Older buildings should sell for less, to compensate for this risk. If the mortgage payments eat up too much of the rental income then the owner overpaid, and should sell at a price that's more appropriate for the risk associated with the building.

Problem is that laws change even when homes don’t change ownership.

Your building might be worth$2M, then a rent control law is passed and suddenly it’s worth $1.5M.

How does this work? The $2m valuation would be based on income from current tenants, would it not? Most rent control laws, and especially not the one in Oregon, don't retroactively change rents charged to current tenants.

That is unless the $2m valuation is based on a speculative estimate of how much rents will go up in the near future?

A good example would be single family homes in SF. Currently no rent control. If the rent control laws were changed to include SFHs, you’d see a pretty drastic decrease in the value of them, since yes, currently they are valued based on expected future rent increases.