PORTLAND, Ore. (KOIN) — Oregon’s annual cap on rent increases will balloon in 2023, from 9.9% in 2022 to 14.6%.

The formula, which determines the rent cap, takes a 7% base and adds the 12-month average of inflation in the Northwest region of the country. Inflation stood at 7.6% over the last 12 months, according to State of Oregon Economist Josh Lehner.

“We have a very low vacancy rate in Oregon. We have a historical underproduction of housing. That’s contributing to increases the cost of housing because there are not other places to move to if you want to live in Oregon. There are very few vacant units,” Lehner said.

The increase marks the highest seen in the five years rent stabilization has been law in Oregon, with the next highest being 10.3% in 2019, the first year of the regulation.

Kim McCarty, the executive director of Community Alliance of Tenants, says for lower-income homes, a rent increase of 14.6% is “in and of itself an eviction.”

“It’s all piling on and when you add the inflationary elements of housing, people are at their breaking point,” McCarty said.

Rent stabilization was intended to squash evictions meant to drive people out of a unit for renovations or otherwise.

Renee Larsen is on the board of Multifamily Northwest and owns rental property herself. On her properties, she says she hasn’t had to raise rents near the state rent cap, or Portland’s 9.9% limit.

“For a majority of Portland renters, this isn’t really going to be a factor,” Larsen said.

Ron Garcia at the Rental Housing Alliance says if an apartment is already leased at market rate, there is likely not going to be an increase in rent near 14.6%. Though for rents “grandfathered” in by the rent stabilization law in 2018, he says an increase at that level is “more than justified” because of the increase property owners have felt in costs as well.

“The problem we have is that costs are up and there is a squeeze happening. Common and reasonable rent increases do not pair well with uncommon, unreasonable cost increases,” Garcia said.

Garcia pointed to a near doubling in construction and renovation costs, appliance costs that have increased by about 13%, as well as more expensive services such as landscaping.

Still, the increase has grabbed the attention of Governor Kate Brown. In a statement to KOIN 6 News, her spokesperson Charles Boyle said the governor is “deeply concerned” about the increase.

“With today’s inflation rates it makes sense to reexamine state law,” Boyle said in a statement.

Boyle refers people who believe their rent has illegally increased to call 211.

If Oregon lawmakers were to follow the governor’s call, they have room to work with, says John Gillem, the Portland Director of Market Analytics for CoStar.

“It’s actually generous from an investment standpoint, from a landlord standpoint,” Gillem says.

He points to communities like St. Paul, Minn., where a 3% rent cap does not include a formula that takes inflation into account.

Gillem looked at the market over the past 12 years, finding an average annual rent increase of 3.8% in that time. The highest year was 2015, in which an average rent increase was tracked at 8.5%, Gillem reports.

If the inflationary component of rent stabilization alone was removed, he believes the market would still be profitable for investors and developers.

“They’re going to crunch the average numbers Portland has produced on a market basis and say, ‘that’s still a pretty good yearly rent increase from our standpoint.'”