The Oregon legislature is poised to pass the nation’s first statewide rent control law.
The legislation is expected to pass in February. Gov. Kate Brown, a Democrat, has endorsed the bill, and the majority leadership in both houses supports passage. Democrats hold supermajorities in both houses of the legislature.
The bill would cap annual rent increases for occupied apartments in buildings more than 15 years old to 7 percent and prohibit evictions without cause after a tenant’s first year of living in the building.
Oregon Senate Bill 608 (S.B. 608) is designated as emergency legislation, so it will take effect immediately if it passes and is signed by the governor.
Major Restrictions on Development
The state’s lack of affordable housing is caused by land-use restrictions that limit the supply of new apartment units and homes, driving prices higher, says economist Randall Pozdena in a new report from the Oregon-based Cascade Policy Institute. Oregon adopted statewide anti-sprawl legislation in 1970. Every major city in the state is surrounded by an urban growth boundary, beyond which building is restricted.
“All eight of Oregon’s [most populous Metropolitan Statistical Areas’] housing markets failed the test of affordability and adequacy of supply,” Pozdena writes in the report. “The estimated total shortfall in supply equals approximately 18 percent of the existing stock.
“Between 1982 and 2007, for example, the population of the Portland metro area grew by 66.7 percent while the share of land developed for all uses grew by only 6. 7 percent,” Pozdena writes.
‘Increasing Cost of Land’
Oregon’s housing regulations restricts home-building in rural areas difficult, forcing potential landowners into the cities, where the rising demand increases the cost of land, says Randal O’Toole, a senior fellow at the Cato Institute and a policy advisor to The Heartland Institute, which publishes Budget & Tax News.
“Oregon has made housing unaffordable by putting urban-growth boundaries around every major city,” O’Toole said.
“Outside the boundaries, in about 96 percent of the state, people can build a house on their own land only if they own 80 acres, actually farm it, and actually earned—depending on soil productivity—$40,000 to $80,000 a year from farming it in two of the last three years,” O’Toole said.
“The result has been a depopulation of rural areas and increasing cost of land and housing inside the boundaries,” O’Toole said.
‘The Problem They Created’
Politicians are looking for a solution to a problem they created, says O’Toole, a native of Oregon.
“Now politicians are doing everything they can to make people think they want to deal with the problem they created except actually abolishing the boundaries,” O’Toole said.
“Their proposed solutions include rent control, charging developers for each new home they build and putting the money into an ‘affordable housing fund,’ and increasing property taxes on homeowners to build affordable housing,” O’Toole said. “Of course, all of these things will make housing less affordable, not more.”
The legislature might even eliminate single-family housing zoning, says O’Toole. The city of Portland, for example, allows almost all residential property to be infilled with additional housing units regardless of previous land use.
“Another policy being considered by the legislature is to ban single-family zoning,” O’Toole said. “But this won’t make housing more affordable either, as land prices are still way too high and construction of high-density housing costs more, per square foot, than single-family homes.”
‘Lower-Quality Service for Tenants’
Rent controls cause deterioration of the housing stock, says Gerald Mildner, an associate professor of real estate finance at Portland State University and academic director of the university’s Center for Real Estate.
“It creates unintended consequences, both in terms of the maintenance of the units and in terms of the production of new units, and then ultimately the efficiency for how the housing market allocates units,” Mildner said.
When demand exceeds supply, landlords can reduce maintenance and services they provide to tenants, Mildner says.
“They’re also unlikely to do small things to maintenance if you got excess demand,” Mildner said. “Why bother painting the building, maintaining the number of hours of doorman service, or reducing the heat or air-conditioning expenditures on the building? These are all kinds of small and subtle ways that rent control leads to quality deterioration.”
‘Abolish Those Restrictions’
West Coast states must remove the government restrictions that are driving up costs for those trying to develop housing in rural areas, O’Toole says.
“The only real solution to affordable housing problems in Oregon, Washington, California, and other states that have restricted rural development is to abolish those restrictions,” said O’Toole.
“This will lead developers to quickly build affordable homes outside the existing urban areas, which in turn will reduce the cost of housing inside the urban areas,” O’Toole said.
Speaker’s Second Try
The bill, introduced on January 14, 2019, is sponsored by Senate Majority Leader Ginny Burdick (D-Portland) and Senate President Peter Courtney (D-Salem), among others. The companion bill in the House of Representatives is sponsored by Speaker Tina Kotek (D-Portland).
Kotek proposed a bill in 2017 that would have prohibited evictions without cause and lifted the state’s 1985 ban on local rent control ordinances. The Oregon State House passed the bill, but it failed in the Senate.
Hayley Sledge ([email protected]) writes from Dayton, Ohio.
Sen. Peter Courtney (D-Salem): https://www.oregonlegislature.gov/courtney
Sen. Ginny Burdick (D-Portland): https://www.oregonlegislature.gov/burdick
Speaker Tina Kotek (D-Portland): https://www.oregonlegislature.gov/kotek
Randall Pozdena, “The Housing Affordability Crisis: The Role of Anti-Sprawl Policy,” Cascade Policy Institute, Jan. 15, 2019: https://heartland.org/publications-resources/publications/cascade-policy-institute-the-housing-affordability-crisis-the-role-of-anti-sprawl-policy