New City of Portland Landlord Regulations: A Roundup
December 13, 2018
Authors: by Aaron Kirk Douglas and Jennifer Shuch
Publishers: The Northwest Apartment Investor
SUMMARY
Inclusionary Housing
As of November 1, 2018, there are 318 market rate Inclusionary Housing (IH) units approved and pending since February 11th, 2017. There are an additional 798 units funded by the Portland Housing Bureau.*
In their February 2018 one-year review of the Inclusionary Housing program to the Bureau of Planning Commission, city staff wrote: “To maintain housing production and housing supply targets identified in the 2035 Comprehensive Plan, the City of Portland would need to start seeing significant increases in land use review and building permit applications over the next six to twelve months to replace development pipeline units that will be delivered to market over the next 18-24 months.
“With the understanding that there are challenges to development feasibility due to broader market fundamentals, BPS and PHB, recommend we explore a process to make adjustments or modifications to the Inclusionary Housing Zoning Code and Program requirements.”
- Despite the recognition that something needed to be done to increase applications, the city has yet to make adjustments or modifications to the code or requirements.
- Back in December 2016, the Portland City Council relied on testimony from Professor George Galster, who assured the council that inclusionary zoning was a well-established practice in use widely around the country for more than 40 years. He specifically cited Denver and Minneapolis. The truth was Minneapolis did not have an inclusionary housing requirement, and Denver had one—but it had been repealed.
Landlord Registry
- Voluntary early registration — when filing your 2019 taxes & reporting rental income.
- Final year to register — with your 2020 tax returns.
On July 26, 2018, the Portland City Council voted unanimously to require landlords to register the addresses of all rental units in the city. The rule kicks in for tax year 2018 – meaning they need to be sent in by April 15, 2019, unless they obtain a six-month extension. Mayor Ted Wheeler decided to make the requirement optional for 2018, so it won’t legally be required until filing in April of 2020.
Landlords can be expected to pay a registration fee to pay for the program, estimated to cost $565,000 per year to operate. Tenants groups support the program as a way to require mandatory safety inspections at all rentals along with requisite fees to support pro-tenant programs.
Better by Design
Work sessions are in progress as the Planning and Sustainability Commission prepares final recommendations for the City Council. After some initial drafts, the project staff took written and live public testimony. Work sessions have been held in September and October covering development scale, bonuses, East Portland standards, and street connectivity. A final session in November 13th covered accessibility, building design, and parking. Updates are on the project website at www.portlandoregon.gov/bps/betterhousing.
Residential Infill
Unllike similar plans around the country, a recent public hearing in Portland had more people testifying in favor of this plan than against it—and the infill project will be voted on by the City Council in early 2019. The plan would allow for more houses, duplexes, triplexes and fourplexes. Houses could have two Accessory Dwelling Units (ADUs) and a duplex could have one ADU. Structure sizes would be more restricted. Double lots would be required to have at least two dwelling units. Minimum parking requirements would be eliminated. Read more in the latest summary at http://bit.ly/infillpdx.
Tenant Screening Ordinance
Commissioner Chloe Eudaly proposed a controversial tenant screening ordinance, but pulled back her proposal due to opposition from nonprofit housing providers. Press reports indicate she plans to move forward once again after additional consultation with those groups and the city’s Rental Services Commission. The ordinance is eight pages in length, and HFO previously mailed a copy to all owners inside the City Limits of Portland in our database. If you own in Portland but did not receive the newsletter or would like to read it online, please visit: http://bit.ly/screeningpdx.
If you own apartments in the City of Portland, please watch our blog and bi-weekly emails for updates on
these pending regulations.
Security Deposits
As rents have risen, cities have begun regulating security deposits more closely. Seattle has been among the most active. Seattle’s regulations prompted many lawsuits between multifamily home owners and the City after the Seattle City Council imposed a limitation on nonrefundable fees to one month’s rent, with a pet fee deposit maximum of 25% of monthly rent. The January 2017 ordinance also requires landlords to allow deposits to be paid in installments over six months. A court recently upheld that Seattle law.
Recently, Portland City Councilor Chloe Eudaly has directed the Rental Services Commission’s work on an
even more complex proposal. The draft policy calls for:
- Limiting the amount of “last month’s rent” collected as a security deposit to 50% of total monthly rent.
- Limiting the amount of a security deposit to the equivalent of one month’s rent if the landlord does not collect last month’s rent.
- A landlord may not charge for interior painting except what is necessary to repair specific damage made to a wall beyond ordinary wear and tear.
- Defines “ordinary wear and tear” specifically in numerous instances.
- Requires the landlord take 3.6% annual depreciation of movable property value into account when charging for repairs.
- Requires landlord to provide a list of the current depreciated value of the movable property to the tenant at the time of move-in.
