Oregon is officially the first state in the U.S. to pass universal rent control for all tenants. Housing economists that spoke with Inman think the legislation, as written, will have either little or adverse impact on tenants and affordability.
The legislation, which passed in the Oregon State Senate by a 35-25 vote and was signed into law by Governor Kate Brown on Thursday, prohibits landlords from terminating month-to-month leases without cause after 12 months of occupancy. It also limits rent increases to one per year and caps the maximum rent increase to 7 percent above the annual change in the consumer price index.
The are some exceptions written into the law, for example, if a tenant receives three lease violations within a 12 month period and the landlord provides written notice within 90 days.
Daryl Fairweather, the chief economist of Redfin, thinks the impact will be negligible, especially in Portland, state’s biggest city.
“The Oregon rent control law limits rent increases of more than 7 percent plus inflation per year, but Portland rents have risen 28 percent over the last 5 years (5.1 percent per year),” Fairweather said. “It’s as if they passed a law saying no one is allowed to be over 10 feet tall.”
“While affordability is a big challenge for renters in Oregon and across the country, this law is mostly symbolic and won’t have a measurable impact,” Fairweather added.
Matthew Gardner, the chief economist at Windermere Real Estate, which has a large presence in Oregon, actually believes the law will have an adverse impact on affordability.
“That is it will act as a disincentive to developers who will likely add fewer units to the market which may allow the 7 percent threshold to be met with lack of development limiting supply and, therefore, pushing rents higher,” Gardner said.
Gardner also added, that, over time, landlords will defer maintenance on existing units as a result of it. He doesn’t believe the potential pocket savings of the bill will have a positive impact on the ability of renters to one day afford homes either.
“I am not sure how much benefit this will give to renters trying to save if they are still seeing their rents rise,” Gardner said.
A recent study by LendingTree found that Portland was one of the big cities where it’s still cheaper to rent, versus buy a home, but the difference isn’t astronomical. According to the study, the median rent in the city is $1,285 but the median mortgage payment is just $5 more.
Zillow’s December housing report found that, year-over-year, the median rent in Portland actually decreased by 1.4 percent.
Oregon is the first state to have a rent control measure. New York State Senator Julia Salazar introduced legislation that would prevent the eviction of any tenant for not paying and increase which is deemed, “unconscionable,” or a percentage increase that’s, “1.5 times the annual percentage change in the consumer price index for the region in which the housing accommodation is located.”
A report last year found that New York City’s rent control laws are easily exploitable due to a number of legal loopholes, even as the city attempts to crack down on tenant harassment and abuse.
In California, an effort to repeal a state law that limits rent control was defeated in a ballot measure in November.