Owen v. City of PortlandOwen v. City of Portland
The city enacted an ordinance requiring landlords to make relocation assistance payments to tenants in some circumstances, based in part on rent increases; the ordinance also created a cause of action for tenants against landlords that violate the ordinance. Plaintiffs challenged portions of that ordinance as preempted by a state law regarding rent regulation by local governments and as beyond the city‘s constitutional home-rule authority. The trial court entered summary judgment in favor of the city, and the Court of Appeals affirmed. Held: (1) The city‘s ordinance does not “control[] the rent that landlords may charge for the rental of any dwelling unit,”
The decision of the Court of Appeals is affirmed. The order of the circuit court is vacated, and the case is remanded to the circuit court for further proceedings.
On review from the Court of Appeals.*
John DiLorenzo, Jr., Davis Wright Tremaine LLP, Portland, argued the cause for petitioners on review. Kevin H. Kono filed the briefs for petitioners on review. Also on the briefs was John DiLorenzo, Jr., Portland.
Denis M. Vannier, Office of the City Attorney, Portland, argued the cause and filed the brief for respondent on review.
Sara Kobak, Schwabe, Williamson & Wyatt, PC, Portland, filed the brief for amicus curiae Oregon Realtors. Also on the brief was W. Michael Gillette, Portland.
Emily
Emily Rena-Dozier, Oregon Law Center, Portland, and Diane D. Nguyen, Legal Aid Services of Oregon, Portland, filed the brief for amici curiae Oregon Law Center and Legal Aid Services of Oregon. Also on the brief was MariRuth Petzing, Oregon Law Center, Portland.
Phil Goldsmith, Law Office of Phil Goldsmith, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association.
Before Walters, Chief Justice, and Balmer, Nakamoto, Flynn, Nelson, and Garrett, Justices.**
BALMER, J.
The decision of the Court of Appeals is affirmed. The judgment of the circuit court is vacated, and the case is remanded to the circuit court for further proceedings.
Garrett, J., dissented and filed an opinion.
BALMER, J.
At issue in this case is a challenge to a City of Portland ordinance requiring landlords to pay relocation assistance to displaced tenants in certain circumstances. Plaintiffs are landlords that rent property in the city. Plaintiffs filed a declaratory judgment and injunction action against the city contending, as relevant here, that
I. BACKGROUND
The Oregon legislature enacted what is now
“(1) The Legislative Assembly finds that there is a social and economic need to insure an adequate supply of affordable housing for Oregonians. The Legislative Assembly also finds that the imposition of general restrictions on housing rents will disrupt an orderly housing market, increase deferred maintenance of existing housing stock, lead to abandonment of existing rental units and create a property tax shift from rental-owned to owner-occupied housing. Therefore, the Legislative Assembly declares that the imposition of rent control on housing in the State of Oregon is a matter of statewide concern.
“(2) Except as provided in subsections (3) to (5) of this section, a city or county shall not enact any ordinance or resolution which controls the rent that may be charged for the rental of any dwelling unit.
“(3) This section does not impair the right of any state agency, city, county or urban renewal agency *** to approve rent increases, establish base rents or establish limitations on rents on any residential property for which it has entered into a contract under which certain benefits are applied to the property for the expressed purpose of providing reduced rents for low income tenants.
“*****
“(7) *** The electors or the governing body of a city or county shall not enact, and the governing body shall not enforce, any ordinance, resolution or other regulation that is inconsistent with this section.”
Thirty-two years after the legislature enacted that statute, the city sought to address the displacement of residential tenants from
The amount of relocation assistance required varies from $2,900 for a studio to $4,500 for larger units. The ordinance permits a tenant to bring an action against a landlord that fails to comply:
“A Landlord that fails to comply with any of the requirements set forth in this Section 30.01.085 shall be liable to the Tenant for an amount up to 3 months Rent as well as actual damages, Relocation Assistance, reasonable attorney fees and costs (collectively, ‘Damages‘). Any Tenant claiming to be aggrieved by a Landlord‘s noncompliance with the foregoing has a cause of action in any court of competent jurisdiction for Damages and such other remedies as may be appropriate.”
PCC 30.01.085(D) (2017) (emphasis added).
