Tag: rent

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Who Will Pay the Bills When the Pandemic Ends?

By Eric Fruits, Ph.D.

This week, the U.K. became the first western nation to vaccinate its residents against COVID-19. The recipient, a 91-year-old retired shop clerk, voiced relief, “I can finally look forward to spending time with my family and friends in the New Year.” Despite the fanfare greeting the vaccine rollout, authorities warned that the vaccination campaign would take many months. They warned the tough restrictions that have rattled daily life and cratered the economy are likely to go on into spring.

While many of us dream the vaccine will bring a return to normal life, for many people post-pandemic life will be a nightmare. The end of pauses, freezes, shutdowns, and lockdowns will mean the end of moratoriums on housing evictions, utility shutoffs, and student loan payments. During COVID-19, millions of Americans have racked up thousands—maybe tens of thousands—of dollars in unpaid rent, utilities, and student loans. For example, information presented to the Oregon Governor’s Council of Economic Advisors estimates unpaid rent in the state is between $250 million and $300 million. When the emergency ends, those bills will come due.

Elected officials have put themselves in an impossible position. If they allow masses of evictions and utility shutoffs, they will face torches and pitchforks from their constituents. If they try to pass laws wiping out the debt, they will face a revolt from some of their biggest donors. And, even worse, they will face years of constitutional challenges.

Both the U.S. and the Oregon constitutions forbid any laws “impairing the obligation of contracts.” Rental agreements are contracts. So are arrangements with utilities and student loan providers. Neither the federal government nor state or local governments can simply “wipe out” the payment provisions of these contracts. Our politicians are in a bind, but it gets even worse.

One way to work around the constitutions’ contracts clauses would be to establish a voluntary program of debt forgiveness. But for a program to be truly voluntary, the state must provide a compelling incentive for debt holders to forgive the debt.

An option promoted by Rep. Jule Fahey (D-Eugene) would provide state grants to certain property owners who forgive 80 percent or more of their tenants’ past due rent. It has been reported the proposed legislation would set aside $100 million for grants to renters and property owners. On the one hand, $100 million is a lot of taxpayer money. On the other hand, $100 million is less than half the total amount of unpaid rent in the state.

If such a fund is established, it will be an admission that the governor’s emergency orders have caused enormous damage to households and businesses. If the state is willing to admit it’s caused at least $100 million in damage to rental properties, how much damage has it done to restaurants, bars, retailers, manufacturers, nonprofits, and families?

In September, Portland attorney John DiLorenzo sent a letter to Governor Kate Brown demanding the state compensate several businesses for losses associated with her pandemic-related executive orders. Under Oregon law people are “entitled to reasonable compensation from the state” if their property is “taken” under the emergency powers Brown invoked to shut down most of the state. According to DiLorenzo, “What’s happened here is the governor has basically destroyed property for the purpose of furthering the policy behind the executive order.” Rep. Fahey’s draft bill would be the first piece of legislation to attach a dollar figure to the value that has been taken as a result of the executive orders.

It’s easy for politicians and policy makers to mindlessly remind us, “We’re all in this together.” But, too often they face no meaningful consequences for their decisions that affect millions of people. Oregon’s law requiring reasonable compensation for property taken under the governor’s emergency orders was designed to impose a consequence on the government. If the government has to pay a price for its emergency orders, then the government is more likely to make decisions that account for the costs it imposes on everyone else.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Oregon Needs a Moratorium on Overbroad Laws

By Vlad Yurlov

Once again, Oregon’s legislature has succumbed to shortsighted politics. Effective June 30, House Bill 4213 prohibits landlords from evicting tenants due to nonpayment until next April, regardless of their circumstances.

Of course, there could be many reasons tenants might not pay their rent. One of the most pressing is Oregon’s lockdown policy, which effectively prohibited many businesses and entire industries from operating, and their employees from supporting themselves. While these conditions may warrant legislative action, people who have continued to earn an income may simply choose to delay their rent payments.

