By Jim Straub, Oregon Rental Housing Association Legislative Director
November 21, 2019
The 2019 Oregon State Legislative Session was a historic, landmark session which passed Senate Bill (SB) 608, a first in the nation state-wide rent stabilization bill. SB 608 was a negotiated bill, and neither landlord nor tenant advocates got all they wanted. What we did get, though, is a bill everyone might be able to live with. But in order for you/landlords to recognize this, you need to know some of the back story. Will the bill do everything the legislature hopes it will, including solve the housing crisis? It remains to be seen.
SB 608 is complicated and lengthy. In fact, many landlord-tenant attorneys are still working out all the details and implications. In fact, you’ve probably seen a lot of coverage on this bill by now. But so that we’re all on the same page, let’s review the major points of the bill.
#1 : SB 608 limits rent increases.
This bill limits the amount rental property owners in Oregon may raise rents to a base amount of 7% plus the amount of the western region’s consumer price index (CPI). In 2018, the CPI was 3.3%. Thus, if this bill had been in effect in 2018, the amount rents could be raised would have been limited to 10.3% (7% base + 3.3% CPI).
Although SB 608 does limit rent increases, the amount of the increase limited in the bill was a strategic negotiation. Tenant advocates originally proposed a limit of 2-3%. While that amount may have seemed fair to them in terms of owner profit, we know that there is more to consider when raising rents than simply a profit motive. Another consideration when determining the fair amount of a rent raise is the cost rental owners must plan for deferred maintenance over time. Rental property owners must factor in such things as repairs to heating systems, sewers and roof maintenance. So, while 10.3% might seem to be a larger annual rent increase than most rental property owners in Oregon might implement, a savvy rental property owner will increase the rent enough each year to allow for deferred maintenance and other items to be factored in.
Rental property owners whose buildings received their certificate of occupancy less than 15 years ago will be exempt from rent increase limitations. This exception was negotiated by rental property owner advocates so that new construction was not discouraged by the bill. This means that for these newer buildings, rental property owners will be permitted to raise rents without limits, as much as the market will bear.#2: SB 608 limits notices to vacate.
Under SB 608, no-cause notices to vacate are limited to the first year of occupancy. After the first year, only with-cause notices are permitted, which the tenant may cure. Of course, an eviction (FED) may be filed if the tenant doesn’t comply with the with-cause notice, and if they do comply but commit the same offense within six months, then a ten-day repeat violation notice may be served.
Fixed-term leases automatically become month-to-month rental agreement at lease termination, unless the landlord has written the lease to expire before one year is up. So, if your tenant pays their rent and follows the rules, they get to stay, subject to a few exceptions.
With 90 days notice and the payment of a one month relocation fee to the tenants (payable at the time notice is given, but only by landlords who have an ownership interest in more than four rental units), landlords may ask their tenants to leave under these four conditions:
- The rental unit is to be renovated or remodeled to the extent that it will not be habitable during the work;
- The unit is to be completely demolished, or converted to a non-residential use;
- A landlord or an immediate family member is going to move in; or
- The landlord has accepted an offer to purchase the dwelling unit from a person who intends in good faith to occupy the dwelling unit as the person’s primary residence.
But fear not. SB 608 doesn’t prevent you from getting rid of a bad tenant. If they’re not paying their rent or playing by the rules, serve them with-cause notices. If they don’t comply, evict them as before. And there’s one more opportunity to get rid of bad tenants. SB 608 contains a “three strikes you’re out” rule. If over the course of one year, a landlord has served three written warnings (of any kind, it doesn’t have to be for the same offense), a landlord doesn’t have to renew at the end of the lease and there is no obligation to pay a one month relocation fee.
So, while at first glance it may seem that SB 608 ties landlords’ hands, we believe this is an eminently workable compromise bill.So, what led to SB 608 and did landlords get much say in the bill?
A lot has changed since the first Oregon landlord-tenant bill in 1973. Oregon landlords have been immersed in the development of new landlord-tenant law in Oregon since the Landlord-Tenant Coalition began meeting during legislative sessions since the mid-1980’s. At the Coalition, landlord and tenant advocates met and negotiated compromise bills, ones that were easy for legislators to pass because they knew such bills were supported by both sides. I’ve been meeting with the Coalition on behalf of landlords for ten years now.
