Report: The Fallacy of Rent Control

In the August 2019 edition of the Pathfinder Report, Senior Managing Director Lorne Polger shares his thoughts on why rent control will fail to help produce affordable housing:

"Make it easier to build and make it easier to build with increased density to reduce the cost per unit. San Diego’s Mayor, Kevin Faulconer, was very much in tune with this concept. In 2018, he backed an update to the Affordable Housing Density Bonus Program to incentivize developers to increase the production of smaller and more affordable units and backed several code changes to streamline the development process, remove unnecessary barriers to development and increase production.

"This past June, the Mayor proposed to wipe out height limits for apartment and condominium projects built near transit lines. He said the proposal would spur construction of more housing, especially housing for middle-income residents, by allowing taller buildings with smaller sized units and then streamlining the approval process for such projects. Harrumph said the local planning groups! Harrumph said the local NIMBY’s (not in my back yard). Harrumph said the local BANANA’s (build absolutely nothing anywhere near anything). Quoting one of my favorite singers, Alanis Morrissette, isn’t it ironic? Isn’t it ironic that many of the same groups leading the charge on rent control are the ones restricting new supply."

Read the full piece here.

Fed Cuts Interest Rates for First Time Since 2008

As anticipated, the Federal Reserve announced that it is cutting its target range for the federal funds rate. The new range is 2 to 2.25%. This is the first rate cut since the recession started in 2008. The Fed also plans to speed up the process of shrinking its balance sheet - it now hopes to complete the siphoning off of securities by August, rather than September. The Fed plans to continue monitoring the economy, and has not announced any plans to cut rates further this year. Read more.

Seattle Times: Seattle Now Most Expensive Big City for Renters Outside of California

The Seattle Times reports that the Emerald City is now more expensive for renters than any other city in the U.S. outside of California. Read more.

Oregonian: Developers Hope to Access Clean Energy Funds for Affordable Housing

Today's Oregonian/Oregonlive reports on a New York/DC-based company that intends to raise $150 million to launch investment funds that purchase, rehab and finance construction of affordable housing in Portland. The firm, Centri Capital, plans to buy large, aging apartment complexes where rents are low because of the units’ location or state of disrepair.

According to The Oregonian, the company would rehab the buildings, improve their energy efficiency, then commit to holding rent increases modest for decades while turning profits for investors.

While supporters of the clean energy tax cited energy-saving retrofits as a prime expenditure, "voters were told the money, raised by a 1 percent tax on retail sales by large corporations operating in Portland, would be spent on renewable energy infrastructure, energy efficiency retrofits and green jobs training," according to the paper.

The news story also explores various political ties that include Chloe Eudaly's Chief of Staff, Marshall Runkel. Read more.

Sold! 30 Units in NE Portland, Oregon

HFO is pleased to announce the sale of this listing. The asset was well-maintained but in original condition. Units included washer/dryer hookups, off-street parking and interior hallways. Each unit has a wood-burning fireplace, and ground floor units have private patios. Recent updates include new roof, seal coat and paint.

The property was owner managed and rents were below market. The asset's upside was attractive to numerous investors and HFO worked with the seller to determine the strongest buyer with the ability to close in a timely manner.

After Brief Slowdown, Rental Rates in Seattle Area Climbing Once More

The Seattle Times reports that rents are once again on the rise in Seattle metro as well as surrounding communities. Read more. 

Beginning January 1, 2020: Landlords in Oregon Can't Consider Previous Marijuana Convictions

On June 6th, Oregon Governor Kate Brown signed into law Senate Bill 970. The bill prohibits landlords from considering past convictions for the use or possession of marijuana when screening prospective tenants. A second bill also becomes effective on that date, Senate Bill 420, establishing procedures for Oregon residents to set aside past convictions for marijuana-related offenses that are no longer illegal.

Oregon Adopts New Corporate Activity Tax That Appears to Impact Property Managers and Housing Providers

Oregon has adopted a business activity tax that will be used to support schools and education initiatives. The tax applies to partnerships, sole proprietors, LLC's, S and C corporations, trusts, estates, and others. The tax takes effect on January 1, 2020.

The tax appears to apply to all rents collected by housing providers.

There are some possible deductions and exclusions. Please consult with your CPA or tax attorney for additional information.

Here's a summary explaining the tax and how to calculate what you will owe.

Oregon State Bar Releases Q & A on Landlord/Tenant Law in Oregon

The Oregon State Bar has released a revised and updated version of a Q & A document about Landlord/Tenant Law in Oregon. You can read and download the latest version here. 

