In 2022, the Eugene City Council passed City Ordinance No. 20670. The ordinance was a disaster for landlords, but the worst aspect was undoubtedly the $10.00 application fee. With the cost of screening – not counting staff hours, software, and associated expenses – hovering just below $20.00, the ordinance was a serious financial blow to landlords and management companies. The actual cost for screening, adding in those other categories, hovers between $45- 60 per application.
In 2023, a lower court overturned the ordinance on the ground that it was in contradiction to State Law. It was the first break landlords had experienced in years. Unfortunately, good things usually come to an end. On August 28th, an appeals court overturned that decision and ruled the City of Eugene could reimplement the mandated $10 application fee.
What Now?
That is the question: what do we do now? For the time being, nothing. The City of Eugene has not yet put the mandate back in place, declining to act. Local management companies and landlords are doing nothing. Their customary application fees are still in place and they are watching the City Council, waiting for their decision.
When the City Ordinance, or Phase One, was first enacted in 2022, two property developers sued the City of Eugene. One of those developers, Jennings Group, has indicated a possible willingness to take the Case as far as the Oregon Supreme Court. All bets are off, if that should happen.
What could happen?
If the City Council decides to enforce the $10.00 application fee, there are several consequences landlords can expect and prepare for:
- Higher initial screening and turnover costs;
- Elevated rents as landlords offset those costs; and,
- An even more competitive rental market.
The landlords, both self-managed and those who employ management companies, will sustain the initial additional burden. That burden will be quickly offset once the rent clock begins, and it will be the tenants who are forced to carry the extra weight. The producer in this case is the landlord and the consumer is the tenant. All additional expenses forced upon the producer will eventually filter down to the consumer.
This attempt by the city council to alleviate the load on the tenants at the expense of landlords has done nothing, as usual, but give us yet another minor annoyance. Landlords are leaving the market because of these “annoyances”, further restricting local supply. As supply dwindles, rent prices continue to climb, and climb.
As always, Happy Landlording!