New City Rules re: Rental Fees Could Impact All of Portland Area Real Estate Market

Portland City Commissioners are currently debating a mandatory fee to landlords who issue “no cause” evictions. If the fee passes, the effect could impact not just the rental market but the housing market in Portland and surrounding areas.

It’s no secret that Portland and surrounding area rent prices are increasing at an alarming rate, pushing rental prices well beyond affordable means for many families. The main driving force, it appears, is the lack of housing supply for tenants, coupled with all of the amenities that Portland has to offer, creating a strong to desire to live in this area.

In addition to rising rent prices, there is concern over a trend of “no cause” evictions submitted to tenants by their landlords. What’s the motivation for the landlord to do this? Often, they simply want to sell the property. Or, they may want to renovate the home, perhaps so that they can increase their rent prices and increase their profit margin.

When faced with an eviction, Portland area tenants are often faced with scrambling to find another place to live with very little homes available. when they do find one they have to come up with a first, last, and deposit fees. After paying the inflated rental prices at their last home, they don’t have the resources to move. All of these issues are leading many to homelessness or pushing them further into debt.

Portland City Commissioners are being hammered by tenant unions to do something about the rising rent prices and the evictions. One proposal that was submitted recently: mandating that landlords forgive February rent for those who recently lost wages during our recent snow storm. Though this gained a lot of traction among officials, it appears to have subsided.

The newest proposal: in the case of no-cause evictions, the city is debating whether to force landlords to pay all of the moving costs of tenants. The estimate is between $2,900 – $4,500 for every tenant evicted. While tenant unions are largely excited by the proposal, the real estate industry is up in arms.

Many of my clients and colleagues have multiple rental properties. The buzz among them thus far: if the proposal passes, they feel that they”ll be forced to raise the rent to cover the fee. So, it appears that the proposal could have the opposite effect of what it is intended to do – pushing the rent prices even higher.

And there is large concern over those landlords who are still under water after the recession. For example, I’ve come across homeowners who were faced with a need to move several years ago for work purposes or to be closer to family. When they needed to move, these homeowners did not have enough equity to sell their home and chose to rent until they had enough equity to sell. Sometimes the rent doesn’t even cover the mortgage. Now that the market is improving, they’re once again considering off-loading their home, but with a new fee of removing the tenant so they can put the home on the market, they may not make ends meet in order to sell.

If you aren’t located within the City of Portland limits, or own your own home, you may be wondering why this would impact you. Remember that the majority of cities – even an hour driving time outside of Portland – are largely influenced by rent prices that landlords can get within the big city. For example, Oregon City or Beavercreek rent and real estate prices may not be as high as Portland, but they are still considered a suburb of Portland and are strongly impacted by what happens there. Rising rental prices in Portland creates rising rental prices across the entire region.

And how could this rule impact real estate sales? I’ve read many landlords simply saying that they will sell their rentals prior to the implementation of the new rule. Certainly this will deplete the supply of rentals, which could impact the rental market poorly. On the flip side, it will increase the supply of homes for sale. This would spur a lot of sales and could be of short-term benefit. However, as the law of supply and demand shows, the more supply, the lower the prices will become. Thus, our market may slow.

The new rules could offer some relief to the families that are renting in Portland.  But it begs the question: will this regulation actually help, or do more harm than good?

I would ask the city commissioners to please consider this proposal very carefully – looking at how it could impact the real estate market on the whole – and to explore alternative solutions that would benefit both landlords and tenants. Surely there has to be some other options to look at and other ways to help the families that really need it.

What’s a concerned Portland-area resident to do? Express your concerns to the City. If you have any ideas on legislative changes that could benefit both tenants and landlords, by all means bring them forth.

If you are a renter and have been sitting on the sidelines thinking you aren’t able to buy, lending regulations have relaxed considerably in the last few years for those who couldn’t buy a home during the recession. There are even very low and no down-payment options to consider. I have a first-time home buyer course coming up that will be taught at the Oregon City Library on February 18th. More details are located here.

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