Kyle Markley
for Oregon Secretary of State
Kyle Markley
for Oregon Secretary of State
2017 HB2004 would repeal ORS 91.225, which generally prohibits local rent control in Oregon.
The population of Oregon has been growing rapidly (+1.7% in 2016, mostly from net migration), which has put strain on the housing supply, and particularly in the Portland metro area, where rental vacancy rates have recently been among the lowest in the nation. The obvious supply-and-demand consequence has been increasing rental costs.
From an economic perspective, there are two fundamental ways to bring rents back down:
The profit motive already encourages landlords to continuously look for ways to reduce costs on their own, and maintenance of properties over time will gradually cause the installation of more cost-efficient materials, fixtures, and appliances. This will help, but the trend is already in place, and the savings are probably not dramatic.
The quicker option would be for government to reduce regulatory costs. Unfortunately, HB2004 would actually increase regulatory costs by obligating landlords to in some circumstances forfeit their security deposits and pay the relocation expenses of evicted tenants (among other things).
People argue over the extent to which these increased regulatory costs would be paid by reducing landlords' profits versus increasing tenants' rents. But the answer matters little — neither helps renters! To the extent that the increased regulatory costs are passed on to tenants, the regulations plainly fail at their goal of reducing rental costs. To the extent that the increased regulatory costs reduce landlords' profits, they reduce the incentive to increase the supply of housing, which will exacerbate and prolong the tight market conditions that have caused rents to rise in the first place.
If the current demographic trends hold, an increase in the supply of housing is necessary to make housing more available and consequently more affordable. The solution to unaffordable housing here is more housing — and at any price point, because even expensive new housing, when filled, reduces competition for less-expensive housing.
What will induce people to increase the supply of housing? The potential for profit. The profit motive is the essential incentive to increase the housing supply. New housing will only be built on the anticipation of profit, and the greater the perceived profit, the faster that housing will be built. To solve the Portland area's affordable housing crisis, landlords must be allowed to profit — and the more, the better!
This prescription is the opposite of popular thought, which looks upon rent controls with some favor. But economists (in a rare near-consensus) believe that rent controls do not work, and harm the very people they are indended to help. Rent controls reduce the construction of new units, cause the quality of existing units to deteriorate, misallocate those existing units, and reduce tenants' influence over landlords (because tenants become easily replaced).
Indeed, Swedish economist Assar Lindbeck, a socialist himself, wrote that "next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities" (The Political Economy of the New Left: An Outsider's View, 1971, p. 39).
The current prohibition of rent control in Oregon law is a good thing, and should be maintained. HB2004 should not pass.
