HB 2984 – Commercial to Residential Conversion

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Concept art of Mall converting into Housing in Seattle. https://urbanland.uli.org/economy-markets-trends/turning-malls-into-neighborhoods/

HB 2984 passed and is awaiting the signature of Governor Kotek – The bill requires local governments to allow conversion of a building from commercial to residential use without requiring a zone change or conditional use permit.

Shifts in the retail industry toward online shopping, and the advancement of remote work during the COVID-19 pandemic, have played roles in higher-than-normal vacancy rates for commercial properties.

In 2022, downtown Portland’s office vacancy rate reached 27 percent. Meanwhile, housing underproduction has led to low vacancy rates and increasing housing costs, with the Department of Land Conservation and Development reporting Oregon needs more than 550,000 new housing units across income levels to accommodate 20 years of population growth and account for current underproduction.

State Representative Pam Marsh put forward a bill (HB 2984) that has passed and is awaiting Governor Signature that requires requires local governments to allow conversion of a building from commercial to residential use without requiring a zone change or conditional use permit. Clarifies housing developed under Act may occur only within an urban growth boundary for cities with populations of 10,000 or greater, and not on lands zoned for heavy industrial use.

It was amended to allow local governments to require payment of system development charge (SDC) if charge is based on specific commercial to residential conversion policy adopted by a local government on or before December 31, 2023; or is for water or wastewater and offset by any SDCs paid when building was originally constructed. Prohibits enforcement of parking minimums greater than those required for existing commercial or residential use.

The state staff has reported minimal fiscal impact and no revenue impact.

I found info on the bill on https://olis.oregonlegislature.gov/liz/2023R1/Measures/Analysis/HB2984

Personally I’m interested in this because I own commercial property around the state and would like to find ways to add workforce housing to them to help address the housing shortage. I’m a big fan of mixed use space where commercial is on the ground floor and housing is above. The footprint for housing is smaller and the vibrancy of the community changes when businesses typically close the night.

I’m hoping that the governor signs this bill into law.

By Jim Teece

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  1. Cecilia Smullin on September 8, 2023 at 10:49 am

    Hello, I’m personally struggling with the same issue. I’m trying to convert office space on the lower level of a two story building (residential upstairs), to residential. The amount of upgrades I have been asked to do, not only for efficiency purposes, but essentially re-wiring the entire downstairs as if it were new construction, is prohibitive. The wiring is not a health or safety hazard and is still up to code, there aren’t enough outlets and switches ……I would have to tear down the entire place to the studs.
    There goes a good opportunity to add housing without expanding the footprint.

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