HB 4037 — Relating to housing; and prescribing an effective date.

[7]307.227. A-Eng.

HB 4037 307.227.

Enrolled House Bill 4037 (HB 4037-B) Page 6 (a) Exempt the eligible housing project property in accordance with this section;

(c) After determining the date of completion under paragraph (a) of this subsection, the spon- [8]soring A-Eng.jurisdiction shall notify the Housing and Community Services Department and the county tax officers of the determination.

HB 4037 soring jurisdiction shall notify the Housing and Community Services Department and the county tax officers of the determination.

(1) Unless repayment of the agency loan made under ORS 307.221 has been otherwise provided for under ORS 307.223, the fee payer for eligible housing project property that has been granted exemption under ORS 307.227 shall pay an annual fee for the term that shall be the Enrolled House Bill 4037 (HB 4037-B) Page 7 presumptive number of property tax years for which the property is granted exemption under ORS 307.227 (3)(b).

and (C) Transfer the net fee moneys to the [Housing and Community Services] department for deposit [9]in A-Eng.the Housing Project Revolving Loan Fund established under ORS 307.237 in repayment of the loans to which the fees relate.

HB 4037 in the Housing Project Revolving Loan Fund established under ORS 307.237 in repayment of the loans to which the fees relate.

Enrolled House Bill 4037 (HB 4037-B) Page 8 (B) The eligible housing project changes substantially from the project for which the developer’s application was approved such that the project would not have been eligible for the project [grant] funding;

[10](b) A-Eng.Amounts collected under this subsection shall be deposited, net of any collection charges, in the Housing Project Revolving Loan Fund established under ORS 307.237.

HBCOMMUNITY 4037DEVELOPMENT (b)FINANCIAL AmountsINSTITUTIONS collectedSECTION under12. this subsection shall be deposited, net of any collection charges, in the Housing Project Revolving Loan Fund established under ORS 307.237.

4 COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS 6 SECTION 12.

Enrolled House Bill 4037 (HB 4037-B) Page 9 (a) Is a community development financial institution, or was certified on October 1, 2025, as a community development financial institution by the Community Development Financial Institutions Fund at the United States Department of the Treasury;

(b) Emphasizes, when providing loans under paragraph (a) of this subsection, the financing of parks whose residents are predominantly members of households with income less than average in- [11]come; A-Eng.

HB 4037 come;

(e) Shall have all or part of the unpaid balance forgiven by the department in an amount not to exceed the losses incurred on investments or loans made by the nonprofit corporation under sub-subsection section (4)(a) of this section.

Enrolled House Bill 4037 (HB 4037-B) Page 10 (a) Have an affordability term of no less than five years, notwithstanding section 51 (2)(a), chapter 13, Oregon Laws 2023.

The Land Conservation and Development Commission shall issue an order requiring a local government, state agency or special district to take action necessary to bring its comprehen- [12]sive A-Eng.plan, land use regulation, limited land use decisions or other land use decisions or actions into compliance with the goals, acknowledged comprehensive plan provisions, land use regulations, housing production strategy or housing acceleration agreements if the commission has good cause to believe:

HB 4037 sive plan, land use regulation, limited land use decisions or other land use decisions or actions into compliance with the goals, acknowledged comprehensive plan provisions, land use regulations, housing production strategy or housing acceleration agreements if the commission has good cause to believe:

Enrolled House Bill 4037 (HB 4037-B) Page 11 (b) Has a pattern or practice of creating adverse disparate impacts to state or federal protected classes or inhibiting equitable access to housing choice[, as described in ORS 197A.100 (2)(b) to (d)];

[13]BUILDING A-Eng.PLAN REVIEW SECTION 16.

HB 4037 BUILDING PLAN REVIEW 3 SECTION 16.

Enrolled House Bill 4037 (HB 4037-B) Page 12 (3) In addition to an approval process for needed housing based on clear and objective standards,stand- ards, conditions and procedures as provided in subsection (1) of this section, a local government may [14]adopt A-Eng.and apply an alternative approval process for applications and permits for residential devel- opment based on approval criteria that are not clear and objective if:

HB 4037 adopt and apply an alternative approval process for applications and permits for residential devel- opment based on approval criteria that are not clear and objective if:

(2) If an occupant or tenant remains in the dwelling unit following termination of the tenancy under subsection (1) of this section, the landlord may issue a termination notice in [15]the A-Eng.manner provided by ORS 90.380 (5)(b).

HB 4037 the manner provided by ORS 90.380 (5)(b).

7Enrolled House Bill 4037 (HB 4037-B) Page 13 USE OF STATE PROPERTY FOR HOUSING 9 SECTION 22.

[(b)(A)] (2) To the extent consistent with applicable trust responsibilities, the department shall give the [first opportunity after other state agencies] opportunity to acquire, purchase, exchangeex- change or lease real property or an interest in real property that the State of Oregon disposes of or sells to the following, in order of priority:

[16][(ii)] A-Eng.(B) Political subdivisions, as defined in ORS 271.005.

