Rent control is not going away. Oregon’s new law has sparked a lot of questions about whether it would work here. The Seattle Weekly posted an article last week about Oregon’s law asking, Would rent control work in Washington? If “working” means creating higher prices and more uncertainty in the housing market, sure, it will work. Would it help anyone? Only people lucky enough to land in a rent controlled unit. Otherwise it would work to make everything worse for everyone else. Here’s an FAQ on the Oregon law.

Frequently Asked Question – Oregon and Rent Control

What did Oregon’s legislature pass?

The legislature passed Senate Bill 608 that limits evictions and leases terms between property owners and tenants, including when rent can be increased.

How does Senate Bill 608 change rent increases?

Property owners are allowed one increase in rent per year of 7 percent plus the yearly change in the consumer price index (CPI). Property owners can raise rents up to 10.3 percent in 2019.

Who is exempt from the new law?

A property is exempt from the 7 percent plus CPI limit until 15 years from when their building was first occupied. Non-profits are also exempted.

How are eviction rules changed?

After the first year of tenancy, a property owner cannot evict a tenant unless she is planning to demolish the unit convert it to non-residential use, renovate the unit, if family is moving into the unit, or the unit is sold. In these cases, eviction can take place within “a reasonable time,” a term with no definition in the law. Finally, after giving a qualifying reason for eviction the property owner would have to pay the tenant one month’s rent when delivering the notice. The property owner also has to pay the renter an amount equaling one month’s rent when they deliver the termination notice — again, should they have a qualifying reason.

What’s wrong with Senate Bill 608?

• Proposed rent increases exceed the market norm– The rent increases are set higher than historic month over month or quarter over quarter or even year over year increases; the rent cap is set higher than the market. Because the legislator can adjust these later, property owners will have to raise their rents to the limits each year to ensure that they can cover operating costs. This will result in higher rent increases than usual and thus, demands for lower increases.
• Rent caps discourage improvements– When rents get adjusted lower, property owners won’t have flexibility to make repairs because they won’t be able to pay for them with capped rent revenue. The value of their investment will fall, and their incentive will be to sell or convert to another use – rent control only controls revenue, not expenses.
• Rent control discourages development – When rent growth is limited, supply is not increased, and demand keeps surging, only large scale developers will be able to build any housing to keep up with demand. When they do, they’ll have to charge as much as possible to stay ahead of the limits in Senate Bill 608; this is a recipe for inflation in the housing market.
• How does rent control make things worse? – When any producer of any product or service is limited in what she can charge for that product or service, it limits what she can borrow to increase production and generate a return on investment. Housing is no different; the uncertainty created by politicians controlling revenue from new housing will mean slower production and ironically, higher prices.

Would Senate Bill 608 make sense in Washington?

For all the reasons above, Senate Bill 608 is a bad idea for Washington State or any jurisdiction with growing demand and supply that is limited by too many limits on production (e.g. design review, impact fees). The best way to keep prices low is to build lots of housing, of all kinds, in every part of the state.