René Nelson, CCIM CRE, and Jim Straub, Legislative Director Oregon Rental Housing Association, discuss the impact of Oregon Rent Control Senate Bill 608 on multifamily owners. Learn from the experts about whether you should raise rents before the Oregon rent control is signed into law.
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René Nelson: Let’s talk about Senate Bill 608, which is rent legislation that deals with rent control. I know you were a champion in the previous legislation and trained to defeat that, but we all know that it is coming to Oregon. Let’s talk about the timing of the bill and the impact it will have on multi-family owners.
Jim Straub: As we speak now, Senate Bill 608 has just passed out of the Senate housing committee and we are awaiting a vote on the Senate floor. We expect that to be within the second week of February. After that point, it will move over to the House of Representatives where they will convene a House committee on housing, hear it, and then we expect it very quickly to move to the House for a pass vote, and then as soon as the Governor signs it, it will become law.
René Nelson: Okay. Right now, we’re in the first part of February. Do you anticipate that’ll be rolled out maybe in the next 60 to 90 days?
Jim Straub: Absolutely. I expect it most likely within the next 60 days. Politics is hard to predict, but the intent behind the bill is to push it through as quick as politically possible.
What Should Owners With Low Rents Do Before the Oregon Rental Control Bill Passes?
René Nelson: Okay. If someone has low rents, are they going to have a chance to give out rent notices or is it too late at this point?
Jim Straub: There’s a peculiarity in the bill. I would urge anybody to take whatever action they need to take immediately. Don’t worry about what the law says. Protect yourself, raise the rents if you need to raise the rents, and raise the rents to whatever amount you need to raise the rents.
Jim Straub: The original intent of the bill was to allow any pending notices as long as the notices had been given on passage. If they were still pending, they would be honored. There’s a technicality in the bill that erases that, and we’re not a 100 percent certain if it’s going to be fixed or not, but I would urge people to plan on it being there and to take action.
Jim Straub: The worse case scenario is they either resend the notice or they notify the tenants of the restriction that doesn’t allow them to raise the rent more than 10 percent, and they just lower it to whatever the maximum cap is that they’re allowed to raise it.
René Nelson: I see this having an impact on multi-family owners who have properties that are significantly under rented. If those owners decide that they want to get out of the market, let’s say they want to sell their property, the first thing that a buyer is going to look at is the net operating income that’s being generated off of that property. So, if you’ve had an investor who’s owned a property, and you know they’ve just maintained the rent increases at a very minimal pace, but they’re below market by a couple of hundred dollars. I know a lot of those multi-family owners are sitting there wondering, what do I do? Should I raise rents now? They hate to disrupt their tenants, but you know that could have a big impact for them down the road when they go to sell.
Jim Straub: Absolutely, which is why I would urge anybody to take the action that they need to take now to protect their interest. If you have been giving the tenants the good graces of low rent for these number of years and you’re thinking about selling in the near future, you shouldn’t feel badly about raising the rent to market. The tenants have benefited for years with under-market rent. All you’re doing is bringing it back to where it was or where it should be under normal market conditions.
Jim Straub: Take the action now. Raise the rent if it needs to be raised. It’s always easier to lower the rent than raise the rent in the future
René Nelson: Well, I know a lot of multi-family owners are going to be happy to hear that. I think one of their concerns will be to stay out of the crosshairs in the media tho
Jim Straub: Absolutely, and any time you do substantial rent raises, you become a potential target. You’ll have to weigh the pros and cons because now that this bill is public, if a large property goes out and across the board raises all the rents a significant amount, that’s going to attract some attention. You’re going to have to evaluate whether or not the attention is positive or not. There is a saying that any media attention is good attention as long as they spell your name right, but you’re going to have to evaluate to whether or not that helps the sale or hurts the sale.
For more information about the Oregon Rent Control Senate Bill 608 and how it affects Oregon rental property owners, call me today: René Nelson, CCIM, (541) 912-6583 / firstname.lastname@example.org / www.eugene-commercial.com