Plaintiffs filed this action seeking a judgment both declaring portions of the ordinance to be invalid and permanently enjoining enforcement of the ordinance. Plaintiffs contended, among other things, that portions of the ordinance were preempted by
The Court of Appeals affirmed the substance of the trial court‘s decision. The court concluded that the trial court properly granted the city‘s motion for summary judgment and denied plaintiffs’ motion, but it also held that the trial court‘s general judgment dismissing the complaint was2
not the proper disposition of plaintiffs’ declaratory judgment action. Owen v. City of Portland, 305 Or App 267, 286, 470 P3d 390 (2020). Accordingly, the Court of Appeals vacated the judgment and remanded the case to the trial court, directing it to issue a judgment declaring the respective rights of the parties. Id. at 286-87. We allowed plaintiffs’ petition for review.3
The first issue is whether the ordinance‘s requirement that landlords pay relocation assistance to tenants in certain circumstances “controls the rent that may be charged” for purposes of
A. State Law Preemption
Article XI, section 2, of the Oregon Constitution provides “home rule” for cities and towns that adopt municipal charters.4 Gunderson, LLC v. City of Portland, 352 Or 648, 659, 290 P3d 803 (2012). Portland has adopted such a charter. Laws adopted pursuant to that home-rule authority cannot conflict with state legislation. “[H]ome-rule municipalities possess authority to enact substantive policies, even in areas also regulated by state law, so long as the local enactment is not incompatible with state law.” Id. (internal quotation marks omitted). The analytical process for determining whether state law preempts a local law in Oregon is well established:
“[B]oth municipalities and the state legislature in many cases have enacted laws in pursuit of substantive objectives, each well within its respective authority, that were arguably inconsistent with one another. In such cases, the first inquiry must be whether the local rule in truth is incompatible with the legislative policy, either because both cannot operate concurrently or because the legislature meant its law to be exclusive. It is reasonable to interpret local enactments, if possible, to be intended to function consistently with state laws, and equally reasonable to assume that the legislature does not mean to displace local civil or administrative regulation of local conditions by a statewide law unless that intention is apparent. However, when a local enactment is found incompatible with a state law in an area of substantive policy, the state law will displace the local rule.”
LaGrande/Astoria v. PERB, 281 Or 137, 148-49, 576 P2d 1204, aff‘d on reh‘g, 284 Or 173, 586 P2d 765 (1978) (citations and footnote omitted).
The question, then, is whether a local law is “incompatible” with state law, “either because both cannot operate concurrently or because the legislature meant its law to be exclusive.” Id. To protect the constitutional interests of municipalities in exercising their home-rule authority, the state must be particularly clear when preempting local legislative authority, and we interpret local enactments to4
function consistently with state law if possible. Id. Here, plaintiffs have the heavy burden of showing that state law preempts the city‘s ordinance. See Rogue Valley Sewer Services v. City of Phoenix, 357 Or 437, 454, 353 P3d 581 (2015) (“A party that challenges a home-rule city‘s authority as preempted by state law is required to show that the legislature ‘unambiguously’ expressed its intent—a high bar to overcome.” (Quoting Gunderson, 352 Or at 663.)). Because the ordinance was promulgated
There is no evidence, nor do plaintiffs contend, that the ordinance and
B. ORS 91.225‘s Text in Context
To interpret
Plaintiffs contend that the text of
assert that the legislature‘s use of the phrase “ordinance or resolution which controls the rent,”
The city contends that the text and context of
We begin our statutory interpretation with the operative wording of
A useful comparison is the express exception in subsection (3) to the statute‘s preemption of any local law that “controls the rent” in subsection (2). Subsection (3) permits local authorities to “approve rent increases, establish base rents or establish limitations on rents” for certain affordable housing properties.
Although subsection (1) is a statement of legislative findings and not an operative statutory directive, it supports our understanding of the phrase “controls the rent” in subsection (2). “Control” as a noun, which is how it is used in subsection (1), means, among other things, “the regulation of economic activity esp. by government directive <price ~s> <wage ~s> <rent ~>.” Webster‘s at 496. As a phrase, “rent control” means “government regulation of the amount charged as rent for housing and often also of eviction.” Id. at 1923; see also Black‘s Law Dictionary 1166 (5th ed 1979) (defining “rent control” as “[a] restriction or limitation imposed in certain cities upon the maximum rent that may be charged on rental property“). Along with declaring “rent control” to be a matter of statewide concern, subsection (1) also describes the potential negative impacts of imposing “general restrictions on housing rents.” Although “rent control” and “general restrictions on housing rents” are not necessarily equivalent, we understand those phrases to refer to similar concepts. Based on the above definitions and other language in the subsection, we interpret “rent control” in subsection (1) to mean, as commonly understood, “regulation of the amount charged as rent” for a dwelling unit. Webster‘s at 1923.
