Oregon’s $75 Million Loan Program Targets Middle-Income Housing Crisis

Oregon is tackling its housing affordability crisis with a bold new initiative: a $75 million loan program designed to spur the construction of middle-income housing. Approved by state lawmakers last year, this program represents a meaningful departure from conventional approaches and is gaining national attention as a potential model for other states grappling with similar challenges.

The “Moderate Income Revolving Loan program” operates by channeling funds through Oregon cities and counties.Developers receive zero-interest loans—functioning as grants under state statute—to finance middle-income housing projects. In return, developers must rent or sell units to households earning no more than 120% of the area’s median income.Instead of paying property taxes, developers repay the loans as fees to local governments, which then repay the state. This revolving structure is designed to ensure the program’s long-term sustainability,allowing for continuous funding of new projects.

Oregon’s homebuilding sector has faced significant headwinds, including high interest rates, according to Oregon’s chief economist, Carl Riccadonna. Riccadonna recently emphasized the state’s critical need for 29,500 new housing units annually to keep pace with projected population growth. He noted that Oregon permitted a little less than half that last year, highlighting the urgency of the situation.

Andrea Bell, director of Oregon Housing and Community Services, anticipates the $75 million investment will generate between 2,000 and 3,000 new homes. The agency estimates a cost of $30,000 per unit, supporting a projection of 2,500 homes. While the timeline for project completion remains uncertain, the zero-interest nature of the loans is intended to make them competitive, feasible, and flexible, according to Bell.

This program marks a shift from traditional government subsidies, which have largely focused on deeply affordable housing, frequently enough referred to as “capital A” affordable housing. However, states across the U.S. are increasingly exploring similar initiatives to address the broader middle-income housing shortage.

“This program is an essential piece of the affordability puzzle,lending a hand to our local partners who need a little help to make the balance sheet make sense,”

Gov. Tina Kotek

State Rep. Pam Marsh, D-Ashland, chair of the House Committee on Housing and Homelessness, emphasized the importance of this middle-income initiative, even while acknowledging the ongoing need for deeply affordable housing. She explained that without investment in middle-income housing, Oregon woudl miss out on the “filtering” effect, a key economic principle where homes become available to families of different income levels as they age. Simply put, she said, homes won’t have a healthy “churn” among residents as families climb up the income ladder and move to more expensive homes.

State sen.Dick Andersen, R-Lincoln City, vice chair of the Senate committee on Housing and Progress, described the loans as an innovation that will “help with the cost of housing projects.” Proponents argue that middle-income programs can achieve new construction with lower subsidies compared to deeply affordable housing.Such as,a proposed $700 million investment in the Local Innovation and Fast Track (LIFT) program is projected to yield 7,000 rental units,representing a public subsidy of $100,000 per apartment. this figure, however, doesn’t encompass the numerous other funding sources developers typically need to secure project viability.

While acknowledging potential concerns, Andrea Bell emphasized that affordable and middle-income housing programs are not mutually exclusive. “We have to come from a place of abundance and opportunity,” she stated, highlighting the program’s aim to expand housing options for a broader range of Oregonians.

Revolutionizing Housing: Oregon’s Bold $75 Million Loan Program for Middle-Income Homes

When a State Role Reverses: Tackling Housing Affordability through Innovation

Senior Editor, World Today News

Interview with dr. Emily Thompson, Housing Policy Expert and Professor at Portland State University

Senior Editor (SE): Dr. Thompson, last year’s announcement of Oregon’s new $75 million loan program has captured the attention of housing experts around the nation. To start, can you share your thoughts on this innovative approach and its potential to serve as a model for other states grappling with housing crises?

Dr. Emily Thompson (ET): The Oregon “Moderate Income Revolving Loan Program” certainly stands out as a transformative approach. Customary methods have often gravitated towards deeply affordable housing, sometimes overlooking the crucial segment of middle-income housing. By channeling zero-interest loans through cities and counties, this program uniquely leverages the existing infrastructure while targeting households within 120% of the area’s median income. This pivot is not just a financial mechanism; it represents a broader shift in understanding housing affordability. It’s a model that other states might consider,especially as they seek sustainable,long-term solutions rather than short-term fixes.

