SALEM — Amid a statewide housing shortage, the building permit programs of 25 small municipalities could be in jeopardy following a recent state Department of Justice opinion that using private-sector consultants to oversee plan reviews and building inspections may violate state law.

The opinion included in a February memorandum could result in new restrictions on small jurisdictions and require them to have building officials on staff, city officials said.

Small counties and cities, such as the rural city of Aurora, with a population less than 1,000, don’t have the resources to hire a building official. Instead, those local governments rely on third-party contractors to provide building review services for them.

“This is going to raise costs in a huge way because we can’t cover these costs with our current funding,” said Aurora Mayor Bill Graupp. “It will raise costs in housing especially in rural Oregon. Low-cost, low-income housing is hit the worst, which is what we are trying to work on in rural Oregon, and this is a huge spike in the heart for us.”

Relying entirely on third parties to conduct a city’s building program violates several state laws, according to the memo by Katherine Lozano, assistant attorney general in the Department of Justice’s Business Activities Section. The state Building Codes Division within the Department of Consumer and Business Services is the agency responsible for delegating the state’s authority to approve building plans to cities and counties. Approving local building programs that rely entirely on third party consultants would be unconstitutional. It is legal for cities and counties to use such third-party services when the contractors are under the supervision of a building official, Lozano wrote.

Some city officials said they have heard that the Building Codes Division in the Department of Consumer and Business Services plans to make rules to clarify restrictions on the use of third-party building plan reviewers and inspectors.

“We were told that we will need to modify our building codes inspection program sometime by end of the year,” Graupp said. “We were told that notices would be going out soon.”

Mark Peterson, a Department of Consumer and Business Services spokesman, said Tuesday he could “not speak” to whether the agency plans to issue rules or notices to cities about their building programs.

Officials with the agency have taken the legal opinion “under advisement,” Peterson said in an email.

Legislation earlier this year, House Bill 4086, sought to address the dilemma by allowing a regional council of governments to hire a building official, which cities could share to supervise their building programs and third-party reviewers and inspectors. The bill passed the House 33-23 in February but came to naught in the Senate.

Even that solution presented problems for small jurisdictions, according to Michael Weston, city manager of King City, who wrote a letter to lawmakers in opposition to the bill. King City in Washington County has a population of about 3,000 and relies entirely on contractors to administer its building program.

“A full-time or even a part-time building official is an unnecessary six-figure expense or nearly a fifth of our budget,” Weston wrote.

Greg Hinkelman, city manager of Clatskanie, said he would like lawmakers to pass legislation next year that allows cities to use third-party contractors to review and inspect plans. “The thing that worries me about the DOJ opinion is that it might be turned into rules and an edict that we have to have a building codes official on staff,” Hinkelman said. “For small cities, this is devastating. If the state of Oregon is forcing small jurisdictions to hire people for things where we typically contract services out, where does this end? Does it mean I can’t use a contract employee as city attorney or a city planner? Does it have to be staff?

“We’ve got a system that works and now someone saying ‘let’s fix what works and it doesn’t have to be this way,’ ” he added.