Regarding the distinction between the phrases “controls the rent” and “rent control,” we reject plaintiffs’ argument that the legislature‘s choice of active verb over phrasal noun in subsection (2) expands the preemptive reach of
Here, in contrast, the dictionary indicates that the noun “control” and the verb “to control” have substantially the same meanings. We agree with plaintiffs that the form of the words that the legislature chooses in drafting a statute can be significant, but plaintiffs do not substantiate their claim that the switch from noun to verb is significant here. Furthermore, consistent with plaintiffs’ argument, we do not restrict our understanding of “rent control” to mean only laws resembling the early generations of rent control practices, where local governments sometimes established maximum rents for thousands of individual housing units based on considerations of land cost, unit size, utilities, taxes, a rate of return on the landlord‘s investment, and so on. See generally Kenneth K. Baar, Guidelines for Drafting Rent Control Laws: Lessons of a Decade, 35 Rutgers L Rev 723 (1983) (comparing the stringent first generation of postwar rent control with the more permissive second generation and reviewing various components of rent control regimes and related statutes). We agree that this statute might preempt more than one type of ordinance, but the fact that rent control can be structured in multiple ways does not resolve whether the ordinance here controls the rent and does not lead us to alter our understanding of
We also consider the possibility raised by plaintiffs that, although the legislature may have been responding to perceived problems with direct government regulation of rent levels and rent increases, it used the broader wording of “controls the rent” in
We next consider the phrase, “the rent that may be charged.”
We readily conclude that the first meaning of “may” (“have permission to“) applies in this statute for two reasons. First, as discussed,
Second, the alternative definition of “may,” which must apply under plaintiffs’ view of the statute, is not plausible in the context of
We next consider plaintiffs’ argument that
Particularly when considered in light of our cases holding that state law can preempt home-rule authority only when, and to the extent that, the party urging preemption can demonstrate that “the legislature unambiguously expressed its intent—a high bar to overcome,” Rogue Valley Sewer Services, 357 Or at 454 (internal quotation marks omitted), plaintiffs’ argument based on the text and context of
C. Legislative History
Having analyzed the key terms of
Relying on the brief of amicus curiae Oregon Realtors, plaintiffs assert that “‘rent control’ covers a wide range of local enactments targeted at restricting a landlord‘s right to set rent charges at free-market levels.”7 We examine the legislative history presented by amicus and come to a different conclusion.
Amicus reviews testimony before the legislature on the topic of rent control before
Amicus Oregon Realtors also contends that relocation assistance to displaced tenants was part of local7
rent control laws in effect in other jurisdictions when the legislature enacted
That argument is unpersuasive. Amicus does not offer any evidence from the legislative history indicating that those laws were on the minds of the legislators when they drafted
Even if those examples of relocation assistance were on the minds of the legislators who enacted
rental buildings were converted to cooperatives or condominiums. That law did not require payments when tenants were displaced by rent increases—in fact, that law did not mention rent increases at all. Moreover, the law is now codified in chapter 34 of the district‘s real property code, DC Code sections 42-3401.01 to 42-3405.13, whereas the district‘s “rental stabilization program” is codified separately at chapter 35, subchapter II, id. §§ 42-3502.01-42-3502.24.
The Santa Monica ordinance cited by amicus requires landlords to pay a relocation fee to displaced tenants in certain circumstances, such as when the landlord withdraws certain rent-controlled units from the market or seeks to recover possession of the unit for
Nonetheless, amicus seems to argue that, because some cities had some other versions of rent control—the District of Columbia at the time limited annual rent increases to a certain percentage of existing rent and Santa Monica imposed rent freezes and ceilings at various times—then the relocation fees at issue here must also constitute “rent control.” That argument is unpersuasive. We do not agree that, because some jurisdictions provided for various kinds of relocation assistance in circumstances not involving rent increases, that the legislature necessarily considered all relocation assistance payments to constitute “rent control.”
