Landowners beware HB2639

By Senator Doug Whitsett

One of this year’s worst bills passed the Senate on the last day of the Legislative session. HB 2639, which had been defeated on the Senate floor during a Sunday session, was unfortunately reconsidered and passed today by a one vote majority. The Governor is expected to sign this prejudicial bill into Oregon law.

The bill, sponsored by the House Speaker, makes significant changes in Oregon housing discrimination laws. It requires the inclusion of entitlement payments in determining a prospective tenant’s ability to make rent or lease payments.

Renting or leasing private property is much like making a loan of money. In a regular loan, a lender loans money to a borrower for a specific period of time. The borrower promises to timely-repay the money, plus interest. The borrower usually provides collateral, as security, to insure they keep their repayment promise.

A property owner loans their property in a rental or lease agreement. The property loaned is often valued at several hundred thousand dollars. The term of the loan is the term of the rental agreement. The tenants’ monthly payments are much the same as the interest due on a loan. The security for the rental loan is the contractual promise, made by the tenant, to return the property to the owner without damage. The loan is usually further secured by a refundable damage deposit.

When you lend money to someone, you want to make sure the borrower has the capacity to repay the loan. Likewise, when you enter into a rental agreement, you want to make sure that the tenant has the financial capacity to pay the monthly rent.

Moreover, before you loan money to someone you want to make sure they are not scofflaws. Before you rent property, you want to make sure that the tenant does not have a previous history of failing to repay previous lenders, failing to pay utility bills, or of criminal activity.

Current statutes and federal law insures a property owner unfettered right to determine, for themselves, whether the prospective tenant has the financial capacity, to make rental or lease payments. This right is not limited so long as the property owner does not otherwise discriminate in their determination.

HB 2639 fundamentally destroys that right, by adding “the ability to pay” as a new-form of discrimination. The bill requires the property owner to include all local, state and federal housing subsidies, in determining whether the tenant has adequate financial capacity.

The owner is forced to rent or lease their private property to a prospective tenant, whose financial capacity, including local state and federal subsidies, meets the owners’ requirements. The bill establishes that the owner is in violation of the fair housing laws if they decide not to rent or lease the property to an otherwise qualified tenant under the newly established rules. This new requirement can force the property owner to rent or lease to a tenant that they would otherwise not consider, due to inadequate financial resources.

Moreover, the property owner is then forced to enter into a third party agreement with the local, state or federal agencies that are providing the subsidies to the prospective tenant. These third party agreements almost always require property owners to submit to one or more inspections of their private property by the government agency providing the subsidy.

Many property owners will not rent to subsidized rental tenants, because they have previously experienced uniformly bad outcomes, from entering into those agreements. Those bad outcomes may include tenants that trash rental properties, fail to pay the tenant’s share of the rent, fail to pay utility bills, or participate in criminal activities including drug use.

Bad outcomes also may include the property owner being forced to work under contract, with government agencies that tend to make up the rules as they go along. Delays in inspections, requirements to make trivial repairs, and further delays in re-inspection and completing contractual agreements cost time and money.

The bill appears to recognize that subsidized rental tenants are more likely to damage property. The measure establishes a taxpayer-paid fund to reimburse property owners for that anticipated damage. The property owner must absorb the first $500 in damages caused by the tenant. After that, the bill allows the property owner to recover up to $5,000 in damages from a tenant who trashes their property. However, the property owner will only be reimbursed after they have obtained a court order requiring the tenant to pay the damages.

Five thousand dollars is grossly inadequate to pay damages such as pets or children destroying floor coverings, damaging window coverings, kicking holes in doors and walls, or tenants manufacturing or smoking methamphetamine in the home. Absurdly, the fund is capitalized at less than $75,000 per year. This amount would only pay $5,000 to fifteen property owners statewide!

I am not able to find the constitutional authority that confers on the Legislature the right to force property owners to rent or lease their private property to people that they know do not have the financial capacity to “pay the rent”? In my opinion, this bill creates a gross infringement on the rights of private property owners.

The bill also prevents real estate brokers from screening prospective buyers for their ability to pay based upon source of income. This bill forces real estate brokers to bring prospective buyers to their clients that they know do not have the unsubsidized ability to pay for the property.

HB 2639 also prohibits lenders from considering the source of income in determining whether the prospective buyer has the financial capacity to make the mortgage payments on a property. Absurdly, it requires the lender to ignore the fact that part or all of a prospective buyer’s income may be derived from local, state and federal entitlements. Are the lenders then required to make a thirty year loan based upon the prospective buyer maintaining their subsidized life style?

Inexplicably, the capitol lobbyists representing the rental property owners, the realtors and the lending community were neutral on HB 2639. The businessmen that these lobbyists represent should ask them why they failed to oppose this damaging bill that virtually extinguishes the private property rights of rental property owners.

Please remember, if we do not stand up for rural Oregon no one will.

 

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