Rent control

Oregon Passes Nation's First Statewide Rent Control Law

The bill comes with new risks for tenants and property owners alike.

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Reason

Yesterday, the Oregon Legislature officially passed the country's first ever statewide rent control policy, capping the rate at which landlords can raise rents and imposing new limits on their ability to evict tenants.

In a lopsided vote, the Oregon House voted 35-25 to pass SB 608. The bill forbids landlords from increasing rents during the first year of a person's tenancy and caps future rent increases at 7 percent per year plus inflation thereafter.

Save for a few exceptions, the bill has no vacancy controls, meaning that landlords are allowed to increase rents however much they wish after an old tenant moves.

To stop landlords from getting around SB 608's price controls by just kicking tenants out, the bill also bans no-cause evictions. Landlords will generally have to show a government-approved reason before kicking a tenant out, and pay them one month's rent when they do.

"This first-in-the-nation legislation will protect renters and ensure we have a fairer system for everyone," said Rep. Jennifer Williamson (D–Portland) after the vote.

Economists generally take a dimmer view of rent control policies, arguing that they reduce the supply of rental housing by incentivizing landlords to take price-controlled units off the market, or dissuade developers from building new rental properties in the first place.

To mitigate these risks to new construction, SB 608 would exempt new rental properties from the bill's price controls for 15 years.

That provision, combined with both the bill's relatively generous caps on annual rent increases and solid pro-rent control majorities in both chambers of the state legislature, saw a lot of landlords decide that this was not their hill to die on.

The Oregon Rental Housing Association, the state's largest landlord group, took a neutral stance on the bill. The group's legislative director told The New York Times he did "not believe [SB 608] will be catastrophic to our livelihood."

Other landlord groups have been less chipper. Multifamily Northwest—which represents larger landlords in the fast-growing Portland metro area—warned repeatedly about the risks SB 608 posed to new housing construction leading up to the vote. After its passage, it expressed a fear that caps on rent increases will be ratcheted down in coming years.

"How can we ensure that 7 percent doesn't become 5 percent in the future, or lower? We would like to see lawmakers offer assurances to investors that Oregon is still a smart, predictable place to invest in the rental market," said the group in a Tuesday press release.

Indeed, the state's tenant groups—while supportive of the bill—argue that its caps on rent increases are far too high, and have promised to fight to lower them in future. These same groups have waved away concerns that lower caps still might suppress new housing construction with the argument that if new buildings are going to be expensive, then we wouldn't want them in the first place.

"If developers need to increase rent on tenants by more than 10% per year, the developments are bad for Portland and bad for tenants!" said the Portland Tenants Union (PTU) in February Medium post. "Let's leave that space open for those who can provide housing for the people."

Say what you will about vacant lots, but at least the rent is lower.

The PTU has also argued that the bill's lack of real vacancy controls and long list of acceptable reasons for evicting tenants will incentivize landlords to harass tenants into moving, or otherwise find pretextual reasons for kicking them out.

That's a fair concern, given that SB 608 allows for landlords to evict tenants if they violate any provisions of their rental agreement three times within a year. The bill also allows landlords to evict tenants if they're performing extensive renovations or have sold a unit to an owner who intends to occupy it. This provides an incentive to property owners to convert their price-controlled rental housing into pricier condominiums they can sell at market price.

Just such a thing happened in San Francisco after the city expanded its rent control policies in the 1990s. For-rent apartments were converted into for-sale condominiums, which reduced the supply of rental housing and spurred gentrification.

Tenant advocates want to address these problems with more regulations still. Yet, the fact remains that these bad incentives are baked into any rent control policy that forces landlords to lease out apartments at below-market rates.

A better solution would be to remove restrictions on new housing supply, so that more rental units can be built. That would arrest the growth in rents, or even see them decline.

Oregon and its local governments limit new housing construction in two primary ways; either through urban growth boundaries, which reserve developable land near cities for natural or agricultural uses, or zoning restrictions, which limit the number of units you can building on residential land within cities.

Free marketers can argue about which restrictions are most harmful, but the fact is both suppress new housing supply.

And that's really bad!

A construction boom in Portland—where developers have been adding new apartment buildings at a breakneck pace—has finally started to see rental prices decline slightly after years of rapid growth. Were restrictions on development lifted, it's likely we'd see more construction and steeper price declines.

How likely that is to happen is an open question. Oregon legislators have proposed a bill that would ban single-family zoning—whereby only one unit of housing is allowed to be built per lot—statewide, a reform that has a decent enough chance of passing.

Getting rid of urban growth boundaries is a much tougher sell in environmentally conscious Oregon. Gov. Kate Brown dismissed the idea in an interview with The New York Times, saying "a lot of people blame the state's land-use laws, but if we didn't have land-use planning, we would not have a wine industry, because houses would have been built on those southern-facing slopes."

