A new Oregon bill, House Bill 3521, is on its way to the governor’s desk and could soon require landlords to return rental deposits if a unit is found to be uninhabitable. The legislation aims to protect renters from losing money to homes that pose health or safety risks before a lease is signed.

Deposits Must Be Returned

Under House Bill 3521, landlords must return rental deposits within five days if the applied-for unit contains serious defects such as mold, pest infestations, or faulty wiring that render it uninhabitable. If they fail to do so, they’ll face a penalty equal to or greater than the original deposit.

Legislative Path Clears

The bill passed the Oregon House in April with a 33–18 vote and cleared the state Senate on Thursday by a 20–8 vote. It now awaits the signature of Governor Tina Kotek. If signed into law, it will apply to deposits collected on or after January 1, 2026.

Driven by Renter Complaints

Rep. Annessa Hartman, D-Gladstone, introduced the bill in response to repeated reports from renters who lost significant amounts of money, sometimes thousands of dollars, on deposits for homes they couldn’t move into due to severe habitability issues.

Protections for Landlords Too

While the bill introduces penalties for non-compliance, it also includes flexibility for landlords. They will not be penalized if a natural disaster or emergency prevents them from issuing refunds. They may also choose to return deposits in person at their business locations rather than by mail.

Renters Make Up the Majority

Oregon renters comprise 37% of the state’s population—well above the national average—and represent 51% of all low-income households, according to Oregon Housing and Community Services. Cities like Eugene, Corvallis, Beaverton, Monmouth, and Seaside have renter majorities.

Clarifies Lease-Free Rights

“Landlords can still enter into whole deposit agreements, collect deposits and keep them when applicants back out without a good reason,” said Sen. Deb Patterson, D-Salem, the bill’s Senate sponsor. “That doesn’t change. What does change is that applicants will have the right to walk away if the unit is substantially uninhabitable.”

Unanimous Support, No Pushback

The bill faced no vocal opposition during the Senate vote on Thursday. Its supporters say it addresses a longstanding gap in tenant protections, offering financial safeguards before leases are signed.