Eugene City Council Proposes Phase II Renter Protections: What You Need to Know

The Eugene City Council has scheduled a work session on its Phase II Renter Protections Draft Ordinance for Monday, June 26, at 5:30 pm. The ordinance calls for:

Limiting security deposits to 2x monthly rent. (including security, cleaning, and last month's rent). This would not include pet deposits.

Displacement Prevention Assistance (relocation fees). Requires rental owners to pay relocation assistance for legal no-cause evictions, substantial lease changes, or substantial rent increases. The amount of the displacement payment would be determined by the City Manager or a specific amount adopted by the council with an escalation provision tied to CPI, or some other method yet to be decided. Displacement payments would be required on the following:

• Legal no-cause evictions
• A rent increase of 5% or more in 12 months causes the tenant to move
• Landlord-based reasons for termination, including landlord occupancy of the unit as a primary residence
• Non-renewal of a fixed-term lease
• Conditioning renewal or replacement of an expiring agreement on substantial changes to the lease or the tenant's agreement to pay an increase of 5% or more in 12 months

Request for Reimbursement of Relocation Fees by *Small Landlords*

The city is allowing landlords defined as those

• Owning four or fewer units, including those through legal entities
• Household income at 80% of Area Median Income (AMI)

Landlords meeting the definition could request reimbursement of the relocation fees:

• Within 60 days of payment
• One time annually

The penalty due to a renter for a landlord's failure to pay required relocation fees:

• Payment of three months' rent
• Actual damages
• Relocation fees
• Attorneys fees and costs

Process applications in the order received. The ordinance mandates that landlords process applications for publicly advertised rental housing units on a first-come, first-served basis, EXCEPT for:

• Affordable housing units
• Rental units occupied by both the landlord and tenant
• Middle housing units when the landlord resides in another middle housing unit on the same lot or parcel
• ADUs with the landlord's principal residence on the same lot
• A dwelling unit that will be shared with an existing tenant who has a separate agreement for the unit 
• A unit not advertised or rented to the general public.

The Eugene City Council plans to add additional tenant protections in Phase III this fall.

A draft of the ordinance and accompanying information from the City of Eugene website can be found here. 

Sign up to receive notices from the City of Eugene on this topic here.

Read more about the City's Tenant Protections here. 

Submit comments on renter protections to: renterprotections@eugene-or.gov

The Rental Owners Association of Lane County urges that you "...continue to let your Eugene Mayor and City Councilors know that their plans to restrict landlord rights will only result in more pain to renters as landlords sell off or increase rents to cover the increased costs of doing business in the city. Send an email to: mayorcouncilandcitymanager@eugene-or.gov"

U.S. Census Bureau: Portland and Seattle Q1 Year-Over-Year Vacancies Improve

Both Seattle and Portland have rental vacancy rates lower than Q1 of 2022 and below the national average of 6.47%

Of the top 75 metro areas, Portland-Vancouver-Hillsboro's vacancy rate was 5.6%, down from 6.1% in 2021. Seattle-Tacoma-Bellevue tied for 11th lowest among the top U.S. metro areas, with a 3.3% vacancy rate, down from 5.7% a year earlier. 

U.S. Rental Vacancies Up
The average national rental vacancy rate for Q1 2023 was 6.47 percent for multifamily dwellings of five or more units, up from 5.8% a year earlier. Year-over-year vacancy rates in the Western U.S. decreased from 4.3% in Q1 2022 to 4.5% in 2023.

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U.S. Homeownership Rates
After falling to a 26-year low in 2016, the national homeownership rate now stands at 66%. Homeownership in the West has increased in the past year from 60.2% to 61.9%.

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Portland Mayor Calls for One-Year Freeze on City Taxes and Fees

Portland Mayor Ted Wheeler announced last week his intention to propose a one-year freeze on nearly all city tax, fee, and utility rate increases in an attempt to aid recovery from economic hardship. The only exception might be a rise in water bills, required to cover the debt for the city's new, federally mandated water treatment plant. This proposed freeze could substantially alter next year's budget, possibly leading to cuts or reductions in municipal services. Wheeler believes this freeze is vital for the city's recovery, stating, "Our focus this year has to be recovery and helping our community to make a comeback."

