This week, Senate Bill 141 goes into effect with its tax exemption calculation changes for mixed use Vertical Housing Development Zone (VHDZ) projects. Signed into law in July 2021, the bill strengthens the incentive to include additional housing units in projects, by updating the current methodology so that partial floors are fully counted toward the tax exemption. Under the old calculation, the portion of the building to be exempt involved the calculation of residential equalized floors, weighted for average size of floor in the mixed-use building. Historically, if this calculation resulted in a mixed numeral, for example 3.4, then the whole number (3 in this case) was determined to be the calculated number of residential floors. However, this methodology creates uncertainty and discourages projects from fully developing housing as a part of the VHDZ—or even participating in the program at all. Conversely, SB141 requires using the full mixed numeral as the exemption multiplier, preventing the historical downward adjustments to the nearest whole number. Given the 20% tax abatement allocation for each floor factor, this bill allows for additional exemption value, related to the proportional floors calculated. In this case, 20% tax abatement would be applied to an exemption multiplier of 3.4 (vs. 3), yielding the full 68% (vs. 60%) tax exemption. This means that the City of Wilsonville, which is considering applying Vertical Housing Development Zones in its downtown area and Villebois, can now offer a more robust partial property tax exemption for 10 years for qualifying projects that combine commercial and residential uses. Property tax exemptions are one type of housing production strategy pursuant to House Bill 2003, which requires systematic housing capacity analyses and the formation of specific housing production strategies to address unmet housing needs. Currently, the cities of Canby, Estacada, Milwaukie, and Oregon City within Clackamas County each have an established VHDZ. To learn more about HBA’s work in Wilsonville, contact Roseann Johnson at firstname.lastname@example.org.