Oregon Considering State Wide Rent Control

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Russell BrazilBusiness Member

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OP

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

7y

Originally posted by @Shawn Mcenteer:

@Russell Brazil how does rent control create a housing shortage?

It creates housing shortages via 2 routes. Developers build less, because there is less demand for rental housing because investors dont want to deal with rent control. Then existing rentals get locked up for many years as tenants dont want to move to higher cost units.

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Shawn McenteerBusiness Member

Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes

7y

@Russell Brazil makes sense. Great post, Thank you!

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Marcia Maynard

Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes

7y

Thank you @Russell Brazil for posting this and for the links. What happens in Oregon and what happens in Seattle could greatly impact us here in Vancouver too, either directly or indirectly. It's interesting to see how rent control legislation differs by jurisdiction across the county.

@Shawn Mcenteer Check out the article in the first link. It will shed some light on your question.

Brian Ploszay

Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes

7y

Interest in rent control seems to be making a small comeback, yet more often, it gets defeated if on the ballot. Proposals to enact rent control is popular in some neighborhoods in my city that are experiencing "gentrification."

Onto Oregon: Rents are very high in the West Coast. A problem is tough restrictions in building new rental housing stock. This contributes to high rents.

Certain cities in Oregon have urban growth boundaries. This was to contain suburban type sprawl and focus development within the main urban area. The results are mixed, with prices of housing increasing because of the restrictions.

Consumers are right to complain about high rents, but rent control amplifies housing scarcity. If you increase the supply of apartments, generally pricing becomes more reasonable as older buildings become more affordable. In super tight markets, the older buildings are being rehabbed, and the affordable rental stock is diminishing.

I read about the proposed Oregon law. It is somewhat softer than traditional rent control. You're allowed a 7% increase plus inflation. New construction is exempt for 15 years.

2 Reply

Jack B.

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

7y

Rent control only benefits low income tenants at the expense of "rich" landlords who must have been handed their money, not that they earned it and have a right to keep it rather than give it away to people who chose not to go to college, build a career, etc. instead electing to go clubbing Friday and Saturday nights and having 5 kids with multiple partners.

Imagine buying an 800K house (common here) where your PITI is 3K a month with 25% down (200K) and you can only charge 2K a month rent due to "rent control" thanks to "the majority". So you get the privilege of wealth redistribution...merely because you worked harder, smarter and made better life choices.

Investors like me will pull our money out and there will be even LESS rental housing.

4 Reply

Keith A.

Rental Property Investor · TX · Member since 2019 · 236 posts · 392 votes

7y

since we are not talking politics, I will just say God Bless Texas.

6 Reply

Mark Fries

Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes

7y

@Keith A. Agreed....thank goodness for Florida...you couldn't pay me 500k a year to move out there...

Dennis M.

Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes

7y

Hard to address the issues on the topic without politics involved because rent control is politically motivated by design . However I will agree it’s a terrible idea and an absolute hindrance to the investor and the renter in many ways .i do low income rentals . I can see the problems first hand when renters struggle to find affordable housing . Some see me as a slumlord and that’s okay but I know I provide a valuable service to the communities by offering a safe comfortable place to stay to people who may be homeless ,on some assistance ,or forced to move to a lower cost area .

4 Reply

Eric Carr

Real Estate Broker · Los Angeles, CA · Member since 2017 · 655 posts · 293 votes

7y

Originally posted by @Shawn Mcenteer:

@Russell Brazil how does rent control create a housing shortage?

Builders won't build if they can't get a return on their money, investors won't buy either. Rent Control also depresses property values and therefore property tax collected - which affects the entire area. Another issue is that owners will defer repairs and maintenance because it's a cost, and with artificially low rents, means low returns, and less budget to make needed repairs and maintenance. This creates a slum. Another issue with blanket rent control policies is that the people who can afford market rents, are not paying them. So the landlord is subsidizing their living costs - when they don't need it.

I own rent controlled buildings in LA, there is a strategy to buying them, but here, multi family rentals built before 1979 falls under rent control and in hip areas that have high growth, we are seeing the people who actually need rent subsidies, being pushed out. Rent Control here has caused the destruction of multi family rentals in favor of condos and small lot homes - which look like condos. Less rentals.

3 Reply

Eric Carr

Real Estate Broker · Los Angeles, CA · Member since 2017 · 655 posts · 293 votes

7y

For the record, I fully support and also have a long term plan, to provide actual low income housing. By taking older buildings, and whatever tax credits, rehabbing them, and renting them strictly to families that fall under a certain income level - even if I take a loss on that building. This is a ways out, but I think more incentives need to be put in place for investors to house the people that serve and have a place in the community - they serve your drinks at your fav coffee spot, clean your office at night, work in your kids daycare.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

@Brian Ploszay to further your thought process.. UBG has artificially kept the market here from having the wilder swings of areas were you have wide open sprawl..

However 90% of renters rent apartments.. No one builds housing stock for rental purposes..

and a lot of the apartment guys have gone luxery. 400 a sq ft to build them.

and 75% or more of the population lives in 10% of the land mass LOL.. so not sure it will really effect much state wide.

Along with rents are pretty topped now.. so I kind of see it as a moot point..

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Eric Carr:

For the record, I fully support and also have a long term plan, to provide actual low income housing. By taking older buildings, and whatever tax credits, rehabbing them, and renting them strictly to families that fall under a certain income level - even if I take a loss on that building. This is a ways out, but I think more incentives need to be put in place for investors to house the people that serve and have a place in the community - they serve your drinks at your fav coffee spot, clean your office at night, work in your kids daycare.

