Tag Archives: Oregon

Oregon Defies Logic With Statewide Rent Control

It is often said by cynical economists and political commentators, usually of the right or libertarian persuasion, that the road to hell is paved with good intentions. There is no more odious and damaging economic policy that comes from the heart than rent control. For years, limiting the cost of living spaces was done at the local level, but one West Coast state aims to be the first to implement statewide rent controls.

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Oregon’s Proposed Rent Controls

Oregon is set to pass SB 608, legislation that prohibits landlords from raising rents in the first year of a resident’s tenancy. The bill would also cap future rent hikes at 7% annually, plus inflation. This will target all rental properties 15 years or older but exempt units that are a part of a government housing project.

It should be noted that SB 608 does not have vacancy controls, which means buildings can jack up the rent by any amount once the tenant gives his or her notice. Because of this, the legislation bans no-cause evictions, so any landlord must offer a government-approved excuse for evicting a tenant.

With Democratic supermajorities in both chambers of the legislature, SB 608 is likely to pass, making Oregon the first state with statewide rent control.

Gov. Kate Brown (D-OR) is proud of the move, saying in her inaugural address:

“We also need to help Oregonians who have homes but are struggling with the high cost of rent. We can help landlords and tenants navigate this tight housing market. Speaker [Tina] Kotek and Sen. [Ginny] Burdick have innovative proposals that will give renters some peace of mind.”

Lawmakers are jubilant over the bill, but economic experts call the Beaver State’s policy proposal risky, including Mike Wilkerson of ECONorthwest, an economics consulting firm, telling Reason: “You’d be hard-pressed to find any economist who comes out in favor of rent control as a means to help improve whatever failure you are experiencing.”

Rent Control Hurts the Poor

First, it is important to examine the justification for rent controls. Advocates contend that it is immoral for someone who has lived in a neighborhood his entire life to be suddenly priced out of it. It is also wrong, they assert, that landlords are just sitting on their rear ends, enjoying higher rents, because there is a greater demand to reside in New York, San Francisco, or Boston than in Jerome, AZ, or Bonanza, CO.

Proponents will ignore the unintended consequences of rent control. New properties are not erected, vacancy rates plunge, existing landlords exit the market, and the small supply of housing diminishes. Landlords will try to evade regulations by transforming their units into condominiums, luxury apartments, furnished suites, or offices.

Advocates also overlook two other important facts: Real estate can be utilized for a diverse array of purposes (commercial, housing, or industrial), and these laws distort pricing signals.

Ultimately, the state plays a game of cat-and-mouse, coming up with intrusive ways to rein in the evaders. Regulation begets regulation.

New York City

When World War II ended and peacetime reigned supreme in America again, things were not what they used to be, at least for the thousands of troops returning home. After being engaged in battles overseas, soldiers had a new front to fight at home: life – and everything it had to offer.

Despite the inflation rate either contracting or rising in single digits between 1947 and 1952, the cost of living ballooned for the returning heroes of the Armed Forces. One area of the country that increasingly priced these men out of the market was New York City, where real estate values were skyrocketing – and still are!

Officials had an idea to help everyone affected by rising housing costs: rent controls. While the goal was to make units more affordable, the city made the situation worse by introducing temporary relief.

Like economist Milton Friedman once quipped, “There is nothing more permanent than a temporary government program.” This relic of 1947 is still around today, exacerbating the housing affordability crisis. It is estimated that approximately 50,000 apartments and one million rent-stabilized units are controlled by a 70-year-old law.

To understand how egregious this policy is, look no further than former Rep. Charles Rangel (D-NY). The Wall Street Journal reported in September 2008 that he occupied “four rent-stabilized apartments in a posh New York City building,” living in three and using another as an office. By holding four properties, he took advantage of valuable resources at below-market prices at the expense of others.

Controls

Is there a difference between bombs and rent control? Economists often pose this question when debating the efficacy of government controls. The Mises Institute’s Joseph Salerno delivered a lecture a few years ago, showing pictures of urban areas and asking his audience if these dilapidated units were the victims of a bombing campaign or rent controls.

When you even pose the question, you know it’s necessary to second-guess the prescription.

Any time officials use “controls,” you know the policy is going to be a failure. Whether it is preceded by “price” or “rent,” this economically defiant measure produces destitution, deterioration, and destruction. It’s too bad politicians and bureaucrats never learn their lesson.

Source: ZeroHedge

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Portland Home Values Continue to Grow at Nation’s Fastest Pace

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Aerial Tram, Portland Oregon

The local market in March posted 12.3% year-over-year gains in home values, which was the largest increase by a significant margin among the 20 metro areas surveyed. Seattle (10.8%) and Denver (10%) were the only other two regions to post double-digit annual gains.

“It remains a tough home buying season for buyers, with little inventory available among lower-priced homes,” said Svenja Gudell, chief economist at Zillow, in an email. “The competition is locking out some first-time buyers, who instead are paying record-high rents.”

Portland’s inventory has been historically low recently. The latest report from the local Regional Multiple Listing Service showed inventory at a miniscule 1.4 months in April. The figure estimates how long it would take for all current homes on the market to sell at the current pace. (Six months of inventory indicates a balanced market.)

Prices have also reached record highs; the average sale price in the Portland area was $397,700 in April and the median reached $350,000.

Nationally, home values in March posted annual gains of 5.2%, the Case-Shiller report found, down from 5.3% the previous month.

“Home prices are continuing to rise at a 5% annual rate, a pace that has held since the start of 2015,” said David M. Blitzer, chairman of the index committee, in a news release. “The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates.”

Blitzer added that the number of homes currently for sale is “less than two percent of the number of households in the U.S., the lowest percentage seen since the mid-1980s.”

“The Pacific Northwest and the west continue to be the strongest regions,” Blizter said.

source: National Mortgage News