A Two-Tier Apartment Market in the US

Joseph J. Ori

So far this year, three states, California, Oregon and New York have enacted sweeping rent control laws in their states. These new laws cap annual rent increases to inflation (measured by the Consumer Price Index) plus 7% in Oregon, inflation plus 5% in California and in a convoluted system in New York, the rent increase is based on the five-year average rent base per the Rent Guidelines Board. The new rent control measures in California don’t apply to any newly constructed apartments for 15 years and in Oregon, new properties are also exempted for 15 years.

We expect many more liberally run states like Illinois, New Jersey, Maryland, Connecticut and Massachusetts to also enact rent control measures similar to the above three states by the end of 2020. As an apartment owner or developer in California and Oregon, you may be fine with annual rent increases of inflation plus 5% or 7%.