Let’s Talk Real Estate – April 2019

Oregon enacted the nation’s first statewide rent control measure on February 28th, 2019, handing a victory to those who say low-income people are squeezed by the housing crunch in many major US cities and believe rent control is the answer.

On the other hand, landlords and developers argued that rent control doesn’t create more affordable housing, and also argued to increase the affordable housing we need, for cities to lower their system development costs, to set aside lower cost land for lower-income housing and add tax incentives to build low income housing.

The Oregon rent-control law limits annual rent increases to 7% plus the change in inflation. New construction, defined as apartments built in the last 15 years, are exempt. This part of the law will affect mainly Portland, which has had a 17.3% increase in rents over the last 3 years. Southern Oregon saw rental prices increase in the last 3 years but at a much slower pace than Portland. What will change is the management of rent increases, and you’re likely to see more annual rent increases instead of increases every few years.

There are more aspects of the bill that deal with evictions, lease terminations and leases converting from a term to month to month. If you manage your own rental property, we would suggest you consult a lawyer or property management company. Here are all the details of the statewide rent control bill and the 4 areas it changes:

#1 Annual Rent Increase

  • Landlords may increase rent by no more than 7% + the change in inflation, as measured by the regional consumer price index in a 12-month period.
  • Maintains current law regarding rent increases: prohibits rent increases in first year of month-to-month tenancy and requirement that landlords give 90-day notice of rent increases thereafter.

Exceptions:

New Construction: A landlord may increase the rent above 7% +CPI in a 12-month period if the certificate of occupancy was issued less than 15 years ago.

New Tenancy: If the previous tenant vacated the unit voluntarily or their tenancy was otherwise terminated in compliance with other applicable law, the landlord may reset the rent on the new tenancy without limitation.

Subsidized Housing: If the landlord is providing reduced rent to the tenant as part of a federal, state, or local program or subsidy, they are exempt.

#2 Eviction Standards

Eliminates the “no-cause eviction” after the first year of occupancy.

  • Landlords can continue to evict for a tenant-based cause (current law—i.e., non-payment, violation of the rental agreement, outrageous conduct, etc.).
  • Adds four new landlord-based-for-cause reasons to evict a tenant:

Sale to a person who will move in

Landlord or family member move-in

Significant repair or renovation of the unit

Removal of the unit from residential use

  • If landlord uses one of these four landlord-based reasons, they must provide the tenant with 90-day notice and relocation expenses in the amount of 1 month’s rent.

Exceptions:

Small landlords (4 or fewer units) do not have to pay relocation expenses.

Landlords who live on the same property as their tenant (owner occupied, 2 units or less) may still use a no cause eviction at any time.

#3 Month-to-Month Tenancies

  • For the first 12 months of occupancy, a landlord may terminate the tenancy without cause with a 30-day notice.
  • After the first 12 months of occupancy, a landlord may only evict a tenant for cause, by using an existing tenant-based reason or by using one of the four new landlord-based reasons.

#4 Fixed-Term Tenancies

  • After the first 12 months of occupancy, the fixed-term lease will automatically roll over to month-to-month unless the landlord has a tenant or landlord-based reason to terminate.

Exceptions: A fixed-term lease might not automatically roll over at the end of the fixed term per landlord discretion if the tenant has violated the terms of the rental agreement 3 separate times during a 12-month period, with written warnings for each violation given contemporaneously with the violation.

Enforcement: If a landlord violates the new provisions, they are liable for three months rent plus actual damages.

Resources: Please reference Senate Bill 608 on the Oregon State website at https://olis.leg.state.or.us/liz/2019R1/Downloads/MeasureDocument/SB608/Introduced.