Things changed over the past few years as the sense of a developing housing crisis in our state gave landlord-tenant law a new sense of urgency. About that time, a large landlord group in Portland joined the Coalition (which is open to any landlord or tenant advocate group). In light of the sense of a housing crisis, the tenant advocates came to the Coalition asking the group to deal with the arising problems in the housing industry. The large Portland group simply refused to go there, identify the advocates’ requests as “industry killers”. By putting their head in the sand, the Coalition died.
This set the stage for 2017 legislative session, and Oregon Speaker of the House Tina Kotek’s House Bill (HB 2004). This bill included many tenant protections, and you may remember it well – the Oregon Rental Housing Association and other landlord advocates worked tirelessly to defeat it. But we couldn’t rest on our laurels, as there was more to come.
In November 2018, Oregon Democrats were voted into a supermajority in the legislature, and Tina Kotek remained as Speaker of the House. Defeating a new bill with extensive tenant protections would not be as simple as in 2017. To be frank, Speaker Kotek now had the political muscle to force most any bill thru the legislature. Fortunately for Oregon landlords, Speaker Kotek had a lot on her agenda for the 2019 session. Cap and Trade (climate change), funding of public schools and housing, zoning changes to incentivize housing development, Medicaid stabilization - some really big and time consuming bills to get through. Why is this good for landlords? The tenant groups in her home city of Portland were demanding she try again for another HB 2004. But, the speaker also knew that the majority of her time later in the session would be consumed with her other target items. She didn’t want to get bogged down in another fight over landlord/tenant issues.
Just days after winning the supermajority, Speaker Kotek called me. She said that she was going to introduce and pass a tenant protection bill, but that she had also heard the testimony of the landlords the previous year and she wanted to work with just one landlord advocate who she felt could help develop a compromise bill that both sides could live with, and she felt that landlord advocate was me. Speaker Kotek said, “Jim, let’s find a way to work together.” And over the next several months, that’s just what we did.
Within a week after winning the supermajority, Speaker Kotek drove down from Portland, and met with me at my office in Springfield for numerous hours of brainstorming. When she sat down, and went over what she wanted in a bill…frankly I was aghast. It would have been an industry killer. Ideas like rent increases limited to 2%, elimination of all no-cause notices regardless of circumstances, something called vacancy control which means that you could never raise the rent on the property more than the 2%, even if the tenant moved out. You would be forced to offer it to the new tenant at the same price as the old, regardless as to how long the previous tenant had lived there or what increases there were on property taxes or local bond measures. I remember thinking for the first time in my life, that it might be a good time to sell my rentals.
Once I regained my composure, I gave Speaker Kotek real word examples of the need for no-cause notices to ask tenants to leave. There are so many examples of why asking a tenant to leave might be necessary, even if a landlord doesn’t have the legal, provable point to evict them in a court of law. I reminded the Speaker that there are good reasons for landlords to raise rents and that a bill that permits no rent raises will hurt small business owners and, ultimately, hurt tenants. I explained that I had tenants living in properties that I knew where paying hundreds of dollars less in rent each month than what the market would bear, and that lots of landlords did this because good tenants that take good care of the property and pay their rent on time are worth keeping and I reward them by not raising the rent to the maximum each year. I helped the Speaker understand that no matter how fair our application process, sometimes landlords end up with bad tenants. That it’s scary for landlords to hand over what is often their single largest investment, something worth $200K or $300K, to someone they barely know and just hope and pray that it’s still worth that when they get it back. That, to landlords, renting to tenants can feel like hiring someone without an interview and you can’t fire them if it doesn’t work out. Speaker Kotek listened carefully and thankfully, I was able to get her to negotiate. We had many more conversations, each time playing out the cause and effect of any change. About the Author:
Jim Straub is the Legislative Director for the Oregon Rental Housing Association, a state-wide trade organization representing more than 5,500 landlords in Oregon. He was President of the Rental Owners Association of Lane County from 2007 to 2015, a local trade organization representing over 1,200 landlords in Lane County. He spent more than a decade as their helpline provider. He is also a past member of the Oregon Youth Conservation Corps where he served as an Advisory Board member for 2 terms. He sits on the Oregon Housing Choice Advisory Committee.