How Oregon Locked In Property Tax Inequality

Two identical houses in the same Portland neighborhood. Both are 1,600 square feet. Both would appeal to the same buyers. One sells for $31,000 more than the other. The difference comes down to property tax assessments. Oregon’s system, locked in place by two 1990s ballot measures, determines winners and losers based on timing and geography. The gap compounds annually and never resets when a home sells. Measure 5 in 1990 capped property tax rates at $15 per $1,000 of assessed value. Measure 50 in 1997 froze assessed values at 90 percent of 1995-96 levels with a 3 percent annual cap on increases. Unlike most states with property tax limits, Oregon never resets assessments when homes sell. The inequities are permanent.

Consider two houses, both worth $600,000 today. The inner Northeast house was assessed at $100,000 in 1995. Growing at 3 percent annually, its assessed value is now $240,000. The Outer Southeast house was assessed at $180,000 in 1995 and is now $440,000. Same house, same market value. The Outer Southeast owner pays nearly double in taxes. When either house sells, the buyer inherits the assessed value.

By 2017, inner Northeast Portland properties had assessed values at only 29 percent of real market value, according to a Portland State University study. In Outer Southeast, assessed values averaged 55 percent of market value. Neighborhoods that gentrified rapidly since 1995 have the largest gaps between assessed and market values. In 2019, PSU studied whether land value taxation could fix it. The researchers modeled a split-rate system taxing land at nine times the rate applied to buildings. Oregon county assessors already maintain separate land and improvement values.

The study modeled tax shifts for 9,621 parcels in Inner Northeast and 15,059 parcels in Outer Southeast. Under the split rate, properties on valuable land in inner Portland pay more. Outer neighborhoods pay less. Total revenue collected county-wide remains unchanged. The system would be “slightly income progressive” compared to the “marked regressivity” of the current system. In Inner Northeast, 88 percent of single-family homeowners pay more under land value taxation. In Outer Southeast, only 23 percent pay more.

Under the current system, building improvements raise your assessed value and thus your taxes, creating a disincentive to develop. Under land value taxation, building on your land does not increase your tax bill. A vacant lot or underused building faces tax bills reflecting the land’s development potential, not its current minimal use. For an underutilized commercial parcel on Northeast Alberta Street, the current tax bill was $1,000 per year. Under land value taxation, that bill rises to nearly $10,000. Develop the parcel or pay high taxes on underused land.

Some low-income homeowners who bought decades ago in gentrified neighborhoods face higher bills. The study proposed deferrals for low-income households, exemptions for farms, and a gradual phase-in starting with a 60/40 split rate and moving to 90/10 over several years. Oregon already operates property tax deferral programs for seniors and disabled homeowners with incomes below $60,000 and net worth below $500,000. Annual tax increases could be capped at 5 or 10 percent per year regardless of underlying value changes.

Implementing land value taxation in Oregon requires exempting properties from both Measure 5 and Measure 50. This means a constitutional amendment. Measure 50 is embedded in the Oregon Constitution, which requires either a two-thirds legislative vote plus voter approval, or a citizen initiative with voter approval.

The current system creates a class of beneficiaries who vote reliably and understand what they stand to lose. That homeowner in inner Northeast Portland who bought in 1995 saves $3,500 per year compared to paying taxes at market value. Over 30 years, that is $105,000 in nominal savings. Invested at modest market returns, the compounded advantage exceeds $250,000. These homeowners vote, donate to campaigns, and show up at public hearings. Recent buyers who pay higher effective rates are younger, more transient, and unlikely to organize around property tax policy.

Oregon has options short of full constitutional amendment. The legislature could authorize land value taxation as a local option, letting individual cities or counties adopt it without statewide constitutional change. Pennsylvania law works this way. Multnomah County voters could approve land value taxation for Portland alone. The political coalition still faces organized opposition from homeowner groups and real estate interests, but the scale is smaller than a statewide constitutional amendment.

The PSU researchers identified the next step: a statewide study requiring legislative approval. A bill to authorize this study appeared in 2019. The House Revenue Committee never scheduled it for a hearing. HB 2124, introduced in 2025, asks for the same study. Six years have passed. The inequities have compounded. Oregon is asking to study what it already studied. HB 2124 has not been scheduled for a hearing.

The PSU study demonstrated that land value taxation could reverse the inequities while incentivizing densification. Oregon already has the administrative infrastructure. The technical barriers are minimal. What Oregon lacks is political will.

Meanwhile, the consequences compound. Surface parking lots occupy prime commercial corridors because paying minimal taxes on underused land costs less than development. Recent homebuyers in some neighborhoods pay double the property taxes of buyers in other neighborhoods for the same house at the same price, transferring wealth to an older generation that locked in low assessments three decades ago. Each year the system continues, the gaps widen and reform becomes harder. Portland needs housing. It has a tax system that rewards land banking and punishes construction. The solution exists, fully researched and modeled. The political will does not.