On Feb 28, 2019, Oregon signed into law SB 608 (Senate Bill 608) and enacted Rent Control for the entire State of Oregon. What does this mean if you are an investor who owns rental properties in the State of Oregon?
First - I would say, don't panic. The law does allow an increase of 7% plus the Consumer Price Index published in September of the prior calendar year. The CPI was 3.3% which allows a total rent increase of 10.3% for 2019. This cap applies to all renewals and rent increase notices delivered on or after February 28, 2019. City of Portland still has their cap of 10.0% before relocation fees would become payable.
This cap of 10.3% is actually more than the average rent increase we have issued in the last 5 years. The average rent increase is 3-5% a year.
If your property received the first CO (certificate of occupancy) in the last 15 years, you are exempt from this cap.
THE ARGUMENT FOR ANNUAL RENT INCREASES!
Annual rent increases are important - even in a down or soft market. Why? Even in a soft market, does your insurance still go up? Maintenance costs go up? Property taxes for sure are going up!
I get a lot of pushback on rent increases. "But my tenant pays the rent on time and I don't want to rock the boat". Excuse me - but why are we rewarding tenants for doing what is expected of them? Does your mortgage company give you a reward for making your payment on time?
By not implementing annual increases, you are doing yourself and your tenant a disservice. I counsel my owners that even in a soft market, an increase of even $15-25/month on the annual renewal is necessary.
If you implement no annual increase, the tenant will start to feel entitled and then one day, you will realize your rental property is severely under market. When you do issue a rent increase notice, you will receive a lot of pushback from your tenant and "but you didn't raise the rent the last 2 years, why now?" kind of attitude.
One of the problems we faced when the rental market took off in 2015-2016 was all of a sudden landlords realized their property could be bringing in a LOT more money each month. If they had done annual increases, they would have kept up with the trend.
Owning a rental property is a business. Implementing a policy of an annual rent increase is ensuring that your business will continue to thrive and prosper.