Portland-area landlords could soon have to pay to help tenants relocate if the landlords raise rents too high for current renters to afford. Portland, Oregon’s city council members recently approved a bill requiring landlords to offer “relocation assistance” in the form of fees between $2,900 and $4,500 depending on the size of the original lease. That is if a landlord raises rent by more than 10 percent and, by extension, compels a current tenant to seek residence elsewhere. The city council said it believes these fees will not only cover the costs of moving, but also the first and last months’ rent and a security deposit as well.
According to the Portland City Council, the new law is a necessary safeguard to protect renters from landlords who raise rates prohibitively high and force tenants to move. At present, according to the council, nearly 2,000 residents in the city are homeless because they are unable to find affordable housing. At present, the city is under a self-imposed state of “housing emergency,” and the City Council’s ordinance will expire when the state of emergency is lifted.
Not surprisingly, landlords in the area are in open revolt and threatening the sue the city council. They argue rents can and should be raised for a number of reasons, not limited to capitalism. But also related to the cost of maintaining the property itself. For example, one investor pointed out, a property that needs a new roof may go without if the landlord cannot raise rents in order to help pay for it. And a landlord who raises rents “too high” will find that out on their own when the property remains vacant.
Chloe Eudaly, city commissioner, feels differently about the rent situation. Eudaly, who is a renter herself, recently attempted to freeze rents in Portland completely. That proposed legislation failed. The relocation assistance bill is what she says is the “next best thing.” However, critics of the law, including a number of renters, say they believe it will actually drive their rents higher faster over the long term. Simply because landlords will opt to raise rents to the maximum amount each year (9.9 percent) because they will not be able to adjust as-needed in the event of an unforeseen circumstance. Rather than simply raising their rents every three to four years as tenants naturally come and go. Eudaly described the process of raising rent as “choosing to cause an economic displacement.”
Any real estate investor considering owning rental property must investigate state and local legislation as part of their due diligence in order to protect themselves from this type of policy. While Portland’s relocation-assistance law is allegedly temporary – the city council has declined to specify how the housing emergency will be declared definitively over. While it is in effect, it will play a huge role. Not only in how much an investor can raise rents, but also in tenant-landlord relationships where it will likely be less focused on working together to find mutually-beneficial solutions to rental rates (such as lower rates for longer leases). And more focused on vilifying investors and property owners. Unless you have experience with this type of rental environment, you may want to steer clear of investments in areas with policies this “tenant-friendly.”
You can read more of Carole’s coverage of this and other topics at Self-Directed Investor News.
About the Author
Carole VanSickle Ellis serves as vice president of research and analysis at the Self-Directed Investor Society, helping investors “declare independence from Wall Street.” Contact her at firstname.lastname@example.org or visit sdiradio.com.