No legislative history offered by either party provides much help in answering the specific interpretive question in this case. The legislature did not appear to consider whether ordinances that do not directly prescribe or prohibit rent amounts, but that would nevertheless impose some costs and procedural requirements on raising rents in certain circumstances, constitute “rent control” under
D. Whether the Ordinance Controls the Rent or “Effectively” Does So
We now consider whether the city‘s ordinance runs afoul of
First, we examine whether the ordinance here “controls the rent that may be charged” by landlords by exercising restraining or directing influence over the amounts that landlords have permission to charge.
Although not challenged by plaintiffs in this court, there are also other conditions under which landlords may be required to pay relocation assistance, such as following no-cause evictions. And even in cases where there is a rent increase of 10 percent or more, the relocation assistance payment is not triggered automatically by that rent increase, but rather by the tenant‘s subsequent decision to relocate. In short, there are no circumstances in which the rent for a particular property is subject to approval or disapproval by the city. Rather than restricting the particular amount of rent that a landlord may charge—a restriction that, depending on how it were structured, might well be preempted by
Plaintiffs contend that the characterization of the required payments as “relocation assistance” is a misleading “label” deployed by the city to circumvent
That argument misses the mark for several reasons. First, just as plaintiffs argued regarding the legislature‘s use of “control” as a verb, the operative word choices here are significant. The ordinance‘s required payments are not identified as “penalties,” but rather as “relocation assistance.” Despite plaintiffs’ assertions that the ordinance is a prohibition in all but name, attaching a condition to certain actions that displace tenants is not the same as prohibiting those actions and then imposing a financial penalty for violations of that prohibition.
Even if the “label” of “relocation assistance” were an unreliable indicator of the ordinance‘s meaning, the required payments are in fact not 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. See Ordinance 188219 § 1(13)-(14). Plaintiffs assert that the city covertly intended its ordinance to discourage rent increases, rather than aid tenants. That assertion is belied by the city‘s extensive studies of the rental housing market, tenant displacement, and homelessness. That work, outlined in the briefs of the city and amici supporting the ordinance as well as the ordinance itself, id. § 1(1), provided the factual underpinning for the 17 specific findings in section 1 of the ordinance about the importance of helping tenants displaced for economic reasons to locate new housing. Id. § 1. The city‘s expressions of its intent in and for the ordinance are more persuasive than plaintiffs’ assertions that the city was simply trying to impose rent control through other means.8
Additionally, whether tenants who receive these payments use those specific funds for relocation costs or other purposes is immaterial. Even if the relocation assistance payment itself were not used for the inevitable costs of relocation, those funds could be used to offset such costs paid from other sources. Whether the relocation assistance payments mingle with tenants’ other assets does not undermine the city‘s policy of assisting displaced tenants.
Finally, plaintiffs’ argument is implausible in practice. By suggesting that the city cannot address tenant
displacement and homelessness in a way that may also affect the rental market, plaintiffs seem to imply that a municipality must choose the narrowest method available to address social or economic problems in that municipality. (The dissent similarly suggests that, to avoid preemption, the city should have used “other means” to enact a relocation assistance program. 368 Or at 693 (Garrett, J., dissenting).) That implication is dubious. Elected officials may enact a law with consequences that extend beyond that law‘s immediate purpose; that a law has a secondary consequence, even an anticipated one, does not mean that the lawmaker enacted it for that reason. Were that not the case, then under
We turn to plaintiffs’ remaining argument that, even if requiring relocation payments based on rent increases does not control the rent explicitly, it effectively does so by imposing a prohibitive cost on landlords that seek to increase rents. We question whether such an ordinance would be preempted by
We recognize that the ordinance may create a disincentive for qualifying rent increases, but contrary to plaintiffs’ argument, the ordinance does not prohibit landlords from imposing such increases. As noted above, there is no legal prohibition in the ordinance on setting rents at any amount. Thus, 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.