By being so broadly applied, this legislation will harm landlords, particularly small private owners who still must pay utilities and property taxes on their units. But property owners won’t be alone in suffering. This moratorium will make it even harder for people to find apartments for rent, because only the most secure tenants would be considered during a time when anyone can simply put off their payments. In addition, the end of the moratorium likely will bring more debt, eviction, and ultimately homelessness to an already stretched system.

Legislators should understand that seemingly simplistic quick fixes can cause long-run damage. This legislation will push Oregon from having a health crisis to an even deeper housing crisis. Laws should be made with specificity, not reactionary haste.

Vlad Yurlov is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research center.

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Stop Raising Rents in Portland

By Micah Perry

On Wednesday, August 7, 2019, the Portland City Council passed yet another ordinance that will harm the housing market in the city. Landlords will now be required to register all their rental units with the city and pay a $60 yearly registration fee for each unit.

Any economist, or even a student who has taken Econ 101, can tell you that countries with more regulations are less prosperous than nations that enjoy greater economic freedom. Entrepreneurship, from the opening of a small bakery to the development of an apartment complex, is seriously disincentivized by regulations.

Rules and fees placed on the housing industry cause any would-be entrepreneurs and developers—individuals who could provide a solution to Portland’s housing problem—to think twice and reconsider investment in housing rentals. This new ordinance joins a slew of deterrent regulations on rental housing within Portland.

Over the past few years, Portland’s City Council has approved policies that restrict or complicate a landlord’s ability to reject a rental applicant for reasons such as criminal background or ability to pay rent, and that require landlords to help pay for a renter’s relocation costs. Those who have already built rental housing may find it more lucrative and safer simply to sell the property they own rather than continue to rent it. Those considering building new rentals may now balk at the opportunity altogether.

Proponents of the new ordinance will argue that the fee is critical because it funds the city’s Rental Services Office, but the necessity of the office itself is questionable. Most of the office’s responsibilities seem to involve explaining the complex landlord-tenant laws passed by the city in recent years, a self-induced problem that could be solved by simply repealing them. In addition, while the office is portrayed as a resource for tenants to utilize when being treated unfairly, the office’s website notes that it often refers those in need of help to previously existing nonprofits and advocacy groups, who would help without the city’s intervention.

There are also at least two clear structural problems with the ordinance. First, mobile homes, which provided an affordable housing solution long before the city stepped in, will be subject to the tax and almost certainly see rents rise. Second, the fee’s structure makes it an especially steep price to pay for landlords managing large complexes throughout the city, even though city bureaucrats claim that it is a moderate price.

To use an example from the testimony of one landlord, Seattle, which has a similar program, charges landlords a base rate of $175, plus two dollars for every additional unit they own. So, the owner of a 200-unit apartment in Seattle would pay $575 a year, but an identical building in Portland would be charged $12,000 a year. Landlords most likely will pass along the costs to tenants in the form of higher rent.

This new ordinance will do more harm than good. It will raise rents on most people and, more importantly, further constrict the supply of rental housing in the city.

Micah Perry is a Research Associate at the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. He can be reached at info@cascadepolicy.org. A version of this article appeared in The Portland Tribune on August 20, 2019.

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Portland’s City Council Wants Rent to Go Up

By Micah Perry

The Portland City Council recently passed a new ordinance that will require landlords to register all of their rental units with the city and pay a $60 yearly registration fee per unit.

While regulated affordable housing will be exempt, other types of rentals, like mobile homes, will still be subject to the fee. It is almost certain that landlords will pass on the increased costs to their tenants.

During one council meeting, current landlords noted that the registration fees will siphon money away that could be used for maintenance. They also said that increased housing regulations will discourage potential developers and landlords from wanting to build new rental units in the city. Many landlords are incentivized to sell their units, rather than rent them, because of the increased regulation.

The money raised by the fee will fund the Rental Services Office, a new, needless expansion of Portland’s bureaucracy that will only serve to grow the number of rules placed on housing in the city.

This ordinance adds to the long list of policies that disincentivize the operation and construction of rental units in Portland. If the Portland City Council keeps pursuing policies like these, rents will continue to go up and rental housing will continue to disappear.