Oregon's famed pinot noirs take precedence over affordable housing for state residents, I guess.

In short, Oregon's rent control bill is not as bad as it could have been, but it is still a mistaken response to a real problem and likely to make things worse for property owners and tenants. Having passed the state Senate earlier this month, SB 608 now heads to the governor's desk, who is expected to sign it.

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71 responses to “Oregon Passes Nation's First Statewide Rent Control Law

  1. So…. can I raise my rent by the max 7%+inflation every year and if for some reason the market rate is below that amount, simply offer a rebate? This would give me more room to jack the rents in future years if warranted.

    1. Any time a government sets maximums, the minimum will quickly become the maximum

      1. if the gubbmint limits me to a maximum increase then i shall be increasing it to the maximum every period in which i am able to.

        1. commiefornia limits some property taxes to 2% per year. (prop 13). with the newly elected socialist/progressive nazi party super majority elected in the commiefornia congress that 2% along with 2nd and 1st amendment bill of rights safeguards are soon to be dismissed and ignored. oregon will soon go the way of washington and commifornia or mexifornia or californexico and you can kiss all your timber goodbye to build all the ILLEGAL ALIEN AND homeless housing.

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    2. Also jack your rents way up when you get a new tenant, more than you otherwise would, since you’ll be locked to that 7% until they decide to move out

    3. Sort’a like The slogan that popped up when Virginia passed a law limiting firearms purchases to one a month.

      “Remember. Buy one gun a month. It’s the Law.”

  2. But there will be no caps on property taxes.

    1. Right? I signed up for the Maryland Homestead Tax Credit. No, it’s not an exemption. There’s no such thing as a homestead exemption in Maryland. If the county or municipality raises your property taxes more than 10% in one year, you can file for a credit from the state (the state pays the tax). Ain’t that some shit? So they can raise the tax 9.9% every year and it’s all on you. This year they only raised mine 6%, the generous bastards.

      1. apply for the Homeowners Tax CREDIT

  3. YOU MANIACS! YOU BLEW IT UP! AH, DAMN YOU! GOD DAMN YOU ALL TO HELL!!

  4. Sell your land in Oregon now, if you were dumb enough to buy any there.

  5. Free marketers can argue about which restrictions are most harmful, but the fact is both suppress new housing supply.

    And that’s really bad!

    I’ve been seeing this an awful lot at Reason and I’m getting tired of it.

    Rent controls savage property rights.
    And THAT’S really bad.
    Full stop.

    1. Then don’t read it, douchebag. It’s good that Reason tries to do more than just preach to the choir.

      The target audience for arguments like that isn’t ideological libertarians who already are completely opposed to such laws on principle. The great majority of people will be more swayed by practical arguments that show why it will lead to bad outcomes.

      1. The great majority of people will be more swayed by practical arguments that show why it will lead to bad outcomes.

        They haven’t been yet. Looks like you’re making an unsupported assertion.

      2. The great majority of people will be more swayed by practical arguments that show why it will lead to bad outcomes.

        Rent control is one of the most thoroughly proven-to-be-bad policies, both by economic theory and the empirical results. The literature on the topic dates back decades and is unambiguous. The practical argument clearly isn’t as persuasive as you think.

        The great majority of people do not care about the realities of economics.

        1. of course not, because we care about the realities of reality.

          it is an excellent policy, because it achieves the goals intended. The empirical result is that more places are cheaper for renting, or more places will be taken off the rental market altogether. It is much better that housing is sold off to “owner occupants” than held as a plantation to be “managed”.

    2. Yah, we all should take debating advice from a Colossal Douchebag. Not.

    3. rent is a contract not a property right.

      rent enforcement is crony capitalism, it relies on a special courts and special statutes and public subsidy to exist at all.

      rent controls PROMOTE property rights, if you mean “real property rights”. A lease or tenancy is an estate in land, it is a ‘real property right’. At common law, you cannot evict tenants or get money judgments by forfeiting the lease.

      This is the typical example where ‘libertarian’ just means “freeze an era in time and make assumptions”

  6. Oregon is off to a good start, but they need to address the overall housing cost issue. The next law they need to pass is to limit the sale price of any home/property to purchase price plus inflation. Of course, if you save your receipts, you can add the dollar value of any renovations, minus depreciation.

    In fact, they should go further and reset the market so properties can only be sold at the historical first purchase price plus inflation. This might be painful for some current owners, but hey: If you could afford to buy a home in Portland or Seattle in this market, you’re clearly earning your money unjustly and not paying your fair share as part of the social contract.

