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.

“It is very clear that S.B. 608, while great, has a lot of room for improvement,” said Katrina Holland, executive director of the Community Alliance of Tenants. “It’s one piece of an ever-evolving puzzle that we need to solve our housing crisis.”

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.

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

“That’s one large fear among the industry is that this will be the first step in a tighter and tighter regulatory regime,” Lapides added.

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

“This is an anti-rent-gouging bill,” 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.

“Yeah, we’re going to come back and ask for lower numbers,” 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.

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

The law could make Oregon multifamily properties less attractive to “value-add” 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.

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

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.

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

Gary Winkler, managing director of Keller Williams Commercial in Lake Oswego, said there were some “good compromises,” including the inclusion of an inflation index.

“It’s not the end of the world,” he said.

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

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

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Legislation that would limit rent increases and protect tenants from eviction without cause has advanced through the Oregon Senate Housing Committee after hours of personal testimony from renters and advocates.

Senate Bill 608 is supported by Democratic leaders in the Legislature; sponsors include House Speaker Tina Kotek and Senate President Peter Courtney.

The bill would limit annual rent increases to 7 percent plus inflation. At current inflation rates of about 3 percent, rent increases would be held to about 10 percent per year.

The bill would also prohibit no-cause evictions after a tenant has been in place for 12 months.

The multifamily industry has taken different approaches to countering the bill. Jim Straub, legislative director of the Oregon Rental Housing Association, said the group is remaining neutral on the bill despite some qualms.

“I do not believe it will be catastrophic to our livelihood,” he said.

Other groups and some individual landlords have lodged their opposition. Some said they feared limits to no-cause evictions, which can be used to oust troublesome tenants without the time and expense of a for-cause eviction fight.

“In cases where tenants have repeated and continual issues, we must be able to remove them without a fight over why we want them removed,” Brian Kester, general manager of Eugene’s Bell Real Estate, stated in written testimony.

Dan Hayes, a Portland landlord, also urged a ‘no’ vote.

“Rent control does not work,” he said before the committee. “When you fix pricing, you have a tendency to fix pricing.”

The bill hearing Monday reflected the changed circumstances in Salem, where Democrats who were backed by tenant advocates have taken power. In symbolism few could miss, Sen. Shemia Fagan, D-Portland, led the hearing as chairwoman of the Senate Housing Committee. Fagan triumphed in the May 2018 primary over longtime Sen. Rod Monroe, a landlord who was considered a roadblock for tenant protection measures.

A stream of advocates for tenants said the bill would protect them from sudden rent increases that can lead to displacement and even homelessness. The bill “gives some measure of accountability and predictability,” said Katrina Holland, executive director of the Community Alliance of Tenants in Portland.

The bill would prevent sharp rent increases such as one of 113 percent given to one man, said Sybil Hebb, director of policy advocacy for the Oregon Law Center.

“These are very real examples and they are very real needs that we have that S.B. 608 will speak to,” she said.

The bill was passed out of committee in its first hearing via a 3-1 vote, with another member absent.

John DiLorenzo, a lobbyist representing the landlord group More Housing Now!, spoke in support of five amendments put forward by Sen. Fred Girod, R-Stayton.

“The bill as written is unworkable,” DiLorenzo said.

One proposed amendment would delete the emergency clause that would cause the bill to take effect immediately, replacing it with 91 days after the Legislature adjourns. Another would bar municipal governments from requiring landlords to pay eviction penalties, as Portland does in its relocation ordinance.

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Landlords and tenants each earned a victory and a defeat last week in efforts to provide greater protections to renters.

Tenant advocates won a resounding decision from Judge Henry Breithaupt, who issued a ruling in Multnomah County Circuit Court upholding a Portland ordinance that requires landlords to pay relocation costs to tenants who are issued no-cause evictions or who experience steep rent increases.

The City Council had unanimously passed the ordinance in February. Landlords then challenged it, arguing the rules interfered with their contract rights.

Breithaupt stated in his ruling the Legislature has allowed cities to regulate rents in indirect ways.

“If the Legislature had intended to proscribe ordinances that had the indirect effect of controlling rents it could have done so,” he wrote.

Oral arguments in the case, Owen et al v. City of Portland, took place in April. Breithaupt held off on issuing his ruling while the Legislature considered bills that could have allowed local municipalities to enact their own rent control ordinances.

Breithaupt’s ruling was issued Friday, the same day the Legislature adjourned. The decision is a victory for Commissioner Chloe Eudaly, who ushered the relocation ordinance through the City Council.

John DiLorenzo, an attorney at Davis Wright Tremaine and a lobbyist for landlord groups, said the plaintiffs may appeal Breithaupt’s decision. The emergency ordinance will expire Oct. 6 unless extended by the City Council.

“We need to get a read from the City Council as to what they intend to do,” DiLorenzo said.

The council is likely to extend the ordinance, said Jamey Duhamel, Eudaly’s policy director.

“The council is definitely looking to utilize the only tenant protections we have in place because people are still in crisis,” she said.

The ordinance requires a landlord to pay a tenant relocation assistance of $2,900 to $4,500, depending upon the size of apartment being vacated.