Micah Perry is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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What’s Causing Oregon’s “Housing Affordability Crisis”?

By Miranda Bonifield

Here’s a question for you: Why is housing so expensive in Oregon?

Government at all levels has attempted to address the issue of housing affordability for years with tax credits, occasional expansion of the urban growth boundary, multimillion dollar bond measures, and now statewide rent control in Oregon. But rather than making life easier for Americans, state and local policies play major roles in the affordability crisis.

Economist Dr. Randall Pozdena recently authored a report published by Cascade Policy Institute that analyzes the decline of housing affordability, with a particular focus on Oregon. His research confirms what any developer can already tell you: Housing is less affordable because land is less available.

Easy access to land up until the 1970s meant housing price increases roughly tracked increases in household income. But in the ’60s and ’70s, planners and environmentalists dreaming of European-style density began lobbying against automobile-driven suburban sprawl. These measures gained enough traction that by 2000, the Brookings Institution found, state ballots around the country contained 553 “anti-sprawl” measures. Supporters expected higher density to decrease the need for public spending, improve traffic conditions by facilitating the use of transit, and lower development costs.

Instead, housing is escalating further out of reach every year. Oregon, California, Hawaii, and Washington, D.C. have the worst affordability scores in the country. An expensive market might make sense in D.C. and Hawaii, as both have extremely limited land available for development. California’s problem is the bureaucratic state whose regulations keep developers from meeting demand. But it’s Oregon that has the worst score for affordability out of the fifty states: Our housing prices rose 32% faster than our incomes between 1992 and 2007. This puts housing affordability in Oregon behind every one of the other 49 states.

With some exceptions, Oregon’s income growth has generally kept pace with the rest of the nation. We have plenty of developable land and a capable, productive community. Our housing is unaffordable because we’ve embraced some of the most aggressive “anti-sprawl” policies in the country. Dr. Pozdena finds:

“The higher the rank of anti-sprawl policy in a state, the poorer is the affordability rank of the state and the lower has been the availability of additional development sites relative to population growth. The confidence that these associations are not random is 99.99 percent. This is strongly indicative of a causal relationship between implementation of anti-sprawl policy, land conservation, and the affordability problem.”

There is no market and no economic philosophy in which reducing supply while demand increases leads to lower prices. In reality, Oregon’s policies have increased public spending, damaged public service quality, made no sizable impact on the number of automobile commuters, and worsened congestion.

It’s encouraging to hear policymakers acknowledge that we need to expand urban growth boundaries and encourage more development; but until a fundamental shift occurs in the philosophy behind growth policy, these statements are all flash and no substance. Oregon’s land use regulations don’t align with the way Oregonians actually live. They worsen traffic, crowd cities, and decrease quality of life.

Oregon must address the true causes of housing affordability problems, not just the symptoms—or the crisis will never end.

Miranda Bonifield is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Rent Control Is a Steal

By Miranda Bonifield

Remember that emotional final episode of the now-classic sitcom Friends? As the group reminisces about the New York apartment that served as the stage for most of the show, Chandler tells his newborn child, “This was your first home…and thanks to rent control, it was a steal.”

His comment was more apt than the screenwriters probably realized. Rent control is a steal. It steals incentive from landlords who are interested in providing housing but can’t make ends meet when they’re no longer in charge of their rates. And especially in combination with aggressive anti-sprawl policies cities like Portland are so fond of, it steals housing opportunities from individuals who need them most.

Rather than solving housing problems, studies have found that in the long run, rent control policies increase housing costs and fuel gentrification. In San Francisco, researchers found that landlords frequently turned their apartment buildings into condominiums and invested in higher-value properties—making it even more expensive to live in the city. And unfortunately, landlords are less interested in maintaining rent-controlled apartments, which does nothing for the tenants’ quality of living.

If people are struggling to find housing, the solution isn’t to limit supply and destroy affordability. That just makes things harder. Instead, state leaders should reduce regulations that constrict housing supply, allowing developers to provide the homes Oregonians need so desperately

Miranda Bonifield is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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