Portland’s elected officials made a bold ask last week. 

In a letter addressed to their “State and Federal Elected Official Partners,” the four City Council members asked for all residential and commercial rent and mortgage payments to be forgiven. 

Portland's City Council put out a call this week asking for all rent and mortgage payments to be forgiven. 

Portland’s City Council put out a call this week asking for all rent and mortgage payments to be forgiven. 

Jonathan Levinson/OPB

While the letter was cheered by some as an urgent demand for much-needed relief, it touched a nerve among those expecting these payments. Landlords and property managers were quick to argue that such a proposal, without mention of relief for them, would only push the economic pain caused by COVID-19 higher up the food chain. 

“It’s unfathomable to me that our city officials don’t understand the domino effect that this will have,” said Maureen McNabb, president of Capital Property Management, a management company that specializes in Portland-based apartments. “It is going to be an unleashing and backlash of epic proportions for this state.”

Most landlords would benefit from a freeze that included mortgages along with rents. Their tenants wouldn’t pay them, the thinking goes, but they also wouldn’t owe anything to their lenders. 

But owners of commercial and multifamily buildings say there are other expenses they must cover beyond just their own mortgage. This means a payment freeze could hurt them far more than it helped. Everyone on their payroll, they warned, would likely lose their jobs. Maintenance contracts — the ones that ensure buildings are cleaned and walls are painted — would be canceled. Gas, electric and water bills would go unpaid, as would property taxes. There would be no incentive, landlords say, for them to rent any units.

“It’s a much bigger ecosphere than I think the city council likes to acknowledge,” said Mark Paskill, a partner at Melvin Mark Capital, which finances commercial real estate.

In a letter fired off Thursday evening to Gov. Kate Brown, the executive director of Multifamily NW, which represents landlords and property managers across the state, warned that rent and mortgage forgiveness would send an “economic shockwave” through the city.

“It is critical that you understand that the City’s proposal is not only dangerous to our community in the near term,” Demorah Imse wrote, “but that it would result in a cascading series of events threatening our basic economic structures.”

Banks and mortgage servicers would similarly be left on the hook if mortgage payments were waived. Linda Navarro, president of the Oregon Bankers Association, said while she understood the letter was “sending a message to policy makers,” she felt it offered little in the form of workable solutions.

“If the intention is not to necessarily require a financial institution to just forgive all of that debt, then where’s the money coming from?” she said. 

Commissioner Jo Ann Hardesty countered that the City Council understands the money for these payments will need to come from somewhere — just not out of the pockets of tenants and homeowners, who are likely to be slammed with deferred payments when the crisis ends. Instead, she said, money for rent during the crisis should be funneled through the state.

“What we know is there are so many community members who are really living paycheck to paycheck. That is going to be extremely difficult for them to catch up,” she said. “Now that doesn’t mean that the city thinks that landlords should eat these expenses. … That’s why we want the governor to actually be able to fund waiving both [residential] rent and commercial rent for the duration of this crisis.”

Asked about the Council’s letter, Mayor Ted Wheeler’s office released a statement calling on “leadership and action from every level of government to stabilize our economy and ensure that Oregon is able to recover quickly when the worst passes.”

Portland’s city council isn’t the first to propose waiving rent and mortgage payments. In New York, a state legislator has proposed a bill that would stop rent and mortgage payments for residential or commercial tenants who have lost income because of COVID-19. Florida Sen. Rick Scott has proposed a moratorium on these payments for people making less than $75,000 a year. Earlier this week, Seattle’s city council unanimously voted for a resolution asking the state and federal government to cancel all rent and mortgage payments. 

In an interview Wednesday, Commissioner Chloe Eudaly said the Portland Council was inspired by Seattle. Though it’s not clear how a proposed freeze would play out, she said, she felt the Council had to put out the call for help as more and more people lost their jobs and found themselves unable to make rent or pay their mortgage. A record 92,700 people filed new unemployment claims in Oregon last week. 

Eudaly said she worried that, without quick action, the city would see something similar to what played out after the 2008 financial crisis. As hundreds of thousands of homes were being foreclosed on, Wall Street investors, incentivized by the federal government, began purchasing homes en masse in suffering markets.

“I don’t think anyone has figured out exactly what forgiveness could look like,” she said. “My fear is at the end of this, if we don’t work to protect renters, landlords, small businesses, then we are going to see another massive land grab by Wall Street. And our current housing crisis is going to pale in comparison to what it could look like after another round of Wall Street investment firms snapping up our rental properties.”

Academics in Portland and Seattle said it’s not clear what level of government, if any, has the power to break a contract between two parties, whether that contract came in the form of a mortgage agreement or lease.

“Good lord,” said Gerard Mildner, director of the Center for Real Estate at Portland State University. “I didn’t know you can suspend the Constitution.”

Gregg Colburn, an assistant professor of real estate at the University of Washington, said the Washington Legislature, spurred by Seattle’s resolution, is currently debating whether state lawmakers have the authority to forgive rental payments. It’s unlikely similar debates will be taking place in Oregon imminently as the governor has no immediate plans to hold a special session to respond to COVID-19.

Experts say they are doubtful the state has the authority to forgive mortgage payments and that negotiation would likely need to take place between the federal government and national banks. California Gov. Gavin Newsom did have success getting the biggest banks in the nation to agree to a 90-day grace period for mortgage payments — though that was to delay payments not forgive them altogether. Shaun Jillions, an influential lobbyist for business in Oregon, wrote in an email that it’s unclear if Oregon enjoys that same sort of influence on national banks.

Colburn said it’s understandable that landlords and financial institutions are bristling at the proposal, even if the path forward is murky. Without mentioning other relief, the Portland City Council appears to have thrown its weight behind an idea that takes the financial burden off the shoulders of renters and homeowners and places it on landlords and lenders.

“Let’s say the federal government waves a magic wand and says people don’t have to make their rent payments or their mortgage payments. … If they’re completely waived then the losers in that are the people to whom those payments were going to be made,” Colburn said. “And so those people are going to stand up and say, ‘Well, wait a second, why? … Why are we the loser in all this? It’s not our fault that a virus hit.’”

Colburn added that he believed a more realistic solution would be for the federal government to step in to provide financial support, so that people can continue to make their rent payments. Multifamily NW suggested something similar in its letter to the governor, asking that Oregon expand its rental assistance voucher program with some of the money provided through the $2 trillion federal coronavirus relief package.

In a statement, renters’ rights group Portland Tenants United warned the state should not “place the burden for applying for aid on the shoulders of already deeply stressed households.” Instead, the group said the landlord industry should apply for funding directly from the state.