Based on market rates for rental units in Portland, landlords whose rent increases trigger the relocation assistance payments under the ordinance can recoup their costs quickly. The city‘s reported 2020 average rent for studios was $1,196 per month. See Portland Housing Bureau, State of Housing in Portland 41 (Dec 2020), https://www.portland.gov/sites/default/files/2021/phb-soh-2020-web-part-2.pdf (accessed Oct 29, 2021). If a landlord renting a unit at that rate increased the rent exactly 10 percent in one year, incurring the $2,900 relocation assistance payment, and then increased the rent 9.9 percent the following year, the landlord could recoup the relocation payment and receive an additional $1,533 over those two years. Or, if the landlord felt that the market could bear a 20 percent increase, and the existing tenant leaves and is paid the relocation assistance, the landlord could recover all but $30 of the relocation assistance payment in the first year. The landlord in that situation could recover $2,840 in additional revenue the following year, or $4,545 if it raised the rent again by 9.9 percent.
Thus, although the ordinance may well have the effect of altering a landlord‘s calculus regarding how much it will increase the rent in any given 12-month period (and, as the dissent points out, strategic landlords may in some cases raise rents by 9.9 percent to avoid paying relocation assistance, 368 Or at 692 (Garrett, J., dissenting)), the ordinance does not amount to a de facto prohibition on rent increases in excess of 10 percent. Increases beyond that amount are contemplated and permitted by the ordinance, conditioned only on the payment of the prescribed relocation assistance, and only when those rent increases are followed by the tenant‘s departure.
We conclude that Ordinance 188219 is consistent with
III. PRIVATE CAUSE OF ACTION PROVISION
We turn to whether the private cause of action created by the ordinance violates Article VII (Original), section 9, of the Oregon Constitution and is therefore void. Because municipal law is a valid source of Oregon law and state courts are courts of
Oregon circuit courts “ha[ve] general jurisdiction, to be defined, limited, and regulated by law in accordance with th[e] Constitution.”
“All judicial power, authority, and jurisdiction not vested by this Constitution, or by laws consistent therewith, exclusively in some other Court shall belong to the Circuit Courts, and they shall have appellate jurisdiction, and supervisory control over the County Courts, and all other inferior Courts, Officers, and tribunals.”
Circuit courts in Oregon have long heard claims originating from a variety of sources. See, e.g., Barcik v. Kubiaczyk, 321 Or 174, 179, 895 P2d 765 (1995) (federal law); Schultz v. First Nat. Bk. of Portland et al, 220 Or 350, 358-59, 348 P2d 22 (1959), reh‘g den (1960) (Nebraska law); State Land Board v. Rogers, 219 Or 233, 241, 347 P2d 57 (1959) (Bulgarian law); State v. Sanchez-Llamas, 338 Or 267, 108 P3d 573 (2005), aff‘d sub nom Sanchez-Llamas v. Oregon, 548 US 331, 126 S Ct 2669, 165 L Ed 2d 557 (2006) (international law). Those sources include city ordinances. See, e.g., Brennen v. City of Eugene, 285 Or 401, 591 P2d 719 (1979) (city employee held liable in tort for violating a duty created by city ordinance); Lange v. Minton, 303 Or 484, 738 P2d 576 (1987) (injured person could bring action against a dog owner for violating a city ordinance prohibiting animals “running at large“).
Here, the ordinance provides that “[a]ny Tenant claiming to be aggrieved by a Landlord‘s noncompliance with the [ordinance] has a cause of action in any court of competent jurisdiction for Damages and such other remedies as may be appropriate.” PCC 30.01.085(D) (2017). The Court of Appeals has previously held that “it is within the judicial power of the circuit court to adjudicate a private dispute that arises under Oregon municipal law.” Sims v. Besaw‘s Café, 165 Or App 180, 189, 997 P2d 201 (2000). Plaintiffs argue, however, that Sims was wrongly decided or was at least overbroad, and that the ordinance here impermissibly enlarges common law and statutory duties and liabilities by requiring state courts to resolve disputes arising under municipal law. Plaintiffs thus contend that the city is attempting through the ordinance “to assert authority over state courts by requiring them to hear a new municipal cause of action, thus expanding state court jurisdiction beyond its constitutionally and statutorily defined limits.” We conclude that the ordinance validly creates a cause of action that may be heard in state courts and does not violate the constitution.
In Sims, the Court of Appeals considered a Portland ordinance that prohibited employers from discriminating against current and prospective employees on several grounds. That ordinance provided a cause of action to people harmed by that conduct, which could be heard in “any court of competent jurisdiction.” 165 Or App at 184. The plaintiff filed an action against the defendants in circuit court for employment discrimination based on that ordinance. The city, which intervened, argued that the plaintiff was entitled to a declaration that he could litigate his municipal law claim in state court. Id. at 183.