SE: The concept of using zero-interest loans as grants is quite innovative.Could you elaborate on this revolving structure and its potential for long-term sustainability?

ET: Absolutely.The revolving nature of this fund is central to its long-term viability. Instead of a one-time subsidy ended by budget constraints, this program allows continuous funding for new projects. Developers take zero-interest loans, making their projects financially feasible. In lieu of property tax contributions to local governments, they repay the state through structured fees—wich are then funneled back into the program. This ensures a cycle of reinvestment, allowing for the initiative to adapt and expand over time. Essentially, this structure addresses both the immediate need for middle-income housing and the future challenges of housing development.

SE: Some experts argue that the availability of middle-income housing can lead to broader societal benefits. Could you discuss the “filtering” effect and its importance in this context?

ET: the “filtering” effect is a critical economic principle in housing policy. It describes how homes can transition between different income groups over time. By fostering middle-income housing, Oregon encourages a healthy influx and turnover within its communities. Without such housing,middle-income families often struggle to access affordable homes,impeding their upward mobility. This can stymie economic diversity and growth. When these families find stable homes, it sets the stage for fewer deeply affordable units to be available as more families advance economically and leave lower-tier properties. Essentially, this creates a balanced churn that is vital for community growth and economic stability.

SE: Many worry about managing the balance between deeply affordable housing and middle-income housing. How dose the new program address this concern?

ET: This is where the program’s design shows its strategic prowess. Experts, like Andrea Bell of the Oregon Housing and Community Services, emphasize that building a variety of housing options isn’t about taking one away from the other. Rather,it’s about creating more opportunities across the board. The long-term backdrop is a housing ecosystem where affordable types exist in harmony, each serving a distinct role. The notion of mutual exclusivity between affordable and middle-income housing is gradually being replaced with a narrative of abundance and prospect. Proponents argue that diversified investments yield a multiplier effect, where increasing middle-income housing indirectly supports deeply affordable segments by freeing up existing stock.

SE: With housing cost pressures mounting, notably due to high interest rates and limited permits, how optimistic are you about the program meeting Oregon’s housing needs?

ET: The urgency is clear. Carl Riccadonna, Oregon’s chief economist, has pinpointed the state’s need for approximately 29,500 new housing units annually, only managing a fraction last year. Such disparity illustrates the gap the program aims to bridge. While it’s enterprising, optimism is warranted due to the program’s thoughtful structure. By making projects financially competitive and feasible, and the program’s versatility, it addresses some core barriers directly. on a practical front, if the projected outcome is accurate—2,000 to 3,000 new homes from a $75 million investment—this will be a substantial step forward. If effectively executed, it will not just fill immediate gaps but also allow recalibration to address ongoing issues.

SE: how does this program tie into broader trends in affordable housing across the United States?

ET: The nation is indeed watching Oregon’s initiative closely, as it highlights a critical shift. While most states still focus heavily on deeply affordable housing, many are becoming increasingly conscious of the middle-income housing shortage. Programs similar to Oregon’s are popping up, underscored by a growing realization that addressing middle-income housing directly can relieve broader market pressures. Consequently, this opens up a dialogue about housing as a spectrum of opportunity rather than a series of isolated problems. It invites policymakers to rethink their strategies, aiming for a more thorough approach.

Echoes of the future

Oregon’s innovative $75 million loan program is not just a beacon for the state but a potential model reflecting evolving perspectives in housing policy across the U.S. By addressing the middle-income housing gap with a revolving loan structure, the state underscores the critical need for diversity in housing solutions.With thoughtful execution and an eye on long-term sustainability, Oregon might just pave the way for an affordable housing renaissance.

We encourage you to join the conversation. Share your thoughts in the comments or on social media using #HousingInnovation. What do you think about oregon’s approach,and how might it affect your community?