How Does Oregon's Rent Control Bill 608 Affect Investors
Whether you are a small, medium, or large real estate investor in Oregon, you will be affected in some way by Senate Bill 608, which was recently passed by the legislature and signed by Gov. Brown. There was much talk and speculation leading up to it's passage, and not all of it was accurate. Following find valuable information to keep you up to speed on these changing rental/rent laws, and discover how it may affect you.
So, how did we get to this point? Rent control has been a hot topic for some time. A bill was considered in the previous legislative session, but was unable to muster enough support to pass. A Willamette Week article HERE describes the various players, interests, and how rent control was finally passed in 2019.
After signing the bill, Gov. Brown said “This legislation will provide some immediate relief to Oregonians struggling to keep up with rising rents and a tight rental market.” Not everyone agrees with that statement though. “There is no doubt that housing affordability is a crisis in Oregon. However, SB 608 will worsen the imbalance between housing supply and demand by allowing for rent control across the state,” said Doug Bibby (Pres. Ntl. Multifamily Housing Council) in a Housingwire article HERE.
The actual affect on Portland real estate investors and landlords will vary. While speaking with a visitor at my open house this past weekend, he said they are exempt from the new law because they own fewer than 4 units. This is one of the misconceptions I've heard regarding the new law: he's exempt from a specific portion of the bill, but not all of it.
Here is the Staff Measure Summary of Senate Bill 608:
a. Prohibits termination of month-to-month tenancies without cause after one year of occupancy. Requires the conversion of fixed-term tenancies to month-to-month after a year of occupancy, unless a new fixed term is agreed on, or the landlord has warned the tenant contemporaneously in writing of three separate violations of agreement within the preceding 12 months, as specified, and provided 90 days written notice.
b. Exempts owner-occupied tenancies (no more than two dwellings, in the same building or on the same property as a landlord's primary residence).
c. Allows landlords to terminate tenancies in order to demolish or repurpose the dwelling within a reasonable time; to renovate or repair premises that are or will be unsafe or unfit for occupancy within a reasonable time; or to occupy the premises as a primary residence for self or immediate family when no comparable unit is available at the same location at the same time; or when the landlord has notified the tenant within 120 days of accepting a buyer's offer to purchase the dwelling as a primary residence.
d. Requires notice to specify reason, date, and supporting facts. Requires landlord to pay tenant one month's rent for such terminations unless there are four or fewer dwelling units. Provides tenant defense against action for possession and three months’ rent plus actual damages for violations when tenant brings action within one year.
e. Limits residential rent increases within any 12-month period to no more than seven percent above average change in consumer price index, as defined, except when the dwelling has been certified for occupancy less than 15 years, or when rent is reduced pursuant to a government assistance or subsidy program. Provides for actual damages plus three months' rent for violations.
f. Directs the Department of Administrative Services to publish maximum annual rent increase and maintain other information for the public online. Declares emergency, effective on passage.
A more detailed update for Portland real estate investors and landlords can be found in THIS article from MutifamilyNW. If you are really into the legal/technical writing, find the full text of Senate Bill 608 HERE. Please note, the update states: "Landlords in cities with separate laws governing End of Tenancy Notices and rent increases should refer to those laws and consult an attorney (i.e. Portland, Bend, Milwaukie). SB 608 does not explicitly preempt local laws."
While SB 608's effective seven to ten percent cap on annual rent increases will allay concerns for many property owners/investors, it does not, in my opinion, solve the core problem. The problem is a lack of supply (especially at the entry level), which has been a ongoing national issue for several years. Clearly, we have underbuilt, and don't have the supply to meet our nation's population growth. This bill won't change that. Some predict this law will have the opposite effect; it will limit new construction, thereby reducing supply, which will cause rents to rise over the long run.
Naturally, all landlords will be impacted to some extent by this new law. Informing yourself about and adapting to SB 608 is the key. Decide on a plan that fits your situation and goals, while conforming to these new requirements. There will still be ways to prosper in Portland real estate, even with these changes.
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