The Oregon Supreme Court ruled on Thursday, November 4, that the City of Portland Ordinance 188829, known as “Mandatory Renter Relocation Assistance,” is not in violation of ORS 91.225 which prohibits cities and counties from “[enacting] any ordinance or resolution which controls the rent that may be charged for the rental of any dwelling unit.”
Ordinance 188829 requires landlords, among other things, to pay a relocation fee of $2,900-$4,500 to their tenant if the landlord raises the rent more than 10 percent in any 12-month period, and the tenant decides to move out.
Oregon REALTORS® was involved in the case, Owen v. City of Portland, as amicus curiae both at the Oregon Court of Appeals and at the Oregon Supreme Court. The case has been active since 2017.
The plaintiffs and Oregon REALTORS® argued that the city’s ordinance controls the amount of rent that a landlord can charge by requiring landlords to pay a substantial penalty if they raise rents above a certain amount, and that this scheme falls within the conduct prohibited by ORS 91.225 because it either directly controls the rent or, at the very least, effectively does so.
The Court disagreed, stating that the ordinance neither “controls” the rent nor “effectively” does so,” and that “Portland landlords retain their legal ability to set rents as they see fit.” The Court reasoned that “to rise to the level of an effective prohibition, any economic disincentive would need to be so substantial that no rational landlord would raise the rent for an existing tenant more than 10 percent in one year but that is not the case here.” The Court also stated that the required payments are not in fact penalties because “they are not paid to the city for the purpose of punishing landlords, but rather are paid to displaced tenants to alleviate relocation costs imposed by displacement as a result of steep rent increases.”
Justice Garrett dissented in the case, arguing that the Ordinance violates ORS 91.225 and that “[w]hat matters is the indisputable fact that the city has imposed a cost on landlords that is tied directly to their decision to raise rent and thus restrains their freedom to do so.”
It goes without saying that we believe Justice Garrett had the better argument. Unfortunately, it did not carry the day. The Oregon Supreme Court has spoken, and we must accept that the City of Portland ordinance, at least as originally enacted, can stand. But the Court’s ruling leaves a lot of open questions about just how far a city can go in crafting laws to get around the state prohibition on rent control, and it raises even more questions about how this ruling will apply to other contexts. After all, there are dozens of state laws prohibiting local governments from engaging in all sorts of conduct, ranging from enacting local minimum wages to taxing certain products and services. It’s only a matter of time before a creative city uses the logic in the Owen v. City of Portland opinion to try to get around other state preemptions. So, while the decision is an immediate blow to landlords, at the end of the day the biggest blow may be to the authority of the Oregon Legislature.