The Court of Appeals explained that “[t]here have been instances in which Oregon cities have exceeded their authority by enacting ordinances that purported to give state courts authority to perform functions that they have not been authorized by state law to
Sims is consistent with this court‘s decision in Covey Garage v. Portland, 157 Or 117, 70 P2d 566 (1937). In Covey Garage, this court considered a Portland ordinance providing that any person injured by “the carelessness, negligent [sic] or unlawful act” of the driver of a rental car was “authorized to institute an action” against the licensee of that rental car (or their surety or insurer). 157 Or at 120-21 (internal quotation marks omitted). In doing so, it purported to create a cause of action that was not previously available in tort or otherwise. In challenging that ordinance, a rental car company argued that the ordinance was preempted by state law in the field of vehicle regulation. This court held that, under its home-rule authority, the city had the “power to adopt the ordinance” so long as “it conflicts with neither a constitutional provision nor with a statute, and if it constitutes a proper exercise of the city‘s police power.” Id. at 123. The cause of action created by the ordinance was therefore enforceable in state court and not ultra vires.
Sims and Covey Garage are also consistent with Portland v. Western Union Tel. Co., 75 Or 37, 146 P 148 (1915). In that case, this court considered a Portland ordinance requiring messenger businesses to post a bond for the faithful delivery of goods and packages, and further granting any person aggrieved by a failed delivery “a right of action upon the bond in the name of the city.” Id. at 39. Although an action in tort by a customer against a messenger company would likely have been available at common law, an action upon the bond in the city‘s name would not have been, and the ordinance therefore created a cause of action. This court upheld that ordinance as “consonant with the powers and purposes of the city of Portland, consistent with the laws and policy of the state, and *** a proper exercise of the police power enacted for the purpose of regulating and not restraining occupations.” Id. at 43. Based on those cases, Sims was correctly decided, and home-rule municipalities in Oregon are not generally barred from creating causes of action in areas within their regulatory authority.
As the city points out, plaintiffs identify no statute or rule of law that affirmatively divests the circuit courts of jurisdiction over claims arising under municipal law. The city correctly argues that the legislature knows how to divest circuit courts of jurisdiction when it so chooses. See, e.g.,
With no affirmative divestment of jurisdiction to cite, plaintiffs argue that the ordinance at issue here is invalid because it has no express state law authorization. We reject that argument. Under the home-rule provisions of the Oregon Constitution, municipalities do not require the acquiescence of the state to legislate within their own jurisdiction. See City of Portland v. Jackson, 316 Or 143, 149, 850 P2d 1093 (1993) (“The people of Oregon, by amending Article XI, section 2, gave to the people of a municipality (acting through their local government) the right to pass laws, and restrict their own individual freedom and the freedom of others within their jurisdiction, subject only to the ‘Constitution and the criminal laws of the State of Oregon.‘“). The private cause of action established in the ordinance to seek redress for violations of the ordinance is permissible, and the circuit court has jurisdiction over such actions.
The decision of the Court of Appeals is affirmed. The judgment of the circuit court is vacated, and the case is remanded to the circuit court for further proceedings.
GARRETT, J., dissenting.
The City of Portland, having declared a “Housing State of Emergency,” enacted Ordinance 188219 (“ordinance“), which provides that, if a landlord raises the rent by 10 percent or more in a 12-month period and the tenant subsequently gives notice of an intent to terminate the lease, then the landlord must make a cash payment to the tenant in an amount ranging from $2,900 to $4,500, depending on the size of the unit. Portland City Code 30.01.085 (2017), amended by Ordinances 188519, 188558, 188628 (2017), 188849 (2018), 189421, 189726 (2019). Although the ordinance does not create “rent control” in the typical form, it nevertheless imposes an adverse financial consequence on a landlord for no reason other than its decision to raise the rent. Because I believe that effort to restrain rent falls within the scope of what the legislature prohibited in
I begin with the relevant text of
“(1) The Legislative Assembly finds that there is a social and economic need to insure an adequate supply of affordable housing for Oregonians. The Legislative Assembly also finds that the imposition of general restrictions on housing rents will disrupt an orderly housing market, increase deferred maintenance of existing housing stock, lead to abandonment of existing rental units and create a property tax shift from rental-owned to owner-occupied housing. Therefore, the Legislative Assembly declares that the imposition of rent control on housing in the State of Oregon is a matter of statewide concern.
