As Bill HB2004A just passed the Oregon House and heads to the Senate, I wanted to put my thoughts on rent control on paper.

Housing is a huge issue in Portland right now. I understand first hand as I've paid a lot of money in rent.

I hate the idea of someone pushed out of the home and neighborhood they rent in because it's too expensive. No one wants Portland's housing to turn into that of San Francisco.

But I'm far from convinced that rent control is the way to go. In principle it feels wrong, and in execution I'm not aware of a scenario where it's worked well. Cities like San Francisco and New York (in part) have rent control in place, and it's also where we find some of the largest housing problems.

Why rent control?

Rent control is to allow protection to someone that rents a place that becomes more expensive than they can eventually afford. If you rent in a cheap area now that becomes a hot spot, and market rates become more than your rent cap, your landlord can not raise rates to market, or not renew your lease so that someone else can move in. 

The pros to rent control is that it sets a maximum amount your rent can increase. This provides stability to tenants, and can save them a lot of money in the long-term if they stay in the same place and the market well exceeds the rental cap. 

Negative effects to rent control

Maintenance: If a landlords rents are below market, why would they want to spend money on maintenance? Landlords can actually be incentivized to not maintain a place and let it run down so that their tenant would want to move out.

Discrimination on tenants: Landlords are incentivized to discriminate against long-term renters. If they are investing in a neighborhood they think will appreciate long-term, they want short term renters.

Landlord discrimination: rent control is discrimination against landlords. They are not allowed to realize the gains of their investment. Owning property is risky and expensive. When renting, it's tough to see the mortgage, taxes, time, and maintenance your landlord is paying. Often landlords lose money on investment properties. In down markets like 2008, there are not laws to keep tenants in place or a cap on how much you have to lower your rent to keep a tenant.

Decreases investment: studies show investment in property increases when rent caps get scrapped. Investors are not as motivated to invest in areas that need revitalization knowing that they won't see the full benefit. 

Increases rent for other tenants: rents (and home values) are a simple game of supply and demand. Rental caps decrease the efficiency of the market and lower the supply of rental units. This increases the price for everyone that did not lock in at a low rental rate.

It's such a contentious issue because it affects all of us

Real estate affects everyone. We either rent, own, or do both. A very small percentage of the population owns a lot of rental properties. So the immediate effect is not on many of us. As Portland continues through it's renaissance, I can't help but feel that we are discriminating against landlords when the real issue is a surge in demand and limited development. Landlords haven't always had it so good. When the market decreases, I can't imagine we'll implement laws to keep tenants from moving, or limit how much their rent can decrease. Nor should we, people should be able to move as they please outside of a rental contract they agree to.

Long-term, I see a lot of negatives that rental caps incentivize. Some will benefit, but a lot will lose. And not just those that own real estate as an investment. Investment in real estate has an integral role in the US economy. It creates jobs in construction, manufacturing, retail, banking, law, and more. 

Imagine if there was a cap on how much you could sell your house for? Or a cap on how much your stocks or other investments could increase? Housing is really tough issue. But we need more supply to increase options for those that rent if we want a real solution.