Rental Companies say rent control bill will hurt housing supply
Local property managers and landlords say Oregon’s first-in-the-nation rent control law will hurt the state in the long run by discouraging developers and pushing homeowners to sell off their units.
For people like Sara Clark, the law aims to avoid dramatic rent increases like the 27 percent increase that she and her family experienced earlier this year.
Gov. Kate Brown signed Senate Bill 608 on Feb. 28, which caps rent increases at 7 percent plus inflation during a 12-month period.
Clark was living in her apartment with her husband and three children for about a year when the owner sold the building to a new owner who raised the rent from about $550 per month to about $700 per month in January.
“They gave us like a 90-day notice right off the bat, so we knew. I was like, ‘yeah, that sucks, but it’s a whole lot better than having to move,’” Clark said. “They also said by the end of December, we needed a $200 increased deposit. Merry Christmas.”
Then in January, Clark was given a 30-day eviction notice based on complaints of her 2-year-old son crying in the night. She said she had not received any complaints about her children before the new owners bought the building.
“These walls are thin and he’s a 2-year-old. He’s going to get up in the middle of the night,” Clark said. “I also have newborn twins. I do what I can. I always tried to be super understanding, I didn’t think it would be a possibility that other people would not be understanding.”
She said they had been looking for an apartment with little luck until a friend who was moving connected her with that apartment. Now her family is staying with her husband’s parents until they can find another place.
She said the search is “really not going” and they are looking into alternatives like buying a house with her husband’s parents.
“If we get into another apartment, are we going to be in the same scenario?” Clark asked. “Are we going to get evicted in 30 days?”
The law also bans no-cause evictions for tenants living in the same unit for more than one year. It’s set to take effect for the first lease renewal after March 30.
Tim Smith, a real estate agent with RE/MAX Professional Realty, said the law could have unintended consequences on tenants.
“I think you’re going to see a lot of tenants get notice to move at 11 months because they can,” Smith said. “Once they are there for a year, it’s harder to get rid of them. If you have somebody who is doing drugs and you’re pretty sure they are doing drugs, but they haven’t been busted, you can’t get rid of them and that’s hard on landlords.”
Housing has been a constant issue for Oregon with the City of Roseburg hiring ECONorthwest to do a buildable lands analysis to make sure there would be enough housing for the 5,000 people expected to move to the area in the next 20 years.
While the buildable lands survey shows there is enough housing, Beth Goodman from ECONorthwest said she’s seeing a “huge need” for affordable housing in Oregon.
“There’s a future need for rentals,” Goodman said. “In this housing needs analysis, we’re finding there’s a big need for affordable housing for lower and middle-income households.
“These are households that probably wouldn’t be able to afford home ownership.”
According to Oregon Housing and Community Services report, the owner vacancy rate from 2011 to 2015 was at 2 percent and rental vacancy rate was 5 percent.
The report showed Douglas County had a deficit of 435 affordable and available homes for people making 80 percent of the Median Family Income of $50,241.
Smith said the law will create a rental shortage instead of creating more affordable housing as investors see limitations on potential rental income.
“The rate cap really won’t affect this area very much because we don’t raise the rent that much,” Smith said. “The negative effect to that rent control is I’ve already lost some investors who said they aren’t going to invest in Oregon anymore.”
The law allows rental units opened in the past 15 years to raise rents beyond the cap, but Smith said investors would rather go somewhere with no rent control at all.
Greg Johnson, owner of G. Stiles Realty, predicts landlords will raise the rent every year to protect against needing to make a large increase and not being able to.
“When they go to sell, that’s where they are going to have a problem,” Johnson said. “No one raises it that much unless they are way behind, then when (the tenants) move it out, you can raise it then.”
The Housing Authority of Douglas County has several units, but they are already rent-controlled as subsidized housing, but Executive Director Janeal Kohler said the bill will cause issues for the Section 8 rental assistance program.
“What we have been seeing is a lot of longer-term landlords that are retiring or choosing to get out of rentals, and those landlords are very committed to our community and keeping rents reasonable,” Kohler said. “When they sell off their properties and other people have been purchasing them, they have definitely been increasing the rent. If for some reason, we can’t (help), then we could have to say this isn’t going to work, you’re going to have to find a different place or we’re going to take a bigger hit, which affects our budget for everybody.”
She said they haven’t had to cut back on how many people they can help, but she is concerned about landlords maximizing the use of loopholes to raise rents. She said that’s going to hurt Douglas County because the generous landlords are leaving the industry and her organization needs those, but she would like to think the law will help someone.
“If you’re a socialist, you probably think this is a good law,” Smith said. “If you’re a capitalist, you probably think it is a bad law. I understand what caused this and a lot of it was from the Portland area. I don’t think rent controls by the state are a good way to make that happen.”