Vertical Housing Development Zone

In 2001, State law established the Vertical Housing Development Zone (VHDZ) to encourage the private sector to build multistory mixed-use buildings through a temporary partial tax exemption. Local jurisdictions may adopt a VHDZ program and designate specific areas or projects in which new or remodeled buildings with commercial uses on at least half the ground floor along the street and residential above are eligible for a partial tax exemption the first ten years of the project.

The amount of the ten-year partial tax exemption is based on the number of equalized floors of residential use proposed in a mixed-use project as well as the amount of affordable housing units (max of 80% of area median income). Generally, the project receives a 20% tax exemption on the structure improvements for each residential floor above a commercial ground floor (up to 80%). An additional 20% tax exemption for the land is also available for each floor dedicated to affordable residential housing (up to 80%). After 10 years, the partial tax exemption ends and the full value of the project will be taxed. The exemption applies to all taxing jurisdictions that do not opt out when the zone is established.

Figure 1: Example Ten Year Tax Exemption in the Vertical Housing Development Zone (VHDZ)

Proposed New Construction¹	Building Tax Exemption	Land Tax Exemption if Every Unit Affordable¹ ²
1 Story	N/A	N/A
2 Stories: Commercial First Floor + 1 Story Residential	20% of Building Improvement Value	20% of Land Value
3 Stories: Commercial First Floor + 2 Stories Residential	40% of Building Improvement Value	40% of Land Value
4 Stories: Commercial First Floor + 3 Stories Residential	60% of Building Improvement Value	60% of Land Value
5 Stories: Commercial First Floor + 4 Stories Residential	80% of Building Improvement Value	80% of Land Value
6+ Stories: Commercial First Floor + 5 Stories Residential	80% of Building Improvement Value	80% of Land Value

¹Refer to ORS for equalized floor calculations.

²Scaled exemption from the land value dependent on the amount of affordable residential in the project.

 

The City Council applied the VHDZ to the Eagle Landing Master Plan in June of 2024.

 

Local Criteria

For a project to be certified for the Vertical Housing Development Zone program, it shall meet all of the following:

1. Be located within the adopted VHDZ boundaries as shown on the attached maps.
2. Comply with the project certification requirements under ORS 307.858.
3. Comply with the applicable Happy Valley Style Design Standards unless waived.
4. Demonstrate consistency with the applicable goals, policies, and/or objectives in adopted Master Plans for the project site, to the City’s satisfaction.
5. Each ground floor commercial space adjacent to the primary street shall have a direct entrance to/from the primary street.
6. Each building adjacent to the street must include at least one nonresidential space that fronts the primary street and meets one of the following criteria:
   • Commercial space designed for use by an entity engaged in the exchange of goods or services with the public, excluding live/work space.
   • Community-serving space that provides access and benefits to the broader community beyond building residents and their guests.
7. An initial application fee of $1,000 plus 0.03% of total permit valuation is due at time of project submittal and an annual monitoring fee of $400 is required for the duration of the program.