Portland Rent Control
Every time I sit to write about Portland’s rent control ordinance, I stop because it is so complex, and so situational, that it really is more of a nuanced conversation rather than a blog post. Recently, however, I was lucky enough to hear Zachary Lenhert with Portland Housing Safety Office present on rent control. He did such a great job clarifying certain points and breaking it down in a more understandable way, so I wanted to share my summary of his presentation in the hopes that it can help. As always, this is my personal understanding of what was said; I am human and make mistakes and misunderstand things at times. Therefore, this is not advice, nor is this guaranteed as being correct, so please consult a lawyer or contact Housing Safety for specific questions and concerns. This is also not an opinion piece, I’m just here to share information on the content without commentary.
As always, I try to be here as a resource, so please don’t hesitate to let me know if you have further questions or need more information.
What is Rent Control?
Rent control is a citizen’s initiative passed by voter referendum in 2020. This initial initiative:
Established a rent board.
Limited rent increases on covered units and capped increases at 10%.
Established requirements for information provided by Landlords to the city regarding their rental units, along with information required to be given to Tenants.
Required (in this initial version) a 75 day notice of rental rate increases.
Note: this is now 90 days.
Exemptions from this 90 day requirement currently are:
A Landlord can evict a Tenant with 7 days notice “for cause.”
A Landlord may terminate a Tenancy by notice of 60-89 days if they provide an amount equal to one month’s rent to the Tenant.
A Landlord may terminate a tenancy by notice of 30-59 days if they provide an amount equal to two month’s rent to the Tenant.
In 2022, an amendment to rent control was passed, which made some changes to the initial initiative:
Allowable increases are now 70% of CPI, not 100%.
Note: Housing Safety will establish the CPI for the following year each September and the Landlord must refer to that CPI as the allowable increase, not the current CPI. 70% of CPI will start for increases in 2024; in 2023 it is still 100% of CPI (which is 7%).
Notification period of increases is now 90 days.
The method by which the rent board evaluates additional increases after improvements/renovation is the Maintenance of NOI Method.
Note: I have not been before the rent board and I find this aspect of rent control quite confusing as the rulings seem to be subjective, so please consult Housing Safety or the Rent Board for more information on this topic.
What is covered under rent control?
All rental units in Portland (including short term rentals) are included under the rent control ordinance, with a few exceptions:
Units in an owner-occupied building containing either 2, 3, or 4 units.
Note: it used to be “Landlord occupied” and is now “Tenant occupied”
Units where rent is publicly controlled or subsidized (for example, Section 8 or GA).
Note: Once that Tenant stops using GA, however, it is no longer exempt. See below for information on how base rent is established on a rental unit after being exempt.
Accessory dwelling units
Units owned, operated, or managed by municipal housing authorities (such as Portland Housing Authority)
Accommodations in a hospital, convent, church, religious facility, or extended care facility
Dormitories owned and operated by an institution of higher education or Portland Public Schools
What are allowable increases?
Each year, the rental rate can be increased a certain amount, based on a few factors. Most importantly, Landlords must understand what the base rent is. Base Rent is the rent that was charged June 1, 2020. This is where it gets murky, as there are situations where this doesn’t apply; for example, the unit was vacant on that day or was exempt at that time. I am not going to get into those situations here, so please refer to the end of this article for additional resources for more information on those questions. At no point can Landlords raise the rent more than 10% without approval from the Rent Board.
Once base rent has been determined, a Landlord can then determine how the rent can be increased. This can only be done through allowable increases. Allowable increases include:
CPI: through 2023, that is 100% of the established CPI by Portland Housing Safety. This is a percentage based on the tenants current rental rate. The CPI is set by Housing Safety in the fall of the previous year and the CPI rate stays the same throughout the calendar year.
Example: Rent is $1,500/month and CPI is 7% in that year (with 100% CPI allowed), so the allowable CPI increase is $105/month.
Tax Increases: in 2022 only, Landlords can take the difference between their 2022 tax bill and 2021 tax bill and add that as an allowable increase. It appears Landlords can divy up the difference as they deem appropriate, for example split equally between number of units or a higher amount for a unit that is more updated, etc.
Example: A 6 unit building has a property tax rate of $10,000 in 2021 and $16,000 in 2022. $16,000-$10,000 = $6,000. Split equally between the units is $6,000/6 = $1,000. Then break down as a monthly rate, ($1,000/12) and the allowable increase is $500 per unit.
Note: This does not mean a Landlord can automatically take the full $500/unit - remember that a Landlord can never increase a rental rate more than 10% unless there is Rent Board approval.
This is allowed in 2022 only, although if that increase was not taken, it can banked for the future (more on that in a minute).
