Eugene launches new tax exemptions to spur more housing

The city of Eugene will introduce new tax exemptions for developers to boost housing supply. 

City councilors Wednesday, July 15, unanimously approved two new programs that would give eligible housing projects a 10-year property tax break on new construction if completed by 2032. The first exemption applies to developments for moderate-income residents near transit routes, and the second applies to housing in commercial centers, including market-rate projects.  

Eugene needs 26,000 new homes over the next two decades to accommodate projected growth and address today’s housing shortage. Nearly 14,000 of those homes are needed for moderate-income and market-rate households. 

But city officials say there are few incentives to support those developments as rising construction costs and relatively low market rents have made many housing projects financially difficult to build in Eugene.

“This is a bold move,” Development Programs Manager Amanda D’Souza told Lookout Eugene-Springfield. “That doesn’t get past us. We know that it’s a lot to ask to put these kinds of programs in place, but that housing need is just so large.”

What are the new exemptions?

Moderate-income housing near transit

The first is a 10-year property tax exemption on the assessed value of new construction for moderate-income housing near transit routes. 

Moderate-income households earn between 60% and 120% of the area median income — for one person, between $41,340 and $82,700. 

Eligible projects must include at least four units and meet a minimum density of 25 units per acre. They must be within a quarter-mile of fixed-route transit — in this case Lane Transit District routes with regular service. D’Souza said 24% of the city’s Urban Growth Boundary falls within that area.

Under the rules for the tax exemption, projects cannot result in the displacement of current residents. Both rental and homeownership projects are eligible. Commercial space may also qualify if councilors determine it provides a community benefit.

Maximum rents for eligible projects would fall between $1,033 and $2,067 for a one-person household.

“The intent for this tool is to incentivize developers who are already considering projects that are close to this affordability range to lower their rents or prices, and commit to a decade of moderate-income affordability, so that they can qualify for the program, which would lower their operating costs and make the project pencil,” D’Souza said.

Housing in commercial centers

The second is a 10-year property tax exemption for housing projects in commercial centers.

Market-rate projects — housing generally affordable to those earning 120% of the area median income or more — would be eligible for this exemption, including both rental and homeownership units. 

Eligible projects must be at least four units and meet a minimum density of 25 units per acre. The developments must be located in one of Eugene’s core commercial centers or the downtown center. 

There’s a catch: Developers must either pay the city 10% of the total tax exemption value toward moderate-income housing, or make 30% of units affordable to moderate-income earners during the exemption period.

The city defines core commercial centers as areas primarily zoned C-2 community commercial, with access to housing, jobs, groceries, schools and services, like parts of Coburg Road, Valley River Center, West 11th Avenue, River Road and Franklin Boulevard. 

The downtown center encompasses the downtown core, the Riverfront district, midtown and other nearby high-density areas. 

Projects eligible for this exemption are also required to have certain “public benefit” criteria, like green building features and a local economic impact plan, like the accelerated Multi Unit Property Tax Exemption programs, which is only available downtown. 

Not much housing has been built recently in C-2 zones, despite it being one of Eugene’s “most flexible and permissive” zones for dense development, city staff wrote in a report on the exemptions.

Why does the city need them?

Oregon state law enables both new tax exemptions. 

The council’s Wednesday vote puts the programs in place. Developers must apply individually, and the City Council must approve each exemption.

Most of the city’s existing affordable housing tools are available only for projects at or below 60% of area median income, like the citywide 20-year Low-Income Rental Housing Property Tax Exemption. Others require funding, like the Affordable Housing Trust Fund, D’Souza said.

Meanwhile, she said, Eugene’s only “significant financial incentives” to support market-rate housing are downtown’s standard and accelerated Multi Unit Property Tax Exemption programs. 

Importantly, properties receiving the exemptions would continue paying taxes on the land, but not on the value of new buildings for 10 years.

“We have very limited options for generating revenue to actually provide subsidies to projects,” D’Souza said. “The idea of tax exemptions is that we can incentivize projects by hopefully reducing the operating costs later on, once the project’s complete.”

The city doesn’t yet have an estimate of how many projects will use the programs, or how much property tax revenue is expected to be foregone over the life of the programs, D’Souza said. 

In the fiscal year ending June 30, 2025, Eugene reported a revenue loss of $902,555 to the Multi Unit Property Tax Exemption program and $904,415 to the Low-Income Rental Housing Property Tax Exemption program in the city’s Annual Comprehensive Financial Report. 

A consulting firm hired by the city found in 2024 that a broader tax exemption for dense, market-rate housing could increase the feasibility of development. 

“There is evidence to show that the tax incentive programs incentivize new development that otherwise would not have happened,” Economic Development Manager Anne Fifield said at the council meeting. “One could say you’re delaying it, but you’re also actually eventually getting it. You may never get it if you don’t provide the incentive.”

Councilor Eliza Kashinsky, who represents Ward 1, acknowledged that the idea of incentives can be “controversial,” but that she was happy to see them move forward. 

D’Souza said the tax exemptions are unique in their “blanket focus” on centers and properties near transit routes. She said city staff will come back to council in 2029 with an update on how the exemptions are progressing. 

“This is just one piece of the very big puzzle of addressing Eugene’s housing needs,” D’Souza said.