Landlords at the state level were able to hold off new rent control legislation or any interference to property owners’ ability to issue no-cause eviction. House Bill 2004 stalled in the Senate.

“We truly feel that the housing advocates are choosing a course that will only exacerbate the housing crisis,” DiLorenzo said. “They say they know better, but they have no experience managing buildings.”

Tenant advocates don’t understand the housing market, DiLorenzo said.

“We have a group that has no experience signing the front of checks, only the backs,” he said.

Duhamel said DiLorenzo’s comments reflect the landlord lobby’s discomfort with tenants gaining protections.

“The landlord market and the rental market has been unregulated for decades, so messing with their ability to gouge tenants makes them uncomfortable,” she said. “I understand that.”

Duhamel noted Eudaly owned a local bookstore for 22 years.

“She certainly understands what it means to make a profit and pay employees,” Duhamel said.

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A bid to end Oregon rules prohibiting local rent control programs is dead after a Senate committee stripped the provision from a broader renters’ protections bill.

House Bill 2004 is expected to come to the Senate floor soon with a number of protections for renters, but rent stabilization, or rent control to its critics, will not be part of it.

“I could not find the votes to do that,” said Sen. Sara Gelser, D-Corvallis, who sponsored the bill in the Senate. “I would have personally liked to keep that in, but I want to get something for tenants now, and these are robust protections.”

Landlords have opposed any move to allow local governments to cap rent increases. A lobbyist hailed the changes to the bill.

“It’s an acknowledgment that rent control or rent stabilization, whatever you want to call it, is not an answer to the lack of affordable housing,” said John Di Lorenzo, a lobbyist and attorney with Davis Wright Tremaine in Portland.

“If we’re really going to address this issue, we need supply-side strategies, not demand-side strategies,” Di Lorenzo said.

The bill does include some new protections for renters that were created in the Senate Committee on Human Services:

• Landlords would be limited to making one rent increase per year.
• Tenants would be protected from a no-cause eviction within 60 days of notifying their landlord in writing of repairs needed for the habitability of the apartment.

The bill also requires 30 days’ notice before eviction during the first nine months of tenancy.

Gelser acknowledged that tenant advocates are disappointed by the lack of rent stabilization, but said she’d rather have a bill with some renter protections that could be passed this session.

“It’s better to have some protections, and these really are very meaningful protections,” she said. “It’s a pretty robust start and something we can be proud of.”

Multifamily NW, an industry trade group for landlords, opposes the bill but is open to finding a solution to the housing crisis that works for both sides, spokesman John McIsaac said.

“I don’t believe it’s reached its final form yet, but we’re working to make it work for both sides, and ultimately, it’s going to, I believe,” he said.

Gelser said she expects the bill to move forward without rent stabilization.

“It is my full expectation that we will have a vote on (House Bill) 2004 on the Senate floor, and I expect it to pass,” she said.

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A bill that would lift Oregon’s pre-emption on local rent control, require landlords to pay relocation expenses and limit no-cause evictions had a hearing before a Senate committee last week.

In the Senate, the legislation has attracted chief sponsors Michael Dembrow, D-Portland, Sara Gelser, D-Corvallis, and Sen. Laurie Monnes Anderson, D-Gresham.

The House passed the bill, H.B. 2004, on April 4 by a 31-27 vote.

Landlords have fiercely opposed the legislation, fearing it would limit their flexibility to get rid of disruptive tenants and raise rents to fair market value.

“Oftentimes you don’t know a tenant or their entourage until they move into your property,” Alex Ianos, a Portland-area landlord, stated in written testimony. “The no-cause notice allows flexibility to rehab a property and also protect other tenants living on the property. A for-cause eviction is an extremely difficult process.”

The legislation comes on the heels of Portland’s emergency ordinance requiring landlords to pay tenants’ relocation costs. Landlords have challenged the ordinance in court; a ruling has yet to be issued.

Portland tenants have complained of steep rent hikes forcing them to leave their neighborhoods. Advocates say tenants have little protection from sudden displacement. Groups such as the Community Alliance of Tenants have become more vocal as the housing crisis has deepened.

Landlords should use the existing for-cause eviction process, CAT Executive Director Katrina Holland said in an interview.

“We cannot understand why no-cause evictions are so near and dear to someone’s heart,” she said. “If some tenant is violating the lease and bothering other tenants, there is a very clear for-cause statute in our law that allows landlords to hold someone accountable.”

One Portland tenant, Brenna Bell, recalled how she was issued a no-cause eviction in 2004 a week after giving birth to her first child.

“The first month of my daughter’s life became a time of intense stress rather than the period of peace I long imagined,” Bell wrote to legislators.

The bill would also give municipalities the ability to cap rent increases, which are unregulated at present.

The bill appears to be headed for a work session and then a floor vote, said Alison McIntosh, deputy director for policy and communications at Neighborhood Partnerships, a Portland-based nonprofit.

“That is our hope, and we’re working really hard to make that happen,” McIntosh said.

The bill’s hearing Wednesday was before the Senate Committee on Human Services. Bill sponsors were not available for comment on Friday.

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