Statewide rent control in Oregon: this is just the start of something

 

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Even as a child, you knew the mouse wouldn’t be happy with just a cookie.

Oregon Democrats won’t be satisfied with their first stab at statewide rent control either.

Senate Bill 608, moving swiftly through Oregon’s Democrat-controlled legislature, proposes to limit annual rent increases to 7% plus the change in the consumer price index, except when the dwelling has been certified for occupancy less than 15 years. Lawmakers in the Oregon Senate approved the bill 17-11 on Tuesday, Feb. 12. It now goes to the House.

In January 2019, Jim Straub, Legislative Director of the Oregon Rental Housing Association, signaled acceptance of, or resignation to, the inevitable, given that the Democrats have a supermajority in both chambers and occupy the governor’s chair. “There is a lot here for landlords to dislike, but more importantly we should recognize it for what it isn’t, an industry killer,” Straub said

He’s dead wrong.

Straub figures landlords can live with the bill because the annual rent increase limit is so high, leaving a lot of wiggle room. In 2018, the all items consumer price index increased 1.9 % before seasonal adjustment. Add 7% and the rent increase limit would be 8.9%.

Although annual rent increases can vary quite a bit in Portland, influenced by a building’s location, age, amenities, etc., annual rent growth in Portland overall averaged just 4.3% in 2017 and, largely due to record apartment construction, actually decreased 1.3% in 2018.

ECONorthwest, an economics consulting firm, has estimated that only 5% of buildings in Portland increased rents above what would be allowed by SB 608 in 2018.

But Oregon real estate interests are going to rue the day SB 608 becomes law.

That’s because once it is enacted, pressure to lower the rent increase limit in response to the pleas of tenant groups will accelerate. And government regulations will beget more government regulations.

In  January, Margot Black, founder and former leader of a renters’ rights group, Portland Tenants United, bitterly criticized the high cap on rent increases.

“If this is the version that passes, and if (Democrat Sen. Virginia) Burdick is the one championing it, then I’ll start my campaign to run against her the day after it passes,” said Black. “I will knock on every renter’s door in the district and let them know that their senator thinks they are no better than a used couch put out to the curb in the rain.”

According to the Oregon Rental Housing Association, some tenant groups have also already gone to the 2019 Legislature requesting that all future rent increases be limited to a maximum of around 2% every 12 months, even if a tenant moves out during  that period.

And don’t expect the Democrats to consider the rent increase limit set in stone.

Government is addicted to constant revision of the rules. The federal income tax began in 1913 with a combined tax rate of 1-2% for the middle class. The marginal tax rate for the middle class now is about 22%.

Oregon’s personal income tax has been all over the map since its inception. According to the Oregon Department of Revenue, in 1930, the maximum tax rate on “single and separate” and “Joint and head of household” was 5%. Only three years later, in 1933, it went up to 7% and by 1955 it had risen to 11.60%. It went back down to 9% in 1987, but jumped to 11% in 2009-2011, In 2018 its was 9.9%.

So, don’t be surprised if SB 608 is just the camel’s first move.

“It is the humble petition of the camel, who only asks that he may put his nose into the traveler’s tent. It is so pitiful, so modest, that we must needs relent and grant it.”

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Marijuana: Oregon’s new lottery

Oregon government has found a new addiction – marijuana taxes.

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Oregon collected $3.48 million in marijuana taxes in January 2016, the first month of taxing legal recreational marijuana. Based on these returns, the future looks bright for Oregon’s budget.

Economics consulting firm ECONorthwest initially projected the state would see $38.5 million in marijuana tax revenue in 2016. The Oregon Liquor Control Commission, which regulates recreational marijuana, projected less. But if Oregon sales for the rest of the year stay on the current trajectory, Oregon will collect $41.76 million in 2016, the Bend Bulletin figures.

“While state officials were quick to caution that it will take time to get an accurate view of the money coming in through marijuana sales, the early estimate shows pot may be a bigger boon than initially thought for Oregon’s schools and police, which receive a portion of tax revenue,” the Bulletin said.

Under Ballot Measure 91, revenue after costs will be divided as follows: 40 percent to the Common School Fund; 20 percent to mental health, alcoholism and drug services; 15 percent to state police; 10 percent each to cities and counties; 5 percent to the Oregon Health Authority for alcohol and drug abuse prevention.

What a windfall is coming their way.

And soon enough, just as has happened with the State lottery, the Oregon Liquor Control Commission and the Legislature will find themselves looking for ways to generate more marijuana money.

Lottery money has already turned the state into an addict, as Oregon’s lottery take has gone from $87.8 million in FY86 to $1.12 billion for the fiscal year ended June 30, 2015, an increase of 6.1 percent over fiscal year 2014. The Lottery is a very big business.

Going forward, the Lottery is working hard to expand its audience and revenues with development of new games, platforms, and venues in order to attract more diverse demographic groups.

The lure of raking in lottery dollars without having to raise taxes has long been appealing to politicians anxious to satiate government’s insatiable thirst for revenue. In fact, the lottery is often referred to as a “voluntary tax”, though behavioral research calls the “voluntary” part into question.

Whatever it’s called, the state always wants more of it, just as it will with marijuana taxes. You can count on it.