Oregon’s New Housing Laws: A Turning Point for Middle Housing

In July 2025, Governor Tina Kotek signed into law House Bill 2138, a landmark measure designed to accelerate the development of middle housing, such as duplexes, triplexes, fourplexes, cottage clusters, accessory dwelling units (ADUs), and single‐room occupancies (SROs), across Oregon’s urban areas and unincorporated lands. This is part of a broader legislative package aimed at dismantling zoning barriers and boosting housing supply in response to a longstanding shortage.

What HB 2138 Does

• Expands where middle housing must be allowed, extending zoning requirements into urban unincorporated lands beyond city limits.
• Erases private deed and HOA restrictions retroactively, invalidating covenants that forbid duplexes, triplexes, ADUs, or higher density, even if established before the 2019 HB 2001 reform.
• Limits local governments’ ability to reduce density allowances within urban growth boundaries, ensuring local regulations cannot roll back density rights previously granted.
• Reforms expedited land division rules, treating approvals for middle housing land divisions as land‐use decisions exempt from public hearing or appeal delays. Plats that combine conventional and middle‐housing divisions must be reviewed within 120 days.
• Creates a rule‐making and grant framework, mandating the Land Conservation and Development Commission (LCDC) to adopt implementation rules by January 1, 2028, and allocating nearly $4 million to rule development and technical assistance.

HB 2138 took effect immediately (as an emergency measure), with most provisions becoming operative on January 1, 2027.

Why This Matters for Multifamily Housing

HB 2138 builds on Oregon’s earlier reforms, such as HB 2001 in 2019, which legalized middle housing on single‐family lots in cities with 25,000+ residents. But the implementation had been uneven. Sightline Institute estimates many thousands of new units have been built, mostly owner‐occupied, the distribution has been patchy, and few are fully accessible.

With HB 2138, several critical gaps are being closed:

1. Geographic expansion: Middle housing is now mandatory even in urban fringes and unincorporated areas, closing loopholes where single‑family zoning persisted.
2. Retroactive covenant elimination: By invalidating old deed restrictions and HOA bans, the bill ensures past attempts to restrict density no longer block development.
3. Streamlined approvals: The 120‑day mandatory review and appeals exemption reduce municipal delays and make multi‑unit developments faster and more predictable.

The Broader Legislative Context

HB 2138 is one of five housing laws signed in July 2025, all targeting different blockers in the housing pipeline:

• HB 2258: Provides a suite of pre‑approved building plans for small-scale housing (apartments, townhomes, duplexes), coupled with model land-use standards to cut design and planning delays.
• HB 3031: Establishes the Housing Infrastructure Project Fund, offering grants and loans to local governments and tribes to build roads, water, wastewater, and site prep tied to housing development.
• Senate Bill 684: Creates a Construction Revolving Loan Fund to finance mixed‑income developments with low-interest, state-backed long-term loans.
• HB 3145: Allocates $25 million in state funds for factory-built/modular housing through the Local Innovation and Fast Track (LIFT) program.

Taken together, these bills aim not only to permit more housing, but to fund it, design it, and get it built faster.

Early Impacts & Long‑Term Potential

Oregon currently builds only around 14,000 new homes per year, far short of the 36,000 per year target set by state officials.

HB 2138 and its companion bills are key tools to help close that gap. Developers and housing advocates point to sites like Century Commons in Hillsboro, 18 affordable homes including duplexes and single-level ADA units, as examples of what could become more common.

Lawmakers, planners, and advocates expect that expanded eligibility for middle housing, streamlined land divisions, and retroactive removal of restrictive covenants will boost multifamily development throughout Oregon’s metro and fringe areas. The model ordinances and technical assistance will help smaller cities meet the new standards.

Challenges Ahead

The stakes are high: implementation hinges on LCDC timelines, local compliance, and thoughtful design and affordability standards. Cities must rewrite zoning codes, adopt model ordinances, and process applications within new timelines. Builders will have to adjust to new density bonuses, accessibility mandates, and consolidated permitting procedures.

Nevertheless, HB 2138, and its legislative siblings, represent the most comprehensive, statewide push Oregon has ever taken to legalize, support, and incentivize multifamily housing development at scale.

In summary, HB 2138 closes critical policy gaps left by earlier reforms, enabling denser housing across Oregon’s urban areas and unincorporated zones, unraveling restrictive covenants, and forcing faster development decisions. In concert with other housing bills, it marks a watershed moment for increasing access to more affordable and geographically distributed multifamily housing in the state.