Turnover: When a rental unit turns over, the Landlord can add 5% of the base rent onto the current rental rate.
Note: this can only be taken once per year so if the unit turns over more than once a Landlord can only take the 5% one time.
Going before the rent board: A Landlord can apply, under certain circumstances, to reset their base rent or for an increase beyond 10%. The application can be found here. It is more complex than what we will dive into in this article. Housing Safety is a great resource to answer questions on this type of increase.
But what happens if we don’t take the total amount we are allowed?
That is where banked rent comes in. Banked rent is the sum of the allowable increases that were not taken and will be banked for future years. There are two reasons that there may be banked rent:
The Landlord chooses not to take the full amount allowed.
Example: A tenant’s rent is $1,500 and allowable CPI is $105. The Landlord chooses to raise their rental rate by $50, leaving $55 as banked rent.
Allowable increases total more than the 10% max. The Landlord can only raise a Tenants’ rent 10% max (assuming they have the allowable increases to do so).
Example: A Tenant's rent is $1,500 and they decide to move out. This means the allowable increases for that year are CPI (which in this year is 100% of 7%) and turnover (5% of the base rent). That is (depending on base rent) likely more than a 10% total increase, so a Landlord would increase the 10%, then bank the rest for future years.
What information must Landlords provide?
There are 3 key pieces of information Landlords must pay attention to:
Proper notification of a rental increase. Landlords must provide specific information to Tenants when notifying them of an increase in their rental rate. The City has provided a sample notice here. If this is not provided accurately, then the form must be resubmitted to the Tenant and the 90 day notification period starts over.
Tip: Make a template in DocuSign, so when it is time to send it with the increase, it’s a little faster to fill out and there is an easy record of signatures.
Rental Housing Rights Document. Landlords must provide updated copies to all tenants (signed by Tenants acknowledging receipt), along with posting in a common area, the most updated version of the Rental Housing Rights Document.
Note: if a Tenant received a copy when they signed their lease but it has since been updated, Landlords must provide a new copy and have Tenants sign for receipt.
Tip: Have tenants re-sign this document with a new lease yearly to ensure it is up to date!
Unit Registration. Landlords must register their rental units with the city and, for units covered by rent control, an Additional Form must be completed. This must be done by January 15. If the Landlord does not complete by that date, the fine has increased from $10/unit/day to $50/unit/day. If the Landlord has not provided this by February 14, then it is $200/unit/day. Do not forget to do this!!! If a unit is exempt, Landlords still must complete the initial registration form and mark the unit as exempt, without completing the Additional Information Form.
Note: these forms are asking what happened during the previous year, not what the plan for the following year will be.
Note: Previous rent means what was the rent on November 1st of previous year. Current rent is of most recent November 1st.
Rent control enforcement:
Rent control can be enforced in 3 ways. Please note that these different parties may not agree and there may be different outcomes.
Housing Safety Office. A complaint is made by the Tenant and Housing Safety works to gather information. My take aways are that their primary goal is to ensure compliance. If a complaint is made, they will work with both parties to resolve the issue, which, if the Landlord is in the wrong, involves making the Tenant whole again. They have yet to impose a fine is my understanding, so long as a Landlord complies.
The Rent Board. The Rent Board is made up of 7 volunteers, with no less than 4 of them being Tenants. They meet monthly to review complaints, applications, etc. They have the right to impose fines.
District/Superior Court. This seems self explanatory.
Miscellaneous Questions/Notes from the Presentation:
Landlords cannot charge application fees.
Landlords may not charge more than 1 months rent for security deposit.
No provision of this ordinance can be waived by a Tenant.
Does Base rent reset with new owners? No.
Will the rent board ever approve an above 10% increase? Technically yes but seems rare. For example, after a major renovation they may approve more than 10% increase but require it to be taken over a few years so it’s not more than 10% in any given year, ie. allow a 15% increase but require it to be spread out so no more than 10% in any year.
Note: It appears that a major renovation is considered to have happened when the cost is at least 20% of the value of the property (not the unit).
What happens when a unit that was exempt is now falling under rent control? The base rent is set at what rent was 120 days prior to being removed from exempt status.
Note: It was unclear if allowable increases during that 120 period are allowed to be banked or not.
If there was no rent 120 days prior, then it is whatever the Landlord charges thereafter.
If the unit is removed from the rental market for at least 60 months, the Base Rent may be reset upon re-entry.
What happens if there isn’t a common area to post The Rights & Responsibilities document? The answer was unclear.
Resources:
Rental Housing Alliance of Southern Maine: consider becoming a member and gain access to additional resources, education, and a message board to ask questions and learn from other Landlords.
City of Portland FAQ Sheet, which includes examples of how to take increases.