With a Democratic supermajority in the Oregon Legislature and the backing of legislative leaders, passage of Senate Bill 608 has seemed a political inevitability from the start of the session.
The bill, which would limit annual rent increases to 7 percent plus inflation and restrict landlords' ability to issue "no-cause evictions" already passed the Senate last week on a party-line vote. The House is widely expected to pass the bill, as Democrats argue that Oregon's housing crisis demands such measures. And the governor has signaled her support, all but guaranteeing that Oregon will soon become the first state in the country to adopt statewide rent control.
It should be said that rent control, or rent stabilization, as backers keep calling it, won't do anything to fix the problem underlying housing unaffordability - an insufficient supply of homes and apartments to accommodate our booming population. Rent control is almost universally panned by economists who warn it can exacerbate the problem by scaring off investors from new construction projects in Oregon and persuading existing landlords to simply get out of the business.
However, as currently designed, SB 608 may offer some short-term relief to tenants facing the most extreme rent hikes while limiting the negative effects of rent control. Provided that the Legislature passes bills that dramatically boost housing construction and increase density in developed areas - a must for easing the crisis - SB 608 can help Oregonians in the near term as leaders map out a strategy for long-term stability.
To their credit, Democrats showed notable restraint in designing SB 608. Rather than use their political might to ram through a more restrictive measure, they appear to be treading cautiously. The bill allows for realistic rent increases on top of inflation to accommodate the property tax hikes and maintenance costs that go hand-in-hand with property ownership. Historically, few buildings register rent increases that would surpass the level that this measure targets, said Mike Wilkerson, a partner with ECONorthwest, who called it more of an "anti-price-gouging" bill.
It also includes a couple relief valves that give validity to legislative leaders' contention that SB 608 is a different kind of rent control. Landlords whose tenants voluntarily leave may reset the rent on the vacated unit to whatever they like. New buildings are not subject to the rent caps for 15 years, giving investors at least some predictability and assurances that they will see a return on their investment.
But while Oregon's approach is different, it is also untested. To that end, the state should seek independent data-collection and analysis to measure the effects of SB 608 and report back regularly, as soon as six months after its implementation. Policymakers must have an open mind to alter or even reverse themselves if credible data shows the law is chasing away investment in housing construction. Because while the proposal is a different kind of rent control, it still introduces a new variable for the investing community to consider. "Nobody knows how investors are going to price any additional risk into their valuations and development decisions," he said.
Nobody knows how investors are going to think about this," Wilkerson said.
Policymakers should also pay close attention to the effects of a provision that significantly restricts landlords' ability to terminate tenancies and requires them to pay tenants "relocation" fees in cases where they do. The idea is to prevent landlords from clearing out tenants, some of whom may have lived there for decades, in order to dramatically raise rent. But property owners and others have argued that the ability to issue no-cause evictions helps them protect tenants from renters whose conduct is harassing but doesn't meet legal standards for court-ordered evictions.
And lawmakers should make clear now that there will be no ratcheting down of the 7 percent plus inflation cap, as opponents fear will happen. Such backsliding will immediately chase away investors - who will rightly suspect that all provisions in SB 608 are subject to political whim - and send them to other states with greater predictability. The legitimacy and effectiveness of Oregon's novel rent-control approach depends on legislators standing firm against pressure to lower the cap.
The bill still needs refinement. The emergency clause provision of the bill means it will go in effect immediately once signed into law, potentially putting property owners who are unaware of the change at risk of significant fines for violating it. Enforcement should be driven by education and a chance to correct violations before levying fines. And the bill should bar local jurisdictions from imposing their own relocation payment requirements on landlords. The state's penalty is enough.
Ultimately, this bill cannot stand alone as legislators' only response to the housing crisis. House Speaker Tina Kotek's bill to loosen single-family zoning restrictions to allow development of duplexes, triplexes and four-plexes is a good start - but it's just a start.
Rent control and other mandates won't lift the state out of a housing shortage. The government cannot build a wall to block out new residents or tax enough to build the tens of thousands of units a year that Oregon needs. Reversing the housing crisis depends on persuading private investors to put their money in Oregon projects rather than elsewhere. The sooner lawmakers recognize that, the sooner Oregonians will find true stability that lasts.
-- The Oregonian