I do that by donating houses each year.. !!

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Matthew Paul

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

7y

Rent control Ok thats a start . Now cars are expensive , shouldnt there be price controls on cars . The power companies are raking in lots of money at the expense of their customers , power control . How about this lets control health care . Its expensive too . ( What is it called again?)

The bottom line is the word CONTROL . And those who are in CONTROL have power , and absolute power corrupts absolutely .

3 Reply

Account Closed

Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes

7y

I make donations to charity through a donor-advised fund (which is regulated by the IRS) rather than direct payments to panhandlers (I'm sure most are destitute, but I never know). In my mind, I treat my crowdfund investments as a charitable donation as soon as I make them because most (at least the ones that are equity based) are likely to fail, as most small businesses do, within 5 years after launch according to the SBA. But if someone gets a job in the meantime, I consider my investment to be a success.

I'm opposed to rent controls and luxury taxes on "expensive" goods for all the reasons mentioned on this thread. I understand the societal reasons for these programs and feel sorry for the people they are intended to help, but my way of being part of the solution is not to let myself become part of the problem. I believe in a free market economy, the cure for high prices is high prices and the cure for low prices is low prices.

Greg M.

Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes

7y

Originally posted by @Brian Ploszay:

I read about the proposed Oregon law. It is somewhat softer than traditional rent control. You're allowed a 7% increase plus inflation. New construction is exempt for 15 years.

So basically nothing to worry about because I'll be able to raise rents about 10% a year... until the local governments start suspending or reducing rate increases for short periods of time due to "emergency situations" like local elections on the horizon. Already seen this movie and the ending sucks for landlords.

3 Reply

Jack B.

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

7y

Originally posted by @Mark Fries:

@Keith A.

Agreed....thank goodness for Florida...you couldn't pay me 500k a year to move out there...

How do you feel about Tampa or Orlando? I've considered moving out there...

Mark Fries

Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes

7y

@Jack B. I think Tampa is great and the surrounding areas like Lakeland, St. Pete

Adam Benmbark

Real Estate Agent · Saint Petersburg, FL · Member since 2018 · 39 posts · 25 votes

7y

@Jack B. I'd be happy to help you search the St. Pete/ Tampa area for your next investment/home!

Ross Leavitt

Real Estate Investor · Springfield, OR · Member since 2013 · 94 posts · 35 votes

7y

How about the effect on CAP rates down the road? We have a number of student housing properties that are valued by their CAP rates. We are getting top dollar for rents, but here's my concern: what starts as 8-10% allowable increase will go down each year until we can only raise it 1-2%, like everywhere else that has rent control.

When that happens, I'm worried that the properties will become less desirable to investors, and that will hurt the value. What do you all think?

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Andrew SyriosPro Member

Moderator

Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes

7y

Uggghhhh...

Whenever I hear about rent control I just think back to this lecture I saw "Rent Control or Bomb Damage?" It would just go back and forth between smashed up buildings and you would have to guess. They were virtually indistguishable. Here's a quick sample: https://utopiayouarestandinginit.com/2016/11/28/bomb-damage-or-rent-control/

But you can (kinda) get away with it in really expensive markets, at least for a while, unfortunately.

Bill F.

Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes

7y

For anyone interested (@Russell Brazil @Brian Ploszay @Shawn Mcenteer)

Brookings did a good job laying out both some unsung positives and negatives in a fairly non partisan way by looking at actual impacts of two real examples, in San Fransisco and Cambridge MA, over long time frames.

It concluded:

"Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood. These results highlight that forcing landlords to provide insurance to tenants against rent increases can ultimately be counterproductive. If society desires to provide social insurance against rent increases, it may be less distortionary to offer this subsidy in the form of a government subsidy or tax credit. This would remove landlords’ incentives to decrease the housing supply and could provide households with the insurance they desire."

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Bill F.:

For anyone interested (@Russell Brazil @Brian Ploszay @Shawn Mcenteer)

Brookings did a good job laying out both some unsung positives and negatives in a fairly non partisan way by looking at actual impacts of two real examples, in San Fransisco and Cambridge MA, over long time frames.

It concluded:

"Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood. These results highlight that forcing landlords to provide insurance to tenants against rent increases can ultimately be counterproductive. If society desires to provide social insurance against rent increases, it may be less distortionary to offer this subsidy in the form of a government subsidy or tax credit. This would remove landlords’ incentives to decrease the housing supply and could provide households with the insurance they desire."

In SF it also created a lot of ways to go around it.. one was a TIC then they hammered those...

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Bill F.

Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes

7y

@Jay Hinrichs It never ceases to amaze me the creativity and speed with which people can find work arounds to nearly any legislation designed to change behavior.

Shows the power of incentives.

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Bill F.:

@Jay Hinrichs It never ceases to amaze me the creativity and speed with which people can find work arounds to nearly any legislation designed to change behavior.

Shows the power of incentives.

I don't have the answers but I can tell you the homeless problems on the west coast and Honolulu are real and very difficult to deal with.

people are camping out every where.. city govmit does nothing or little to stop them.. homeowners end up with some derelict camper in front of their house.. waste garbage stealing water and power.. then in the commercial areas some business have had to shut their doors with the homeless driving away customers.. the west coast though has had rent control in MHP parks for ever.. you just deal with it.

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