    (My wife is in favor of rent control. When I was arguing against it, it didn’t occur to me to tell her that she personally contributed to the unaffordability of the Seattle housing market by accepting $25k over asking for her townhouse. She screwed that poor young couple out of that money! If it comes up again, I’ll ask her why her house sale price shouldn’t have been regulated by the government.)

    1. I would strongly recommend you DON’T do that. She’s your wife. Stick to internet arguments.

      1. The way some men talk about their wives as if they were their bosses, it’s baffling.

        1. As part of her undergraduate studies (pre-vet), my wife wrestled alligators and castrated cattle.

          Let’s just say I have a very healthy sense of fearful respect for her above and beyond what our 30-year bond might otherwise create.

    2. Is your couch comfy?

    3. it’s impossible to “limit the sale price”, the ‘sale price’ is just markings on a piece of paper. it can’t be regulated because it doesn’t objectively exist. Either you me pay what I want or Im not signing the deed or giving up possession.

      The ‘stamp duty’ on recording a deed goes in function of what is listed as “sale price”, and that could help to keep prices lower.

      If you want really low ‘sale prices’, raise property taxes to infinity and forfeit all proceeds at sheriff sales to County. Much of the cost in ‘real property’ is the artificially enhanced ‘lien value’ aka ‘the equity’. We really just want to live there after all, not invest a fortune into its ‘value” because it could be mortgaged or hypothecated.

      1. just wait a few months and you’ll be able to watch that happen in commiefornia.

  7. Another view into the void that is a progressive’s mind. It makes my heart turn to ice when I realize that people with such profound and idiotic knowledge of economics actually have the power in places like Oregon.

    Not to mention the moral element of letting people dispose of their private property as they see fit.

    1. Unlike say people in Congress who know all about economics…and unicorns..and cow farts

    2. Another view into the void that is the basement libertarian nerd mind. Why is it that when I succeed at getting what I want it’s ‘idiotic’? you don’t define my goals. My goal is to REDUCE the supply of rental housing, and eventual kill the market altogether.

      A lease or tenancy is also property, and it takes a special ‘crony capitalist’ landlord tenant court to enforce the artificial privilege of rent collecting. You can ‘dispose’ all you like (do you even own any property or is this just another ‘theory’), but nobody has to subsidise your attempts to ‘collect’ rent with special favors. So when it is privileged to collect rent by the State, it’s also subject to control by the same authority. Your license to collect rent was granted, it can be restricted or cancelled just as well.

  8. These same groups have waved away concerns that lower caps still might suppress new housing construction with the argument that if new buildings are going to be expensive, then we wouldn’t want them in the first place.

    That sentence just gave me brain damage. Supply and demand, how do they work?

    1. I know. There’s no reasoning with these people because they lack the ability to reason.

    2. You supply the tax revenue, the politicians demand more taxes. It’s really simple.

  9. Hope they don’t run out of toilet paper

  10. Rents too low in Oregon? Well, this’ll take care of it.

  11. At some point, we’ve got to face the fact that it’s long past time we culled the herd. Man has become too smart for his own good and failed to respect Mother Nature’s intentions in killing off the weak and the sick and the slow and the stupid. Sure, the anti-vaxxer retards are on the right track by volunteering to take one for the team, but we need a lot more of that sort to step up if we want to stop the regression of the species. I say we go ahead and nuke the whole left coast and get it over with before this mental illness spreads.

    1. Too true. Start by eliminating OSHA, so the stupid ones die off before they breed – – – — –

  12. banning single house zoning only makes building more expensive since now you have to build two houses when you only wanted one and not every one wants to be a landlord

    1. No worries; build your single family home, put a bathroom next to the laundry room by the garage, and call it the second ‘home’.

    2. The comment about single-family homes is a bit misleading in this article.

      If you follow through to the original report it is a YIMBY proposal. It doesn’t forbid the building of single family homes, it prevents cities from *requiring* single-family homes through zoning regulations.

      1. take a look at Inglewood, California if you want to see how the damage looks over 60 years.

  13. Yeah, because rent control programs have worked so well at the city and local level…

    I believe the correct description is “unmitigated disaster that drives down housing supply and inevitably drives up housing costs”.

  14. Rent control?
    How about property tax control instead?
    Oh, wait.
    That makes sense.
    My bad.

    1. I wish we had California-style property tax control here.

      1. CA and OR both have it. Unhappily, there’s all the stupid exemptions that blow it – especially for crap like “schools”, etc. Needs to be a tax on kids instead. After all, the users should pay.

        1. “Needs to be a tax on kids instead”. absolutely!!! and stop the dependent deduction on taxes. you want kids you front the WHOLE cost.

  15. How is this not a regulatory taking of property? Rental properties are valued based on rent cash flows. If you limit the rent cash flows, you are reducing the value of the property. To the extent the rent increase caps take effect, they are directly taking money from the landlord and giving it to the tenant. Why is that OK?