Sold! 25 Units in North Portland

HFO is pleased to announce the sale of this 25-unit asset in North Portland. The property had been extensively renovated prior to sale with a complete envelope replacement. The property's historical operations - high vacancy and high expenses resulting from the renovations - challenged many investors. HFO positioned the property as an outstanding opportunity to purchase a newly renovated asset with additional management upside.

Sold! 18 Units in North Portland, OR

The seller of this asset reached out to HFO to communicate he wanted to sell. HFO was able to quickly identify a buyer in San Francisco who was in a 1031 exchange. The property was a good fit for the buyer's acquisition criteria and set a new benchmark price for the St. Johns neighborhood.

Portland Announces Proposed Technical Changes to Relocation Fee Ordinance; Feedback due August 30.

The Portland Housing Bureau is releasing a draft of technical changes to the Mandatory Relocation Assistance Exemption Eligibility and Approval Process administrative rules.

HFO has reviewed these changes, and they do not appear to change the substance or intention of the law. Rather, they appear to clarify and reduce confusion by:

1)    Clarifying definitions
2)    Reducing some paperwork for nonprofits
3)    Increasing paperwork for most owners
4)    Clarifying processes
5)    Clarifying various requirements

The public is invited to testify on the technical changes of the proposed draft which you can view and download here.

Beginning Monday, July 22, 2019, you can submit testimony or feedback on the draft.

Testimony may be submitted via email, fax, letter, or in person at the public hearing (details below).

Written comments or testimony must be received by August 30, 2019 and must include a first and last name to be considered. 

• Email your testimony to: RentalServices@portlandoregon.gov
• Fax your testimony to: 503-823-2387
• Mail your testimony to: PHB c/o Mandatory Relocation Assistance Exemption Eligibility and Approval Process, 421 SW 6th Ave, Suite 500 Portland, Oregon 97204
• Testify in person at the public hearing: Thursday, August 8, 2019 from 6 – 8pm at
  IRCO – 10301 NE Glisan St, Portland, OR 97220

To request translation services at the hearing, contact Andrés Oswill at Andres.Oswill@portlandoregon.gov at least three business days prior to the hearing. If you have questions regarding the proposed rule changes or the rulemaking process, please contact the Relocation Assistance Rules Coordinator, Andrés Oswill, at Andres.Oswill@portlandoregon.gov. 

City of Portland Considering Annual $60 Per Unit Fee on All Apartments July 31st

**IMPORTANT NOTICE**
[Courtesty of Multifamily NW]
On July 17th the Portland Housing Bureau unveiled a plan to assess a $60 per-unit annual fee on market-rate units to fund the city’s rental housing initiatives.

It’s anticipated that this $60 per-unit fee proposal will be presented to Portland City Council on Wednesday, July 31st.

You're invited to attend the hearing at City Hall on July 31st and testify against the city’s continued pursuit of untested and unfunded policies. This fee will cost the typical 75-unit apartment building $4,500 per year. Portland City Council’s policies continue to drive up the cost of existing housing while showing little to no results in creating affordable housing for everyday Portlanders.

Further details about this proposal will not be confirmed until Friday, July 26th, the last day possible the city is required to publish the following week’s city council agenda and share the proposal language.

Deborah Imse
Multifamily NW
Executive Director

Portland anticipates collecting 60% of assessed fees during the first year and has prepared this preliminary budget. 

The fee would be used to cover the rental services office and to:

• Provide resources for maintenance costs for an expanded rental registration system
• Adjusted annually to account for inflation or deflation
• Regulated affordable housing at 60% AMI and below will be exempt

HFO urges you to contact your council representatives with your thoughts and concerns. We will forward additional information as it becomes available.

Mayor Ted Wheeler
mayorwheeler@portlandoregon.gov
503-823-4127

Commissioner Nick Fish
nick@portlandoregon.gov
503-823-3589

Commissioner Chloe Eudaly
chloe@portlandoregon.gov
503-823-4682

Commissioner Jo Ann Hardesty
joann@portlandoregon.gov
503-823-4151

Commissioner Amanda Fritz
amanda@portlandoregon.gov
503-823-3008

Pacific Northwest Tops List of Where Millennials Are Moving

Insurance company Haven Life recently released a ranking of the cities that have seen the highest increases in their millennial populations over the past five years. The Portland-Vancouver-Hillsboro metro area ranks first in the nation for its growth in millennial residents, while Seattle, Denver, San Francisco, and Austin round out the rest of the top 5. Over the past five years, the number of millennials in Portland has grown by 22.8% - 18.6% of Portland area residents are now millennials. The cities where millennials are leaving include Tuscon, Virginia Beach, Rochester, Memphis, and Pittsburgh. Read more.

