Middle Housing Progress Report
The Residential Infill Project (RIP), first adopted by Portland City Council in 2021 and then expanded in 2022 as the Residential Infill Project Part 2 (RIP2), has accelerated the development of more diverse and affordable housing options in Portland’s single-dwelling residential neighborhoods, which make up 75% of the city’s land where housing is allowed. The middle housing production has been successful in better meeting the changing housing needs of Portland’s residents.
RIP and RIP2 created new allowances for middle housing - such as duplexes, triplexes, fourplexes, Accessory Dwelling Units (ADUs) and cottage clusters - in most of Portland’s single-dwelling residential zones.
To evaluate the outcomes from the first few years of implementation, the Bureau of Planning and Sustainability (BPS) contracted with Cascadia Partners to produce a progress report on middle housing development. This report evaluates middle housing production from January 2018 to June 2024.
In summary, the report found that middle housing permitting activity in single-dwelling zones has increased since the adoption of RIP and RIP2 and has resulted in homeownership opportunities that are more affordable to more people.
RIP is performing as intended, with impressive results
RIP was developed as a tool to help address housing affordability in Portland by allowing for multiple smaller homes on individual lots at lower price points in Portland’s single-dwelling zones. Two years after RIP2 was developed, the tool is working exactly as intended. Middle housing production has accelerated, with the City permitting over 1,400 ADU and middle housing units between August 1, 2021 and June 30, 2024 in single-dwelling zones. Middle housing is now the most prominent housing type being built in single-dwelling zones. Most middle housing production is happening between the Willamette River and I-205.
These new allowances have allowed for more housing production during a time of reduced development activity in commercial and multi-dwelling zones. Historically, housing permits in single dwelling zones have only accounted for 10-20% of the city’s total housing production. In 2023 and 2024, as development activity slowed in commercial and multi-dwelling zones, single-dwelling residential zones have contributed a greater percentage to the city’s overall permitting activity - 23% in 2023 and 43% in the first half of 2024.
Units permitted (per month) by housing type in single-dwelling zones
Average sales price for new middle housing is now trending $250,000 to $300,000 less than the average sale prices for new houses in single dwelling zones
RIP has also successfully produced more affordable middle housing units. A key element of RIP was a cap on building sizes, which shifted middle housing development incentives from building large units to building a greater number of smaller units. This has led to the production of smaller and less expensive middle housing units. In 2023-24, the average sales price of a new market-rate middle housing unit was about $250,000 to $300,000 less than that of a new market-rate single detached house, mostly due to size difference. In addition, following RIP’s adoption in 2021-22, average sale prices for new middle housing decreased by $200,000.
Average closing price (2024 dollars) by housing type
Middle housing participation in affordability programs is on the rise
Another indicator of affordability is participation in the Portland Housing Bureau’s (PHB) affordable homeownership programs. PHB’s Homebuyer Opportunity Limited Tax Exemption (HOLTE) and System Development Charge (SDC) programs provide tax and fee relief to developers in exchange for meeting affordability and income requirements. Since the adoption of RIP, participation in PHB’s affordability programs has significantly increased in single dwelling zones, and approved applications for these programs have shifted dramatically from single detached houses to middle housing.
Applications for PHB's affordable homeownership programs in single-dwelling zones by housing type
These affordable homeownership applications have risen in both high opportunity areas and economically vulnerable areas. Affordable middle housing in high opportunity areas offers more options in neighborhoods that have greater access to transit, jobs, shopping and amenities, where housing prices have conventionally been more expensive. Affordable middle housing production in economically vulnerable areas is also beneficial, as it provides housing opportunities in locations where residents are more likely to pay 30 percent or more of their income on housing costs.
Applications for PHB's affordable homeownership programs in single family zones by housing type and geography
Income-qualified middle housing has also filled an important niche in the housing market that is underserved by new single, detached houses – small units that are under $600,000.
Closing price (2024 dollars) by housing type and unit size, post RIP-permits
Middle housing is more affordable to more people
As interest rates have risen the income required to afford new market-rate homes has risen significantly. The expansion of middle housing allowances has allowed more households to afford new market-rate homes. For example, an annual income of $233,000 for a three-person household is required to afford the average price of a new house of $916,000 in 2024. By comparison, an annual income of $116,000 for a three-person household is required to afford a new triplex or fourplex unit, which cost an average of $460,000 in 2024. In other words, the income required to afford the average sales price for middle housing is roughly half of what is required for new houses.
Annual Income (2024 dollars) required to afford average monthly mortgage, taxes, and insurance for market-rate new home sales
Middle housing development results in a net positive in housing production
Since RIP’s adoption, demolition rates have remained steady. This trend indicates that a greater number of middle housing units in single-dwelling zones are being developed without an increase in the number of demolitions. When demolition has occurred, the resulting development has produced nearly twice as many units than demolition prior to RIP’s adoption.
A case study: small, family-sized units in North Portland
RIP’s success in increasing the production of smaller, more affordable units is exemplified by a three-story triplex that was developed in North Portland. This project includes three 1500-square-foot, three-bedroom homes. Each home sold on its own lot for between $435K - $490K – well below the $916,000 average closing price of a new detached house in Portland.
While two-bedroom units are the most common permitted middle housing type, this example showcases how developers can utilize middle housing to create diverse and affordable housing types – in this case, housing that can accommodate a growing family.