- Tenant has a week to complete and submit a condition report noting any damage to the unit.
- Requires landlords keep security deposits in an account with or without other security deposit funds that are separate from owner’s funds. The account may be a checking, savings, money market, or client trust account.
- The landlord must provide the bank institution name and account number in writing to the tenant. Interest accrued must be repaid to the tenant when refunded, less a 5% deduction for administrative costs.
- A tenant may request a receipt of the account and interest earned up to once each year.
- Outlines notification requirements and termination timelines.
- The Landlord must report terminated tenancies to the Portland Housing Bureau on a specific form within five business days.
- Failure to comply with any requirements result in landlord liability to the tenant for:
- Security deposit
- A penalty in the amount of 2x security deposit
- Attorney fees and costs
Read the September 20, 2018 draft here: http://bit.ly/screeningpdx
90-Day Right of First Refusal
Commissioner Chloe Eudaly’s Proposed Tenant/City Right of First Refusal Policy
In September of 2017, Portland Commissioner Chloe Eudaly was quoted in the Portland Mercury about her plans to propose a new policy “in January 2018” that would allow tenants and the City of Portland the right of first refusal when a landlord decided to sell a property. As described in the media, the policy would allow a tenant or group of tenants 60 days to put together an offer. If they fail to do so, the City of Portland would have 30 days to submit an offer. If the city opts out of making an offer, the seller would then be able to market the property openly.
Eudaly’s office claimed her proposal is based on a similar law in Washington, D.C. However, the D.C. law differs in these three respects:
- It gives tenants an opportunity to make an offer competitive with any third-party offers received within 45 days of notification of a pending sale.
- It does not impose a 90-day delay on the marketing of private property. A 90-day delay would be detrimental for owners participating in a 1031-exchange, who are subject to federally mandated timelines set by the IRS.
- It does not give the District of Columbia a right to purchase the property.
On September 12, 2018, the Portland Mercury reported once again on Eudaly’s plans for this policy, but did not go into any specifics. No information on her proposal is available from her website.
So far, no other members of the Portland City Council have indicated whether they support or oppose Eudaly’s concept.
URM Mandatory Seismic Upgrades
Beginning in September 2016, a City of Portland task force set out draft mandatory seismic upgrade requirements for unreinforced masonry buildings. The city council held its first public hearing in October of 2017. A final draft report was published in November 2017, and, in June of 2018, after several rescheduled hearings, the city council voted to postpone the decision for another year. The Council instructed staff to more thoroughly explore financing options, timelines and the possibility of temporarily exempting educational and religious nonprofits. They agreed to proceed with requiring warning signs on Unreinforced Masonry Buildings.
URM Placards and Tenant Notifications
Two stakeholder committees were formed following the June 2018 council meeting. The private owner group recommended, “…that the City support a public education campaign for building owners and tenants, a voluntary building placarding program to mark retrofitted URM buildings, and an earthquake navigator to assist building owners in navigating the permitting, financing and design of seismic retrofits.” The staff ordinance did not incorporate any of these requests and instead recommended that the city:
- Require a placard on all URM buildings that have not been retrofitted to prevent collapse in the event of a “major earthquake.”
- Require URM building owners to notify tenants/renters through rental agreements that their building is an unreinforced masonry building and unreinforced masonry buildings may be unsafe in the event of a major earthquake
- Strengthen existing triggers in Title 24.85 requiring seismic retrofits of URM buildings
Placarding and Tenant Notification Requirements
On Wednesday October 10th, the Portland City Council adopted the requirements. The new ordinance requires
URM owners to post signs according to the timeline below. The signs are required to be durable 8”x10” placards
with 50-point bold font lettering that are posted in a conspicuous location on the exterior at the main entrance:
Timeline:
- January 1, 2019 - publicly-owned buildings
- March 1, 2019 – privately owned buildings
- November 1, 2020 - non-profit buildings
- 1. Building owners must notify existing tenants that the building is an unreinforced masonry building, and that unreinforced masonry buildings may be unsafe in the event of a major earthquake.
- 2. Every lease or rental agreement entered into or renewed after the timeline for placarding noted above, must contain the above statement.
- 3. Building owners must record an agreement not to remove the placard and acknowledgment of compliance with tenant notification requirements.
Landlord Registry
In July of 2018, the Portland City Council adopted an ordinance requiring all owners of rental properties within city limits to identify rentals in tax returns beginning with the 2018 tax year. The council allowed a one year grace period, or until April 2020, for owners to comply and register their rentals as part of their annual tax return filings.
*Source: "Inclusionary Housing Program Permit Progress Summary, PHAC Update - October, 2018." Retrieved from the City of Portland website on December 11, 2018.