HB 4037 [(ii)] (B) Political subdivisions, as defined in ORS 271.005.

Enrolled House Bill 4037 (HB 4037-B) Page 14 (f) The entities listed under paragraph (c) of this subsection, in order of priority, on the condition that the entities will develop housing on the real property without regard to the affordability of the housing.

[17](e) A-Eng.Property that public universities listed in ORS 352.002 control;

HB 4037 (e) Property that public universities listed in ORS 352.002 control;

Enrolled House Bill 4037 (HB 4037-B) Page 15 (2) Notwithstanding ORS 273.775 to 273.790, an agency disposing of real property or interest in real property under this section also may convey the mineral and geothermal resource rights in the real property to the Indian tribe.

TECHNICALURBAN FIXESRESERVES SECTION 25.

(1) On or before January 1, 2027, the Land Conservation and Development Commission shall amend its rules related to the prioritization of lands being added to an urban reserve in order to allow local governments to assign lower priority to land for which the provision of future urban services, as defined in ORS 195.065, is not reasonable or cost effective due to existing topographical or other physical constraints including built con- straints.

(2) Notwithstanding any provision in ORS 183.325 to 183.410, rules adopted under this section shall be adopted without an advisory committee.

RESIDENTIAL DEVELOPMENT ON COMMERCIAL LANDS SECTION 26.

ORS 197A.445 is amended to read:

197A.445.

(1) As used in this section:

(a) “Affordable housing” means residential property:

(A) In which:

(i) Each unit on the property is made available to own or rent to families with incomes of 80 percent or less of the area median income;

(ii) The average of all units on the property is made available to families with incomes of 60 percent or less of the area median income;

or (iii) A manufactured dwelling park is operated that serves only households with incomes of 120 percent or less of the area median income;

and (B) Whose affordability, including affordability under a covenant as described in ORS 456.270 to 456.295, is enforceable for a duration of no less than 30 years.

(b) “Area median income” means the median income for the metropolitan statistical area in which housing is located as determined by the Housing and Community Services Department and adjusted for household size based on information from the United States Department of Housing and Urban Development.

(2) A local government shall allow affordable housing if the proposed affordable housing is on property that is:

(a) Owned by:

(A) A public body, as defined in ORS 174.109;

(B) A nonprofit corporation that is organized as a religious corporation;

(C) A nonprofit corporation that is organized as a public benefit corporation whose primary purpose is the development of affordable housing;

(D) A housing authority, as defined in ORS 456.005;

or (E) A manufactured dwelling park nonprofit cooperative, as defined in ORS 62.803;

or (b) Zoned:

(A) For commercial uses;

(B) To allow religious assembly;

or (C) As public lands.

(3) A local government shall allow the conversion of a building or a portion of a building from a commercial use to a residential use.

(4) Subsections (2) and (3) of this section:

(a) Prohibit the local government from requiring a zone change or conditional use permit before allowing the use.

Enrolled House Bill 4037 (HB 4037-B) Page 16 (b) Do not trigger any requirement that a local government consider or update an analysis as required by a statewide planning goal relating to economic development.

(c) Except as provided in paragraph (d) of this subsection, do not apply on lands where the local government determines that:

(A) The development on the property cannot be adequately served by water, sewer, storm water drainage or streets, or will not be adequately served at the time that development on the lot is complete;

(B) The property contains a slope of 25 percent or greater;

(C) The property is within a 100-year floodplain;

or (D) The development of the property is constrained by land use regulations based on statewide land use planning goals relating to:

(i) Natural disasters and hazards;

or (ii) Natural resources, including air, water, land or natural areas, but not including open spaces or historic resources.

(d) Do apply to property described in paragraph (c)(C) and (D)(i) of this subsection if more than percent of the lands within the urban growth boundary that the property is within are located within a tsunami inundation zone or if more than 30 percent of the lands within the urban growth boundary that the property is within are located within a 100-year floodplain.

(5) The development of housing under subsection (2) of this section may occur only:

(a) Within an urban growth boundary;

and (b) On lands zoned to allow for industrial uses only if the property is:

(A) Publicly owned;

(B) Adjacent to lands zoned for residential uses or schools;

and (C) Not specifically designated for heavy industrial uses.

(6) The development of housing under subsection (3) of this section:

(a) Applies only within an urban growth boundary of a city with a population of 10,000 or greater;

(b) May not occur on lands zoned to allow industrial uses;

(c) May require the payment of a system development charge as defined in ORS 223.299 only if:

(A) The charge is calculated pursuant to a specific adopted policy for commercial to residential conversions adopted on or before December 31, 2023;

or (B) The charge is for water or wastewater and includes an offset for at least 100 percent of the water or wastewater system development charges paid when the building was originally constructed;

and (d) May not be subject to enforcement of any land use regulation that establishes a minimum number of parking spaces that is greater than the lesser of:

(A) The amount that may be required for the existing commercial use;

or (B) The amount that may be required in lands zoned for residential uses that would allow the converted development.