Wheeler's announcement follows a meeting with regional leaders to discuss what he referred to as the "collective tax burden" currently affecting households and businesses. He expressed concern that residents of Portland are already overwhelmed by escalating taxes, utility rates, and fees. Proposed hikes currently under review by Portland city bureaus include a 6.6% increase in water and sewer services, a 20% rise in parking meter rates, and a 5% hike across several building and development permits. The Portland Bureau of Transportation is considering a monthly tax on residents and businesses to help patch up its transportation budget. Wheeler acknowledged that the freeze, which he plans to advocate for during a City Council work session, would likely necessitate significant adjustments in his proposed $7.1 billion budget.

"Everything has tradeoffs, and one tradeoff is that we would potentially have to reduce or eliminate some services that we provide," he said. "We have to balance that against the reality that our taxpayers are tapped out. They are on economically unstable ground. Families are hurting."

Read more at OregonLive.com.

Multnomah County Voters Decisively Reject Controversial Eviction Measure

Multnomah County voters overwhelmingly rejected Measure 26-238, known as the Eviction Representation for All Measure. The measure sought to provide legal representation for those facing eviction after pandemic-related restrictions were lifted. With 82.37% of voters opposing the measure, it faced significant opposition, including concerns about taxing homeowners who would be exempt at the federal level.

Measure 26-238 proposed a 0.75% tax on capital gains, affecting individuals who sold assets, including homes, in Multnomah County. Despite its intention to target the wealthy, critics argued that the tax would impact a broader range of individuals, including seniors and low-income homeowners. Opponents highlighted the availability of the Metro Supportive Housing Tax, an existing income tax on higher earners, suggesting that funding for tenant support should come from the city and county's substantial budgets instead of imposing a new tax. 

Read more at KOIN.com.

What is a Cap Rate?

A cap rate, short for capitalization rate, is a real estate metric used to evaluate the profitability of an investment property by measuring the rate of return on an investment property. It is calculated by dividing the property's net operating income (NOI) (before any debt service) by the price. For instance, if the Net Operating Income (NOI) is $100,000 and the price is $1,818,181, the cap rate would be 5.5%.

NOI/Price = Cap Rate

$100,000/ $1,818,181 = 5.5%

Cap rates are influenced by supply and demand and the cost of debt in the market.

Cap rates are one of the primary determinants of pricing for investment property. A direct correlation exists between market cap rates and currently available interest rates for debt on an investment property. When interest rates are lower than cap rates, the market is in a positive leverage scenario, where the more one borrows, the higher the return on investment. Conversely, when interest rates are greater than cap rates, the market is in a negative leverage scenario, where borrowing against a property results in a lower rate of return on the investment.

Real estate offers several advantages over other investment types, such as leverage and tax advantages. Many of the benefits of owning real estate come from using leverage; hence most real estate investors want to leverage as much as possible. Like any other investment type, investment real estate pricing is driven by supply and demand. Buyers of investment real estate typically have a certain threshold of investment return they are willing to accept, depending on the asset and the current market.

As interest rates decline, investors are willing to accept a lower rate of return on their cash, as other investment vehicles offer lower returns. Two market forces are working to drive an increase in real estate prices in this scenario: cap rates are decreasing with interest rates, and investors are willing to accept a lower rate of return on their money.

Conversely, in a rising interest-rate environment, cap rates increase as the cost of debt increases. This increase in cap rates reduces the price an investor is willing to pay for an asset. The market also plays an essential role in cap and interest rates. The higher market demand is in a particular market; the lower cap rates tend to be. Lower cap rates positively affect prices, while in a weaker market with lower demand, cap rates rise, and values decrease.

Downtown Foot Traffic in the Pacific Northwest Trails Other Regions in Post-Pandemic Recovery

Portland's downtown foot traffic is only 40% of its pre-pandemic volume, according to a recent study by the University of Toronto's School of Cities. The study analyzed foot traffic in downtown markets across the United States and Canada using connectivity data from phone antennas. This ranking puts Portland third from the bottom of the list, with only San Francisco and St. Louis ranking lower.

Despite the study period being impacted by winter weather, Portland's low ranking highlights the challenges the city's businesses have faced since the pandemic. Downtown Portland has struggled with low foot traffic, and more corporate moves are expected from downtown as businesspeople express frustration over high taxes and crime and locations outside Portland and Multnomah County become increasingly popular. 

However, with downtown Portland's Q1 office vacancy rate relatively low at 26.8%, there is hope for the city's economic recovery. 

DowntownRecovery.com/dashboards/recovery_ranking.html

Read more at Downtown Portland office vacancy remains high, despite marginal decrease - Portland Business Journal (bizjournals.com)