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Protesters march through the Capitol Building, in Salem , Ore., on Thursday, Feb. 18, 2016.
(AP Photo/Timothy J. Gonzalez)
It was only a matter of time before tenants' calls for rent control were going to be taken up by the Legislature. The state has long banned local governments from imposing general restrictions on rent. But story after story of steep rent increases forcing seniors and families into searching for new housing in the stingiest of rental markets have ratcheted up pressure on leaders to do something to calm this crisis.
Thus, House Speaker Tina Kotek's announcement earlier this month that she plans to introduce legislation to lift the rent-control ban. She also aims to impose a statewide moratorium on rent increases above "reasonable" levels to provide tenants relief among other possible fixes.
There's just one critical shortcoming. Rent control, several economists said, is exactly what you don't want to ensure affordable housing in the long term.
State and local leaders are right to look at beefing up tenant protections. But they also need to recognize the fundamental factor driving the tight market - a lack of housing that, in some cases, is worsened by local policies that make construction even more expensive. While cracking down on landlords may be a popular move, it also threatens to aggravate the underlying problem and shift the burden of meeting a public goal onto a small group of private entities.
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"Rent control just sends us a couple hundred miles closer to San Francisco in terms of housing policy," said Gerard Mildner, director of the Center for Real Estate at Portland State University.
Among other things, limiting rent growth dampens future investment in housing, inflates rents for unregulated units and discourages residents who secure rent-controlled units from moving, even when it's in their best interest. In a nutshell, "the demand for urban living is increasing and cities are not increasing the supply nearly fast enough," Portland economist Joe Cortright said. "The only solution is to build new housing."
Kotek and her staff defend rent control as an effective strategy. They cite a few studies from the 1990s that challenge the conclusion that rent control or "stabilization" efforts result in the negative impacts that Cortright and other economists describe. The idea, Kotek said in an email to The Oregonian/OregonLive Editorial Board, is to create a solution that helps protect tenants, gives them some predictability, but still allows landlords a "reasonable rate of return."
"The simple fact is that many property owners are taking advantage of the hot market conditions by evicting tenants, raising rents, and finding new people who can pay more each month," Kotek wrote. "So until we have more affordable units available, which is vital but will take years to build, families will continue being forced out of their communities and more Oregonians will experience homelessness. Or the government will take action to help, which I believe will build the inclusive, equitable cities that most Oregonians want."
There are some assumptions in her statements, however, that deserve greater scrutiny by both legislators and those who want lasting solutions.
Rent restrictions certainly create some winners, giving immediate relief to tenants in affected units. But adopting such regulations, even temporarily, sends a message to builders and investors that the state could very well impose other restrictions in the future, said Mildner. That discourages investment and new housing construction.
It also puts the blame for the situation squarely on landlords, as opposed to local policies that make housing less affordable. In the Portland area, leaders at Metro have opted against expanding the urban growth boundary, Mildner noted. In Portland city limits, commissioners have increased systems development charges, restricted multi-family housing in close-in neighborhoods, demanded parking minimums and passed a law requiring that older homes be painstakingly deconstructed rather than demolished.
All those requirements drive up the costs and risks of construction, limit where developers can build and result in higher prices for the ultimate tenants. There may be legitimate goals behind such policies, but local leaders should weigh those against the impact to housing affordability.
Letting the government decide what is a "reasonable rate of return" also fails to recognize that landlords are a wide-ranging group of individuals, small investors, pension funds and others with differing costs and needs. It's not necessarily greed that's behind rent increases.
None of this is to dismiss the crisis that many renters are in. But the state should look at solutions funded by the public, whether it's increasing housing subsidies or even exploring Minnesota's model of providing a refund to low-income tenants based on the property taxes paid by their rent.
Rent control might seem like the easy answer, but it's not the right one.
- The Oregonian/OregonLive Editorial Board
This editorial expresses the opinion of The Oregonian/OregonLive editorial board, one of whose members owns a rental condominium unit.