(7) The development of housing allowed under subsection (4)(d) of this section may only occur:

(a) Within an urban growth boundary located no more than 10 miles from the Pacific Ocean;

(b) In areas that require compliance with minimum federal regulations under the National Flood Insurance Program or with local floodplain development regulations adopted by the applicable local government, provided that the local regulations are equal to or more stringent than the minimum federal regulations;

(c) In locations that do not include floodways or other areas with higher risks of greater water velocity and debris flow;

(d) In communities with emergency response, evacuation and post-disaster plans that have been updated for the housing development;

and (e) In areas that are not public parks.

(8) A local government may prohibit affordable housing or require a zone change or conditional use permit to develop affordable housing in areas described in subsection (4)(d) of this section.

Enrolled House Bill 4037 (HB 4037-B) Page 17 (9)(a) An applicant who applies to develop affordable housing under this section within a planned mixed-use development shall, if the development would cause the amount of lands available for commercial uses within the planned mixed-use development to be reduced to less than 80 percent of the amount in the adopted planned mixed-use development, amend the planned mixed-use development to allow an additional area not smaller than the proposed housing development.

(b) As used in this subsection, “planned mixed-use development” means an area of land:

(A) Larger than 10 acres;

and (B) Subject to a land use approval or binding development agreement adopted by the local government that establishes areas or minimum acreages for commercial uses and includes residential or other uses.

[(9)] (10) A local government shall approve an application at an authorized density level and authorized height level, as defined in ORS 227.175 (4), for the development of affordable housing, at the greater of:

(a) Any local density bonus for affordable housing;

or (b) Without consideration of any local density bonus for affordable housing:

(A) For property with existing maximum density of 16 or fewer units per acre, 200 percent of the existing density and 12 additional feet;

(B) For property with existing maximum density of 17 or more units per acre and 45 or fewer units per acre, 150 percent of the existing density and 24 additional feet;

or (C) For property with existing maximum density of 46 or more units per acre, 125 percent of the existing density and 36 additional feet.

[(10)(a)] (11)(a) Subsection [(9)] (10) of this section does not apply to housing allowed under subsection (2) of this section in areas that are not zoned for residential uses.

(b) A local government may reduce the density or height of the density bonus allowed under subsection [(9)] (10) of this section as necessary to address a health, safety or habitability issue, including fire safety, or to comply with a protective measure adopted pursuant to a statewide land use planning goal.

Notwithstanding ORS 197.350, the local government must adopt findings sup- ported by substantial evidence demonstrating the necessity of this reduction.

TECHNICAL FIXES SECTION 27.

[18](d) A-Eng.Exactly one dwelling unit on each resulting lot or parcel, except for:

HBEnrolled 4037House (d)Bill Exactly4037 one(HB dwelling4037-B) unitPage on18 each(A) resultingLots, lotparcels or parcel,tracts exceptused for:as common areas;

(A) Lots, parcels or tracts used as common areas;

(7) Notwithstanding any other provision of ORS 92.010 to 92.192, within the same calendar year as an original partition that was not a middle housing land division, a city or county may allow one or more of the resulting vacant parcels to be further partitioned into not more than three parcels [19]through A-Eng.a middle housing land division.

HB 4037 through a middle housing land division.

Enrolled House Bill 4037 (HB 4037-B) Page 19 SECTION 26.28.

SECTION 27.29.

[20](d) A-Eng.Amending siting and design parameters for middle housing types;

HB 4037 (d) Amending siting and design parameters for middle housing types;

(b) To the extent practicable, implement recommendations in the reports produced under section 5 (1) to (3), chapter 110, Oregon Laws 2024.

Enrolled House Bill 4037 (HB 4037-B) Page 20 (d) Adopt operative and applicable dates for the rules, subject to section 3, chapter 639, Oregon Laws 2019.

CAPTIONS SECTION 28.30.

EFFECTIVE DATE SECTION 29.31.

[21]Passed by House February 18, 2026 Received by Governor:

Repassed by House March 5, 2026 ........................M.,........................................................., 2026 Approved:

.........................................................................M.,........................................................., 2026 Timothy G.

Sekerak, Chief Clerk of House ..................................................................................

..............................................................................Tina Kotek, Governor Julie Fahey, Speaker of House Filed in Office of Secretary of State:

Passed by Senate March 4, 2026 ........................M.,........................................................., 2026 ..................................................................................

Rob Wagner, President of Senate ..................................................................................

Tobias Read, Secretary of State Enrolled House Bill 4037 (HB 4037-B) Page 21