NY Times Reports: New York Landlords Sue to Dismantle Rent Control

This week, landlords in New York City filed a lawsuit in federal court to dismantle the entire rent-regulation system, arguing that the laws are unconstitutional. Currently, nearly 1 million apartments and 2.4 million tenants are covered by the regulations. Read the NY Times story. 

Newly Released: Portland's Final Screening and Security Deposit Ordinances

The City of Portland has released unaudited final versions of its ordinances on tenant screening and security deposits that will take effect on March 1, 2020. A schedule of the city's "Traveling help Desk" for landlords is also included. Read and download here.

Sold! N Interstate 6-Plex

HFO is pleased to announce the sale of this 6-plex in North Portland. Tenants of this building live within walking distance of a New Seasons and the MAX light rail. The property was very well maintained with many historical details including hardwood floors.

The apartment building was owner managed and rents were below market. HFO utilized its extensive network of investor relationships to secure a buyer with the wherewithal to close quickly on this unique property.

Yardi Matrix: Portland Year-Over-Year Rent Growth 1.2% in May

Yardi Matrix reports that Portland's rent growth has slowed in light of a high development cycle and dampening gains. Read more. 

Sold! 5 Units in SE Portland

HFO is pleased to announce the sale of the SE Gladstone Apartments. HFO was hired to market the sale of this property and it went under contract very quickly.

Interest was high for this asset and multiple offers were received. The transaction closed smoothly without any issues.

Recall: Universal Security Instruments Smoke & Fire Alarms

The US Consumer Product Safety Commission has recalled approximately 180,000 smoke and fire alarms that were sold by Universal Security Instruments between July 2015 and December 2016. People who have purchased these smoke alarms can test their alarms by pressing a test button on the device. Owners of broken alarms can contact Universal Security Instruments for a replacement. Read more.

Sold! 6 Units in Sellwood

HFO is pleased to announce the sale of this new 6-plex located in the desirable Sellwood neighborhood of SE Portland, Oregon. The property features high-end finishes and appliances, private decks and balconies, two secured vehicle garages and off-street parking. Through HFO's marketing, the seller received an all-cash offer from a California-based 1031 buyer and closed for more than $358,000 per unit - a benchmark high for new construction in SE Portland.

Sold! 20 Units in SE Portland

HFO is pleased to announce the sale of this 20-unit property in SE Portland. Interiors and exteriors of this asset were extensively renovated by the seller in 2016. The property was previously owner-managed for occupancy and its expenses did not align with the current market. HFO sold the asset to an exchange buyer looking to build a critical mass of units in the Portland metro area.

State of Oregon Spends $400k More in Limited Resources on Public Market Idea

The State of Oregon has pitched in an additional $400,000 of extremely limited resources into an idea that Portland needs a touristy public market similar to Seattle's.

The James Beared Public Market project has been on the drawing boards for over a decade. Proposed  and still remains basically in concept form after $250,000 in grant money from the State of Oregon's taxpayers in 2013. The project has received nearly $1 million in taxpayer funding that includes $312,000 from the City of Portland.

Read more in this week's Oregonian.

Sold! 12 Units in Beaverton, Oregon

HFO is pleased to announce the sale of this 12-unit townhome community in Beaverton. This property consists of 2-bedroom townhomes with private laundries, carport parking, and backyard patios. The seller had completed extensive updates to the property's exterior, including new roofs and siding. Most units had some interior updates.

Historical operations at the property were impacted by the renovations and a lack of management oversight. Vacancies were above market for the submarket and ongoing renovations limited the ability to lease apartments. HFO targeted investors with portfolios on the west side of the metro area, helping those potential buyers understand the management upside opportunity.

Senate Votes to Eliminate Single Family Zoning in Oregon Cities

Republican state senators returned to the capitol on Saturday, and on Sunday night voted to pass HB 2001, which eliminates single family zoning in cities with populations above 25,000 across Oregon. The bill passed in a 17-9 vote and heads to the governor's desk for a signature. Most of the law's provisions will not take effect until 2020, in order to give municipalities time to update zoning codes. Read more.