Oregon Lawmakers Propose Unorthodox Approach to Rent Control

Saturday, January 19, 2019
Elliot Njus
The Oregonian

Oregon appears poised to impose statewide rent controls, a national first, and place new restrictions on evictions.

It’s the second time rent control has been teed up as a major decision for the Legislature. This time, however, Democratic leaders in the Oregon House and Senate have united around a single proposal, and there’s little sign members of the majority party will defect to oppose it.

Yet rent control remains controversial. A large body of academic research says strict rent control reduces the supply of rentals, pushing rents higher in the long run. Only four states have cities with rent control, and most states prohibit it.

And the approach proposed in Oregon is unorthodox, not only in its statewide approach but also in its generous allowance for rent increases. That’s served to broaden its support but also has drawn misgivings from some renters and tenants’ rights activists.

Senate Bill 608 would limit annual rent increases to 7 percent plus inflation throughout the state. It also would require most landlords to cite a cause, such as failure to pay rent or other lease violation, when evicting renters after the first year of tenancy.

The rent increase restrictions would exempt new construction for 15 years and landlords would be free to raise rent without any cap if a renter left of their own accord. Subsidized rent would also be exempt.

In the high-cost Portland metro area and given 2018’s rate of inflation, that mean an increase of more than 10 percent — about $138 a month for a tenant renting a typical two-bedroom apartment renting at $1,330 a month.

That cap is far higher than is typical in cities that have rent control. In many California communities with rent control, affected apartments see their rents climb only by the rate of inflation, or a fraction of it, each year. (Annual increases in the Consumer Price Index, a measure of inflation, for western states has ranged from just under 1 percent to 3.6 percent over the past five years.)

House Speaker Tina Kotek had in 2017 proposed to eliminate no-cause evictions and lift the state’s 1985 ban on rent control, allowing cities to create their own rent control policies. That effort failed in the Senate after passing in the House.

“We need to make progress here,” Kotek said in an interview, “so we needed to have a bill that could get support in the Senate.”

Lawmakers settled on allowable increases of 7 percent plus inflation because, she said, it would be “fair and responsible” to both tenants and landlords while tamping down on the most eye-popping increases. Cases where rents rose by hundreds of dollars — in some cases doubling overnight — have been reported across the state.

“We want predictability and stability for tenants,” Kotek said. “We don’t want to see the kinds of spikes that we’ve seen that have caused so much disruptions in people’s lives.”

It’s also intended to provide stability while limiting the impact on the supply of rental homes, Kotek said.

Economic research has shown that rent control reduces investment in housing.

Most recently, a 2018 Stanford University study of San Francisco rent control found that it reduced displacement of existing tenants and particularly those who were members of racial minorities.

But at the same time, it reduced the housing supply through landlords converting rental apartments to condos or redeveloping the property. That likely resulted in higher rents in the long run across the city, with the brunt borne by new and relocating residents.

Lawmakers in Oregon, where the Legislature banned rent control in 1985, are proposing a version that gives landlords more latitude to raise rents. That, Kotek said, would prevent double-digit rent hikes seen in some properties in recent years without stifling development.

“I think that the traditional criticisms just don’t apply here,” Kotek said.

But it’s drawn ire from some renters and activists who say it’s too little to provide real protection and could instead normalize huge increases. And it maintains a state ban on cities implementing their own rent control policies that could go farther.

“I think it does more to protect landlords from strong tenant protection than to protect tenants from landlords,” said Margot Black, a Portland tenant organizer.

The Oregon Housing Alliance, a coalition of housing-related nonprofits and governments, endorsed the measure. Alison McIntosh, a spokeswoman for the group, said it’s important to advance a politically viable measure that would provide stability for tenants.

“We know the Legislature needs to act,” McIntosh said. “Tenants all across Oregon are still seeing rent increases and no-cause evictions, particularly in more rural communities.”

Oregon’s proposal closely resembles one put forward by the Terner Center for Housing Innovation at the University of California at Berkley as an alternative to an expansion of that state’s rent control.

In the runup to a vote over whether to repeal California’s restrictions on rent control — a vote that failed — the center proposed an “anti-gouging” cap on rent increase of 5 percent plus inflation. It was modeled on state laws that prohibit price gouging during declared states of emergency.

“The goal was to provide a high-level baseline protection against really egregious rent increases that are really just designed to get the tenant out,” said David Garcia, the center’s policy director.

It’s a fair criticism, Garcia said, that that baseline protection still permits rent increases that might be unaffordable in some cases.

But in California, he noted, municipalities have the freedom to further restrict rents, and 15 do.

With California’s restrictions -- which allow rents to reset upon vacancy and exempt single-family houses and units built after 1995 -- rent controls have demonstrably reduced displacement, even as they pushed rents higher overall, Garcia said.

Research is only beginning to capture that nuance, Garcia said.

“There are some tradeoffs when you talk about any kind of rent control,” he said. “Rent control can mean a lot of different things.”

FAIR USE NOTICE. Tenants Together is not the author of this article and the posting of this document does not imply any endorsement of the content by Tenants Together. This document may contain copyrighted material the use of which may not have been specifically authorized by the copyright owner. Tenants Together is making this article available on our website in an effort to advance the understanding of tenant rights issues in California. We believe that this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner.

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