  16. The government should go into everyone’s house and decide how much room we really need. Homeless families and refugees can be housed in spare bedrooms, closets and attics. Do you really need more than one TV? That TV could be repurposed at a homeless shelter or in a public spade that doesn’t have access to CNN. And there are too many lamps here, who needs all this electricity? Turn the damned thermostat down, where a sweater.

    1. If such a thing were to occur, I’d remove the rooms I didn’t need.

    2. I believe the Soviet Union did a good job with that. It proved very successful and everyone has such wonderful memories of shared flats.

    3. “And there are too many lamps here, who needs all this electricity? Turn the damned thermostat down, where a sweater.” the socialist/progressive nazis running the state of commiefornia already do this and much more also.
      tear out all the small reservoirs that captured runoff water, don’t build more hydro dams so that a few 100 rafters can run white water rapids while counting snail darters and redlegged frogs.

  17. Oregon Passes Nation’s First Statewide Rent Control Law?

    How about

    State of Oregon Seizes Control of Millions of Private Properties. Implements Fascism.

    1. In the United States? Fascism is a no-go. How about we call it Democratic Fascism?

  18. Econlib.org

    Economists are virtually unanimous in concluding that rent controls are destructive. In a 1990 poll of 464 economists published in the May 1992 issue of the American Economic Review, 93 percent of U.S. respondents agreed, either completely or with provisos, that “a ceiling on rents reduces the quantity and quality of housing available.” Similarly, another study reported that more than 95 percent of the Canadian economists polled agreed with the statement.

    The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners Milton Friedman and Friedrich Hayek on the “right” to their fellow Nobel laureate Gunnar Myrdal, an important architect of the Swedish Labor Party’s welfare state, on the “left.”

    Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”

    His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city?except for bombing.”

    1. Headline a year from now: “Oregon Suffers Surprising Housing Shortage”

      1. CNN headline a year from now: “Conspiracy between builders and landlords causes housing shortage in western U.S.”

  19. So, owners won’t do any repairs any longer at the very least. Should be amusing when property prices skyrocket but income from rental properties is capped. Oregon is full of morrons, it would seem.

    1. that’s okay I’ll just withhold the rent money and do the repairs for you, and I won’t pay you for all the extra time the warranty is breached too,and the courts will side with me, now who’s stupid?

      once all the rental properties become unprofitable, these will be sold off to owner occupants, and that will bring down the price of housing. now who’s the moron?

      1. Too bad for you, rent control has never worked like that. Not paying rent is cause for eviction by statute.

    2. like California, Oregon is only full of morons in the socialist/progressive populations living in the cities. Portland, Salem, Frisco, L.A., san diego prime examples.

  20. it’s always amazing how anyone just *assumes* that “renting” is normal. if it’s normal and “private market”, then why does it take a special “landlord tenant court” and extra statutory privileges to enforce collections?

    1. It exists because of risk and price incentives combined with scarcity moron. In other words proven economics.

    2. Remember some section 8 landlords in the LA, CA area must go door-door to collect rents and maybe it’s a good idea to show up with two armed collectors.
      After state mandated rent control destroys the market the FEDs step in and screw it even worse. What a bunch turdheads.

  21. Anything that disrupts developers, and corporate ownership of housing is fine and dandy. I also fully support anything that discourages creating more housing anyway, because I don’t want there to be more space for more people to move into. Let em go to frigging Kansas, Iowa, etc.

    1. we should have stopped all the slime covered a**holes from philly, new york and no. new jersey from dragging theis ooozing pustule covered asses out to the west coast in the 1960s. we would still have 3 great states had we done that.

  22. Prepare for the decline.

  23. “How can we ensure that 7 percent doesn’t become 5 percent in the future, or lower?”

    You can’t. nor can you ensure 5% or lower won’t get enacted in the future even if 7% doesn’t get enacted now. What legisl’n makes, legisl’n can unmake. What constitutions make, constitutions can unmake. What revolutions make, revolutions can unmake. Whatever you do now has nothing to do w the future; people have free will.

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  27. The old saying about money being a coward and leaving or never going to places where it is not wanted is relevant here. Some people may choose to avoid investing in residential rental real estate in Oregon. Others may invest there but only with a premium to compensate for the increased cost and risk. If it were my investment decision, I would pick the former because it is simple, easy, and does not require trying to guess what might happen next. If Oregon’s politicians are willing to do this now, one can see there is nothing to keep them from doing worse later. There are plenty of safer places to put one’s money.

  28. Jennifer Williamson (D Portland) is the dim bulb we should switch out for an LED. Large urban areas and ciities with rent control cause suffering due to do-gooderism.

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