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Oregon has become the first state in the nation with a statewide law capping rent increases. Gov. Kate Brown signed Senate Bill 608 into law on Thursday.

The law takes immediate effect under an emergency provision. Landlords are limited to annual rent increases of 7 percent plus inflation, or about 10 percent total at recent rates.

Tenants are also protected from eviction without cause after they have been in residence for a year.

The move to enact some form of rent control was widely expected after Democrats cemented control of the Legislature this past November. For tenant advocates, Senate Bill 608 was only the first step in a slew of tenant protections they hope to see enacted.

鈥淚t is very clear that S.B. 608, while great, has a lot of room for improvement,鈥� said Katrina Holland, executive director of the Community Alliance of Tenants. 鈥淚t’s one piece of an ever-evolving puzzle that we need to solve our housing crisis.鈥�

The law’s enactment was a landmark accomplishment for tenant advocates, who have scored a series of successes including voting out former Sen. Rod Monroe (a landlord) and elevating allied commissioners in Portland.

Professionals who work with landlords said they’re waiting for the next shoe to drop in the form of tighter rent controls and additional rules on tenant evictions.

鈥淭here’s a long history of rent control bills only going in one direction,鈥� said Jim Lapides, vice president of the National Multifamily Housing Council, a trade group that represents landlords and multifamily brokers. 鈥淭hey never go the other way.鈥�

鈥淭hat’s one large fear among the industry is that this will be the first step in a tighter and tighter regulatory regime,鈥� Lapides added.

Tenant advocates initially requested a tighter form of rent control that would allow only modest rent increases.

鈥淭his is an anti-rent-gouging bill,鈥� Holland said.

Tenant advocates will be back for tighter rent controls, Holland said, pointing to renters on fixed incomes who can’t afford to pay more.

鈥淵eah, we’re going to come back and ask for lower numbers,鈥� she said.

It remains to be seen how the law will affect the rental and multifamily sale markets on the ground. There’s some concern it could hold down values of older multifamily properties.

鈥淵our value on a multifamily (building) is based on income,鈥� said Lindsey Zehel, an advisor with Investors Management Group Northwest. 鈥淪o if you’re not raising rents like you should, you’ve potentially really taken a bite out of your gain.鈥�

The law could make Oregon multifamily properties less attractive to 鈥渧alue-add鈥� buyers, Zehel said. Those investors often renovate buildings and raise rents before flipping them to other buyers.

The law may prompt some landlords to take whatever rent gains they can support to maintain the values of their investments, Zehel said. It may also cause landlords to more closely watch their operating costs, she said.

Some observers also noted that evicting troublesome tenants could become difficult under the law.

鈥淏efore, you could just no-cause evict and say we want you out, and you’re gone,鈥� said Jonathan Singer, a partner at Barg Singer, a boutique commercial real estate law firm. 鈥淣ow statewide, in addition to Portland, there will be a cost to that.鈥�

The level of allowable rent increases is to be established by state officials no later than Sept. 30, according to the law.

Landlords were largely resigned to new regulations. Some industry groups remained neutral on the bill, and opposition was softened by a series of compromises, including a higher cap on rent increases than in many cities with rent control laws, and provisions such as an exception on rent increases for new tenants in buildings less than 15 years old.

鈥淢y sense is folks saw the writing on the wall with the election in 2018, not only statewide but in the city of Portland,鈥� Singer said. 鈥淚t really changed the landscape, and landlords realized that. It doesn’t mean they like this bill, or are happy with this bill.鈥�

Gary Winkler, managing director of Keller Williams Commercial in Lake Oswego, said there were some 鈥済ood compromises,鈥� including the inclusion of an inflation index.

鈥淚t’s not the end of the world,鈥� he said.

The bill had been pushed by Democratic leaders, including House Speaker Tina Kotek and Senate President Peter Courtney. They celebrated its passage.

鈥淭his groundbreaking tenant protection bill will make a real difference for Oregon renters,鈥� Kotek wrote on Twitter. 鈥淭hank you to the advocates who made their voices heard and pushed our state to address the housing crisis. Today was one big step forward.鈥