spahr recommends that developers, builders, and real estate investors update their project pro formas and business strategies with these substantial legislative and programmatic changes in mind. For more information or assistance analyzing how SB1521 may impact your projects or investments in Oregon, please contact our team for guidance tailored to your needs.
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