Portland Revises Downtown Zoning for Housing Conversions

Portland, Oregon, is undertaking a significant revision of its downtown zoning regulations in an effort to convert approximately one-third of its vacant commercial real estate into residential units. City officials cite the COVID-19 pandemic and the widespread adoption of hybrid work models as primary drivers for the current high vacancy rates in the downtown core. This initiative aims to address the city's pressing need for housing and stimulate economic activity in a downtown area that represents a substantial portion of the city's estimated $80 billion economic output. Portland is one of the nation's top-25 most populous cities.

The Portland Planning Commission unanimously approved a package of zoning changes on July 14, forwarding them to the City Council for consideration. This package, known as the Central City Code Amendments Project, is anticipated to be voted on by the Council in the fall or winter of the current year. The timeline for this vote has already been adjusted; initial plans in January 2026 aimed for Council hearings to conclude by the fall, but the project's July update extended this target to the fall or winter. This zoning rewrite represents the most substantial alteration to downtown development rules since the adoption of the Central City 2035 plan in 2018.

While the proposed zoning changes are designed to facilitate the conversion of commercial spaces into housing, the current draft lacks specific financial incentives for developers. This contrasts with the approaches taken by other major cities, including New York, Washington D.C., Boston, Seattle, and Los Angeles, as well as midsize cities like Grand Rapids, Michigan. These municipalities have often paired zoning reforms with financial mechanisms such as tax abatements or direct subsidies to encourage office-to-apartment conversions. The absence of such incentives in Portland's proposal could impact the pace and scale of conversions.

The zoning rewrite is part of a broader strategy to combat Portland's housing affordability crisis. Previously, city officials explored taxing property owners for leaving commercial spaces vacant, but this idea was met with strong opposition from property owners and was deemed ineffective. A more impactful development occurred in March when Governor Tina Kotek signed legislation to rectify a problematic affordable housing mandate. This mandate, implemented without accompanying public incentives, had inadvertently led to a reduction in new housing unit construction at a time when Portland's housing supply was critically needed.