“(2) Except as provided in subsections (3) to (5) of this section, a city or county shall not enact any ordinance or resolution which controls the rent that may be charged for the rental of any dwelling unit.”
The question is what is meant by the phrase “controls the rent” in subsection (2). I agree with the majority‘s textual analysis of that phrase:
I also agree with the majority that that definition is not enough to resolve this case. One could interpret “regulate” and “exercise restraining or directing influence over” narrowly to mean that the only type of prohibited ordinance is one that directly prescribes the amount of rent that may be charged. Alternatively, one could understand those terms more broadly to encompass ordinances that have any restraining, limiting, or directing influence on rent. I agree with the majority that the most expansive understanding of those terms is not what the legislature had in mind. Id. The word “control” connotes purposive action; thus, the statute is naturally read to prohibit local measures that are aimed at restraining, limiting, or directing rent (and are calculated to have that effect1), and
That understanding follows from the legislative history, which reflects a concern that local governments, faced with a problem of high rents, would be tempted to simply restrain them instead of taking longer-term actions geared toward increasing the supply of affordable housing. The legislative record is replete with testimony to the effect that the promised benefits of suppressing rent below fair market levels are, at best, transient and that “rent control, in the long run, makes affordable housing less available for lower-income renters.” Testimony, House Committee on Judiciary, HB 2505, Apr 16, 1985, Ex E (testimony of Debbie Wood, State Housing Council). That is because actions taken by government to keep rent below fair market rates reduce the “incentive for developers to develop and maintain rental units.” Id. As the potential profitability of housing development is artificially suppressed, investors will opt out and spend their money where it is not so suppressed, compounding the very problem of short supply that led to rising rents in the first place. As another witness put it,
“[a]lthough the imposition of rent controls has in most cases been in response to a ‘housing shortage’ and the subsequent spiral of rising rents, the experience of cities in which rent control has existed for a period of time strongly supports the conclusion that rent control not only does not alleviate the problem, it actually leads to greater pressures on the rental housing market and has a severe economic impact in the communities in which it is imposed.”
Testimony, House Committee on Judiciary, HB 2505, Apr 30, 1985, Ex K (testimony of James Irvine, Oregon State Home Builders Association and The Multifamily Housing Council of Oregon).
In response to those concerns, the legislature prohibited cities and counties from enacting “any ordinance or resolution which controls the rent that may be charged for the rental of any dwelling unit.”
The majority opinion is elusive on that point. On the one hand, it seems to conclude from the text, context, and legislative history that preemption applies only to ordinances that “prescribe certain rent amounts or prohibit increases.” 368 Or at 678. On the other hand, the majority proceeds to consider whether a city could violate
There should be no doubt that a city can violate
However, even if the phrase “controls the rent” should be understood to mean exactly the same thing as “rent control,” that still does not mean that the only way that a city can violate the statute is by fixing rents at certain levels. Given its stated purpose, the prohibition should be understood to cover local ordinances that “regulate” or “exercise restraining or directing influence over” the amount of rent—either by direct prescription or prohibition, or through less direct measures that are nonetheless calculated to “regulate” or “exercise restraining or directing influence over” the rent by directly attaching adverse consequences to the setting of rents at levels that the city does not favor. Consider two hypothetical ordinances:
- “No landlord shall raise rent by more than 10 percent in a 12-month period.”
- “Landlords may set rents at whatever levels they choose, but those who raise rent by more than 10 percent in a 12-month period shall pay a fee to the city in the amount of $25,000 per affected unit.”
