The Northwest State Giving 0% Interest Loans for New Affordable Home Construction

It’s been more than a year in the making, but new home construction in Oregon has taken a step forward.

The state will start giving loans to developers to help finance the construction of middle-income housing, the governor’s office announced on Feb. 20.

State lawmakers last year approved earmarking $75 million to test the Moderate Income Revolving Loan Program. MIRL was one of the key pieces of Gov. Tina Kotek‘s housing package that passed the legislative session in 2024.

“When Oregonians making a good wage can’t afford to live where they work, our businesses and communities can’t thrive. We have to work to make sure all Oregon families can afford a home with the urgency they deserve,” Kotek said in a press release.

“This program is an essential piece of the affordability puzzle, lending a hand to our local partners who need a little help to make the balance sheet make sense.”

The median home price in Oregon is $549,949.

The zero-interest loan program comes at a time when the state’s chief economist highlighted to lawmakers that Oregon has seen a stall when it comes to homebuilding.

The “state needs 29,500 units annually to meet the demands of the anticipated rebound in migration,” said Carl Riccadonna, according to OregonLive.

The publication went on to explain that the director of Oregon Housing and Community Services said she expects her agency to build between 2,000 to 3,000 homes with the money.

How it works

OHCS will make 0%, or no interest, loans to cities and counties that meet specific requirements to fund low- or moderate-income housing projects.

In turn, sponsoring jurisdictions can use the loan to award a grant to a developer with an eligible housing project in their communities.

“MIRL supports development activity that is approved at a local level,” Andrea Bell, executive director of OHCS, tells Realtor.com®. “Development in general, depending upon the size and scope of the project, is often a one- to three-year process, but cities and counties could start discussing MIRL and passing ordinance/resolutions in the next 60 to 90 days if they are interested in accessing the loan program.”

The MIRL program looks to develop new housing or conversions of nonresidential structures to housing for households earning up to 120% of the area median income.

The bonus is that the taxable improvements are exempt from property taxes for 10 years. So, instead of regular property tax payments on the improvements, the developer, or whoever pays the fees, will pay a predetermined annual program amount for the duration of the property tax exemption period. The sponsoring jurisdiction will use this money to repay the no-interest program loan.

Program funds may be used for costs related to infrastructure, redevelopment, or construction, among other expenses.

When program loans are repaid through the program fee structure, OHCS can issue loans for additional eligible housing development.

“The heart of local governments is rooted in making everyday life better for their residents. Boosting housing support reinforces the importance and unity we ought to have about getting big things done, through locally driven housing solutions,” says Bell.

Housing dilemma

Oregon is not the first state hoping an MIRL program will help tackle a housing program. In New York, Gov. Kathy Hochul proposed in her January 2025 State of the State address a similar solution for the housing gap in her state.

Hochul said the state will launch its first revolving loan fund to spur mixed-income rental development outside New York City.

The fund will fill construction financing gaps by providing a lower-cost and more flexible form of capital than is generally available in market financing. The funding will revolve and self-sustain over time through repayments once projects have converted to permanent financing after construction.