Oregon, first state wide rent control

[Robert M.]

Well, its a done deal. Oregon just sent an ominous message to real estate investors. We are now the first state to incorporate mandatory statewide rent control with relocation fee's.

What do you think this will do to the market and why?

[Gretchen P.]

I think it will be interesting to see how this plays out. I looked up the one year increase in 2017 in Seattle and Portland, one was 3% and one was 4%. The newly allowed 7% plus inflation (2018 was 1.9%) is higher than rent has risen over the past year. 

As a landlord in I currently haven't raised the rent on good tenants for the first renew, and if I do after the second it isn't for 7% year. Turnover is more expensive than the extra money from a rent increase. However, if I was in OR I would automatically raise the max allowable per year. I wouldn't want to get stuck after 4 years with the same tenant and modest increases without the option to raise to market rent for a new tenant, especially after incurring make-ready costs and vacancy associated with finding a great tenant. In my mind year over year of 7% increases (without inflation added) is hefty, $105 per year on $1500 rent. I'm guessing rents end up skyrocketing over time in OR, historically rents have risen about 4% nationally. Landlords have a good anchor for raising the max allowable - it is allowed by law. I'm not sure this law will help tenants keep rents low. Eviction seems like a thornier issue for landlords with the new regulations.