A federal judge in Portland said he won’t block new city housing screening and security deposit rules going into effect this weekend because a rental industry group waited too long to file a legal challenge.

U.S. District Judge Michael Simon on Thursday said he was denying a request from Multifamily NW for a temporary restraining order to delay two Fair Access in Renting ordinances because the near yearlong gap between when the city council approved them and when the group sued last Friday “implies a lack of urgency or a lack of irreparable harm.”

Multifamily NW and two landlords sued the city claiming the new rules were unconstitutional and ultimately should never go into effect. Simon said he didn’t believe U.S. District Court was the appropriate venue to sort out the constitutionality of city policies.

“I think at some point we’re all going to be better off getting decisions on state law questions from the state appellate courts,” he said.

The traditional route, he said, is a lawsuit is filed in circuit court, where a decision can be reviewed by the Oregon Court of Appeals and possibly later to the Oregon Supreme Court, if they choose to take up the issue.

The ordinances are the first of their kind in the country and go into effect March 1. The Portland City Council voted last June 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 on a first-come, first-serve basis 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 lay out new tenant screening criteria. Landlords may no longer reject prospective tenants for credit scores as low as 500, a court eviction order older than three years or insufficient credit history. Landlords also may no longer reject a tenant whose income is between 2 and 2.5 times the rent.

Landlords may substitute their own screening criteria. If they do, however, the new policy requires them to explain in writing why they rejected a prospective tenant.

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

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

Commissioner Chloe Eudaly’s office, which has championed the ordinances, 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.

In court Thursday, Simon encouraged the two parties to discuss how they would like the lawsuit to proceed. He said he’d be open to halting the proceedings of the federal lawsuit if Multifamily NW chooses to challenge city rules in state court or preside over a bench trial in federal court, if it came down to it.

Jill Gibson, an attorney representing the group, said last week that the lawsuit was filed after failed negotiations with the city. She said in court that her clients didn’t want to wait until the ordinances went into effect to launch legal challenges.

“Once these rules go into effect there will be landlords and tenants throughout Portland trying to understand what these mean,” Gibson said. “We believe it’s better to get that clarified first before people start suing each other.”

Deborah Imse, Multifamily NW’s executive director, said in a statement that she was disappointed in Simon’s ruling but said her group was “looking forward to continuing the next steps of this case and getting relief from this unworkable ordinance.”

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.

The ordinances passed by the Portland City Council 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.”

In a response to the request for the restraining order, Portland city attorneys disagreed that the ordinances were unconstitutional and said Multifamily NW were overstating negative impacts landlords would face once they became active.

“The ordinances are not vague and require common sense and logic in order to comply,” said a response filed Tuesday signed by City Attorney Tracy Reeve and four deputy city attorneys. “Plaintiffs’ ‘fear [of] being sued’ because they do not, as landlords, know how to ‘process’ rental applications or use a tenant’s security deposit to repair only those damages caused by the tenant is grossly exaggerated.”

[Read the lawsuit]

[Read City of Portland’s response to delay ordinances request]

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

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