With T.J. Starker and Starker Forests, Inc., Oregon is fortunate it can lay claim to having birthed the modern like-kind real estate exchange. God knows Portland area landlords are going to need it.
The systemic stripping away of landlord rights as evidenced by the Portland City Council in its “emergency” ordinance requiring ‘rapacious’ landlords to pay tenants relocation expenses upon termination of tenancy without cause has now gained serious momentum statewide.
As recently reported in the Wall Street Journal, (Mark Hemingway 1/25/2019) “Oregon is poised to become the first state to enact statewide rent control.” Imagine that, Oregon always suffering by proximity to its bigger, richer, neighbor, California is about to leap frog it in terms of bad policy. This, despite the fact “nearly every main stream economist, from Paul Krugman to Thomas Sowell, has condemned rent control as bad policy.” Who says the tail can’t wag the dog?
Portland, along with other west coast cities clearly has an affordability problem where housing is concerned. However, this stems from lack of supply not a landlord class bent on unjustly enriching itself. The affordability issue is a direct bi-product of the Urban Growth Boundary (UGB) created by Metro in 1979.
When you limit the supply of developable land in and around Portland proper you create artificial scarcity. Artificial scarcity results in higher property valuations and correspondingly higher rents. This of course says nothing about runaway systems and development charges and permit fees, Oregon’s notorious red tape, that can exceed $20,000 per unit before ground is even broken.
Somehow progressives such as Portland Tenants United founder Margot Black miss all this and lay off higher rent to “Hometown Oregonians…being white and racist…the faster they can get out of the landlord business the better.” (Margot Black, Founder of Portland Tenants United)
With people like this throwing their weight around down in Salem, builders, developers and investors will begin to think about selling everything. Fortunately, when suitable, with DST they have the ability to sell out of an over-priced market whose political class will never accept this as the result of their own failed policies and exchange into something where the powers that be are not antipathetic to landlord rights. Think Sunbelt.
With this, the ownership profile of Portland’s landlord class will change fundamentally. Having made it impossible for mom and pops to continue in business, rental housing will become increasingly concentrated in the hands of institutional owners. They will be the only ones with the size and resources necessary to deal with the antipathy and bureaucratic red tape of the anti-development left.
This is the supreme irony of progressive’s myopia. In driving small landlords out of business, they will become champions of the big business interests they so despise.
In nearly 20 years of facilitating landlord reinvestment into remotely managed DST properties, without exception all their rents were below market. This is because they value tenant stability and continuity more than simply maximizing income. This humane component will disappear as property ownership shifts to large impersonal institutions. Much to progressives chagrin, rents will continue to rise while responsiveness to tenant needs decline. With DST properties and 1031 exchange, landlords have a way out of this downward spiral. Sadly, tenants do not.
Having leap frogged California in terms of bad policy, the only mountain left to climb for progressives appears to be New York where Mayor Bill Deblasio is now advocating outright seizure of rental housing that doesn’t measure up to government specs. Better get out while the getting’s good.
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