The difference between those two ordinances is no difference at all when it comes to real-world consequences. The legislature cannot have intended to treat them differently. The majority somehow resists that conclusion; it only begrudgingly considers the possibility that
In the majority‘s hypothetical example, if the market would support an increase of 10 percent in the rent for a studio apartment, a landlord who raises the rent by exactly 10 percent for one year, and then increases that rent 9.9 percent the following year, would recoup the $2,900 “relocation assistance” payment and earn an additional $1,533 over those two years. From that, the majority infers that the $2,900 payment is not enough to interfere with the setting of market rent. The flaw in the majority‘s reasoning is that no rational landlord would do what the majority proposes. Instead of raising the rent 10 percent in the first year, the landlord would raise the rent by 9.9 percent in both years, earning nearly the same amount of increased rental revenue and avoiding the $2,900 “relocation assistance” payment altogether. The difference between 9.9 percent and 10 percent may seem trivial, but economically it will make sense for many landlords to raise rent no more than 9.9 percent even where the market would support increases of 11 percent, 12 percent, or more. Moreover, because of the compounding effect, the difference between annual increases of 9.9 and, say, 12 percent will lead to highly disparate results over time. The majority dismisses all of this as simply “altering a landlord‘s calculus regarding how much it will increase the rent,” but that is the entire point. 368 Or at 682. A landlord that must alter its rent-raising calculus solely to avoid a city-imposed financial penalty2 has had its freedom
The majority‘s argument also fails to take the city at its word. The city made no bones about its intent to discourage landlords from raising rents in amounts higher than what the city considered acceptable. At the February 2, 2017, Portland City Council meeting discussing the ordinance, Commissioner Eudaly, the lead sponsor, framed it as a deterrent when she said, “there‘s an easy way to avoid relocation assistance. Do not no-cause evict your tenants and don‘t raise their rent 10 percent or more per year.” Audio Recording, Portland City Council, Ordinance 188219, Feb 2, 2017, Part 21 of 27, at 11:40 (comments of Commissioner Chloe Eudaly), https://www.portlandoregon.gov/auditor/article/622981 (accessed Oct 29, 2021). The deterrent purpose and effect of the ordinance was further confirmed when, three years later, the city‘s mayor described the relocation assistance program as “one tool we have to keep rent levels stable.” Audio Recording, Portland City Council, Ordinance 190122, Sept 16, 2020, Part 1 of 3, at 2:43:13 (comments of Mayor Ted Wheeler supporting an amendment to lower the 10 percent threshold for relocation assistance payments during the COVID-19 public emergency), https://www.portlandoregon.gov/auditor/article/751848 (accessed Oct 29, 2021). Even putting those comments aside, the purpose of discouraging rent increases is amply demonstrated by the fact that, if the city had been concerned solely with providing assistance to displaced renters, other means were available. The city could have required payments to all renters who terminate their leases without regard to the amount of any rent increase, or whether it had been increased at all. Or the city could have imposed a surcharge on all leases to fund an assistance program for displaced renters. Instead, the city required the “relocation assistance” payment only from landlords who raised the rent more than a threshold amount. This court should assume the city knew what it was doing, and I see no reason for this court to question the city‘s economic assumptions about what would work. Certainly, there is nothing in the record that gives this court a basis for confidently stating that the penalties the city chose to impose are too modest to make a difference.
In my view, the text of the ordinance and the circumstances surrounding its adoption permit only one conclusion: The city, as a means of “stabilizing” rising rents, intended to deter landlords from setting rents at fair market levels and selected a coercive tool to accomplish that objective. That is what the 1985 Legislative Assembly feared cities would do. The ordinance is a measure that “controls the rent” and is preempted by
Notes
“If, within 14 days after a Tenant receives an Increase Notice indicating a Rent increase of 10 percent or more within a 12 month period[,] *** a Tenant provides written notice to the Landlord of the Tenant‘s intent to terminate the Rental Agreement ***, then, within 14 days of receiving the Tenant‘s Notice, the Landlord shall pay to the Tenant Relocation Assistance in the amount that follows: $2,900 for a studio or SRO Dwelling Unit, $3,300 for a one-bedroom Dwelling Unit, $4,200 for a two-bedroom Dwelling Unit and $4,500 for a three-bedroom or larger dwelling unit.”
The ordinance also requires relocation assistance payments when a landlord evicts a tenant through a “no-cause” eviction. “No-cause” eviction occurs when a landlord ends a tenancy without any predicating misconduct by the tenant. The majority misinterprets what I mean by saying that “control” connotes purposive action. 368 Or at 670 n 5. I do not contend thatWe disagree with the city‘s argument. Although
“The Legislative Assembly shall not enact, amend or repeal any charter or act of incorporation for any municipality, city or town. The legal voters of every city and town are hereby granted power to enact and amend their municipal charter, subject to the Constitution and criminal laws of the State of Oregon.”