COMMENTARY | Oregon’s new law is nothing compared to efforts in some U.S. cities
The new Democratic super-majority in the Oregon Legislature raised hopes for real progress on urgent issues, including affordable housing, climate change, an abysmal lack of support for families, and finding a progressive way to fund our declining schools. But our weak campaign finance laws let corporations get away with spending more money to block the will of the people per person in Oregon than is true in any other state. Corporate money funds deceptive advertising, big campaign donations to legislators, manipulative lobbying and threats to take every issue to expensive referendums.
For real progress, we’ll have to take what we can get now and redouble our efforts to organize to do what we can locally where our chances are better, push even harder on the Legislature and get big money out of our politics. In this column, I’ll focus just on action against skyrocketing rents.
Rent stabilization
Rent stabilization is back on the table. Democratic leadership neutralized much of the opposition by pushing the fast passage of a bill designed to stop only extreme rent gouging and limit no-cause evictions. Prohibition on cities from passing their own, stronger rent stabilization policies is maintained, and housing activists worry that landlords may be encouraged to harass renters over small issues, in order to build a case for eviction.
The new statewide cap on yearly rent increases is 7 percent plus the inflation rate, now 3 percent in Portland, for a total of 10 percent. Ten percent dwarfs wage growth, which has only just risen to 3 percent a year in Oregon after years of stagnation. And 10 percent is huge compared to more effective rent stabilization programs elsewhere. San Francisco and Berkeley allow rent increases of only two-thirds of the regional inflation rate, unless landlords have made significant improvements to a rental property.
Capping annual increases at 10 percent would have only slightly limited the unaffordable growth in rents in Portland over the past five years. Portland’s rent increases slowed over 2018, particularly at the top. But the average annual rent increase near the middle of the price spectrum rose between 8 percent and 11 percent a year for the past five years, with the sharpest increases for the smaller units.
FURTHER READING: Oregon renter-protections bill is the least we can do (editorial)
Nor can 10 percent limits be justified by landlords’ ongoing investments in their properties. Astronomical rent increases in Portland – and landlords’ windfall profits – resulted from insufficient public housing, lack of available financing for private housing for years after the Great Recession and Portland’s continuing attractiveness to in-migrants.
It’s not true that economists are uniformly against the kind of rent stabilization that now exists in hundreds of U.S. cities. Landlord and real estate lobbies – and our biggest local paper – love to assert that economists uniformly oppose rent control. What they don’t tell you is that what economists oppose are crude price controls like those imposed in New York to get through World War II.
Rent stabilization policies are now much more sophisticated. New construction is exempted for a period of 15 years, maintaining the incentive to build new housing. Rents are allowed to rise annually with that part of the inflation rate not created by unregulated growth in housing costs. Landlords can petition for increases based on spending for improvements and unusual maintenance needs.
Next steps
This bill represents progress against the worst excesses. However, if the state would allow it, Portland could pass a much stronger, more effective rent stabilization policy without harming the supply of housing. Our best next step would be to pass a second bill to lift pre-emption on cities hoping to set their own course – and get to work in Portland.
Second, we can raise funds locally to build more public and affordable housing. Ongoing efforts are excellent, but too small to make a real difference. Raising the city and county business tax on the very biggest corporations making sales here could raise real money. The Portland Clean Energy Fund is doing that with a tax targeted narrowly on retail in Portland. We should expand that tax to most other industries, countywide.
A 2017 report by the city’s Revenue Division showed that a 1 percent tax on all businesses selling more than $1 billion globally and at least $500,000 in Portland – exempting groceries and medicine – could raise more than $200 million a year. That’s even if taxes on any one company were capped to reduce the chances they’d lose interest in selling in Portland.
The feds have given Big Business an enormous tax cut, and Oregon’s state and local tax take from businesses is the second lowest in the country. This is the time to raise local taxes on giant corporations selling in Portland.
Street Smart Economics is a periodic series written by professors emeriti in economics for Street Roots. Mary C. King is a professor emerita of economics at Portland State University.
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