Three years after Portland implemented rent control, landlords are responding to slimmer profit margins by seeking out high-earning or subsidized tenants and leaving pricey units vacant for months instead of lowering rents.
They say that is driving one of the major problems that rent control aimed to solve: gentrification. While it is not clear if that is happening on a wide scale in Maine’s largest city, it highlights some of the unintended spillover effects from the kinds of laws that cap how much a landlord can increase rents from year to year.
Most economists agree that rent control benefits current tenants in the short term but can lead to gentrification and decreased affordability for future residents. Yet Portland voters are overwhelmingly in support of the law first passed in 2020. Last year, voters rejected a landlord-backed attempt to weaken the law.
Now, Portland’s ordinances cap annual rent increases at 70 percent of the inflation rate, exempting subsidized housing and certain other types of units. Tenants also have protections, including a 90-day notice of rent increases passed in 2022. The city also has a rent board that meets monthly to respond to disputes and consider landlords’ requests for exemptions.
The allowed annual increases do not keep up with the mounting costs of utilities and general maintenance, said landlord Chris Aceto, who owns more than 25 buildings in Portland. Those slim profit margins have driven Aceto and other landlords to take the corrective action of selecting the highest-earning applicants to lease their units.
“You do have a lot of people running around Portland with an income that can easily afford $1,400, so you end up saying, ‘Why should I take the risk?” Aceto said. “It has absolutely squeezed out a certain pool of tenants for a pool of tenants with much more means.”
Another mid-sized landlord, Eddy Ahmed, said he’s responding to the rent control ordinance by letting two of his vacant, pricier units — one on Tate Street and another on Congress Street — sit empty for months when he would usually lower the rent to lease them out sooner.
Ahmed has heard of other landlords also holding out for tenants who can afford a rent over $2,000, noting that only 2 percent rent increases will be allowed in 2024. That price point is a relatively new one in the city, where a 2018 report found few rentals above $2,000. Now, 143 out of the 194 rentals listed on Zillow here are above it.
“Usually, in the past, I’ve lowered the price as incentive for people, but since we can’t raise it up, we don’t have that incentive,” Ahmed said.
Some of the concerns come down to unresolved questions about the ordinances. For example, the rent board has not definitively ruled on whether landlords can reduce rent sharply and then go back to the old price point if demand returns, city spokesperson Jessica Grondin said.
Brit Vitalius, a real estate broker who is president of the Southern Maine Rental Alliance, a landlord group, said that he hears of a lot of confusion around the ordinance among landlords. He has also noticed landlords giving preference to tenants who qualify for subsidized housing over those who don’t because they are exempt from the rent control ordinance.
“I’m hearing a number of situations which are not positive or negative, but they’re different, and they might be different than what the people who wrote this intended,” Vitalius said.
But landlords’ criticisms of rent control are generally exaggerated and anecdotal, said John Gilderbloom, an urban planning professor at the University of Louisville who helped craft rent control ordinances for over 150 U.S. cities including Portland.
He pointed to the tax breaks, appreciation and equity that landlords like himself most often benefit from. Most of a landlord’s costs are fixed due to mortgages, meaning minor rent increases can typically cover remaining costs, he said.
Though Gilderbloom acknowledged that rent control can lead landlords to raise rents when they otherwise would not, research he conducted in New Jersey showed that rents in rent-controlled and non-rent controlled cities rose at similar rates over 40 years. He argues that moderate rent control guards against unfair evictions and allows tenants to anticipate rent increases.
“This is like a speed limit,” he said. “People are safer when there’s stop signs out there and there’s speed limits, and that’s just a part of what a government should do.”