A rental industry group and two landlords they represent sued the City of Portland Thursday to block new housing screening and security deposit rules from taking effect, claiming they’re unconstitutional.

Multifamily NW, Nevada resident Janet Newcomb and Oregonian Jerry Mason are seeking a federal judge’s order to first temporarily stop the two Fair Access in Renting ordinances from going into effect March 1 and to later overrule the regulations entirely.

The ordinances passed by the Portland City Council last June violate free speech protections by requiring landlords to use certain language when advertising units and send notices issued by the city to applicants and tenants and prohibiting them from speaking to prospective tenants before processing applications, according to the lawsuit.

The policies are also too vague and don’t completely inform housing providers on how to stay in compliance, have penalties that are too steep and appear to conflict with existing statewide landlord-tenant regulations, said attorney Jill Gibson, who represents the group. She said the lawsuit resulted from at least a year of trying to negotiate with city officials to “make the rules more understandable and more fair.”

“We want to slow this down so the judge has a chance to look at it and really absorb what the changes are going to bring,” Gibson said Friday.

[Read the lawsuit]

Multifamily NW, represents residential property managers, owners and vendors throughout the state and parts of Washington. The group said its members own 30,000 rental units in Portland alone.

Newcomb owns 19 rental units in Portland and Mason owns 62, according to the lawsuit.

The Portland City Attorney’s Office and Office of Commissioner Chloe Eudaly, who led the effort for the new regulations, declined to comment on the lawsuit Friday.

The ordinances are the first of their kind in the country. The Portland City Council voted 3-1 last year to change the city code revising the screening criteria for landlords to use when evaluating a renter’s application.

The changes include requiring landlords choose renters for open units via a first-come, first-serve application process and to give 72 hours’ notice before accepting applications. Landlords would no longer be allowed to check for felony convictions older than seven years or misdemeanors older than three years.

The new rules also limit the grounds on which landlords can reject prospective renters. The ordinances call for renters to no longer be rejected for credit scores lower than 500, a court eviction order older than three years or insufficient credit history. Landlords also could no longer reject a tenant whose income is between 2 and 2.5 times the rent, and if landlords decide to use their own screen criteria, the new policy requires them to explain in writing why they rejected a prospective tenant.

The city code was also changed to requires landlords to more thoroughly account for security deposit funds withheld for repairs and allow tenants to pay security deposits in installments over three months.

Eudaly’s office has said the policies were intended to increase access to housing for people who have been locked out of the conventional market because of years-old convictions or financial defaults. They said research showed screening barriers, including credit history and criminal history, disproportionately impact people of color and that renting to people with past criminal convictions didn’t put housing providers or rental properties at risk.

Eudaly, Mayor Ted Wheeler and Commissioner Nick Fish voted yes on the ordinances at the time. Commissioner Amanda Fritz voted no. Commissioner Jo Ann Hardesty was absent.

The lawsuit said landlords are required to pay $250 per violation of the screening criteria ordinance or pay double the amount of the security deposit if found in violation of the other. They would also have to pay attorney fees in both cases.

Gibson referred to the ordinances as “poorly crafted laws that further exacerbates the housing crisis” in Portland. She claimed it’s already caused some landlords to sell their properties.

The Portland Housing Bureau has been offering free training for landlords on the ordinances.

-- Everton Bailey Jr; ebailey@oregonian.com | 503-221-8343 | @EvertonBailey

Subscribe to Oregonian/OregonLive newsletters and podcasts for the latest news and top stories.