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Posts about Rent Control


DC has rent control, but if landlords aren’t making a 12% profit they can file a hardship petition and raise rent

Thanks to the Rental Housing Act of 1985, DC has rent control laws that limit how much rents can go up in a given year for anyone living in a building with five or more units and built before 1975. But a lot of people miss out on these protections when landlords use a loophole called a hardship petition.

1320 Nicholson Street NW, where a landlord raised rent after filing a petition saying he wasn't making enough of a profit. Image from Google Maps.

"The landlord raised rent three years ago with no notice. A lot of people who had lived here fifteen, twenty years chose just to leave." That's Javier Rivera, a resident at 1320 Nicholson Street NW, talking about how rent in his rent-controlled apartment recently went up.

The basic rule of rent control is this: if you live in a building built before 1975, your annual rent increase is limited to inflation plus two percent. For 2015, that would mean about a three percent bump. So, if your rent costs $1000, and inflation is 1%, that means your rent could go up by $30 at the most.

But because of a loophole called the hardship petition, that's often not the way it works.

This section of the law seems to dictate simply that rent control shouldn't prevent landlords from making money on their investment. If they're not getting a reasonable return, they can file a hardship petition with the DC Rent Administrator to ask to be allowed extra rent increases. It's an eminently reasonable idea—if landlords are putting money into buying and fixing up apartments, they should be financially rewarded for their work.

It's become problematic, however, because of what the law considers to be a "reasonable return." Landlords of rent-controlled buildings in DC can file a hardship petition if the rate of return on their property is less than 12%.

Given that DC is dealing with an affordable housing crisis and costs keep rising, that's a questionable bar to set for raising rents.

If landlords aren't profiting enough, rent can go up

To put that in context, the average landlord in both DC and the greater region saw about a five percent return on investment in 2014.

And this takes us back to 1320 Nicholson Street In 2013, Rivera's landlord Michael Lesesne filed a hardship petition. He won, and residents soon saw increases of 40, 50, even 70 percent on their monthly rents.

The tenants hired a lawyer and were eventually able to convince a judge to overturn Lesesne's petition. But the damage had already been done: Lesesne had pocketed the money and to this day claims he's unable to pay residents back.

Latare Whitaker, another tenant, says the irony has not been lost on those who live there. "Mr. Lesesne didn't have any mercy on us when he raised our rent. Now he's asking for mercy after a judge has ordered him to pay back what's ours."

Some lawmakers are working to ditch hardship petitions

The Nicholson Street residents say this all could have been prevented if their landlord hadn't had such tools at his disposal in the first place, and they're fighting to save other tenants from their fate.

"This," says Whitaker, "is going on all over the city."

DC Councilmember Anita Bonds agrees with him. She and fellow councilmember Robert White (who was then the Democratic nominee for an at-large seat on the council and has since been appointed as councilmember) both spoke during a summer rally at the Nicholson Street property about the problems rent control faces.

"We have to draw attention to these situations," said Bonds. "So often on the council all I get to do is hear. Today I get to see."

Councilmember Bonds has also gotten to do some writing. Last year she introduced the Rent Control Hardship Petition Limitation Amendment Act of 2015, a bill that would limit the amount rent can go up as a result of hardship petitions to five percent, which is the regional average.

Bonds's bill is currently before the council and needs to be voted on before the end of the year, when proposed bills that haven't had a vote will slip away or need to be reintroduced next year.

Other rent control bills have recently come before the DC Council as well.

For their own sake and for the sake of their fellow tenants, the residents at 1320 Nicholson Street hope that sometime soon, the council gets to do some voting.


Rent control, explained

The most straightforward way to make sure a family can afford housing is to limit the amount that its rent can rise each year. Although there are a few different ways to do this, they all fall under the umbrella of "rent control."

Photo by Bill Holmes on Flickr.

Rent control measures are controversial. Advocates argue that rent control makes apartments affordable for tenants in rent-controlled units, while opponents claim that it actually makes other apartments in the city more expensive.

In this explainer, I focus on rent control measures in the District and the debates about the effectiveness of these policies.

Rent control creates affordable housing by limiting the amount that private landlords can increase the rent each year.

Typically, these annual rent increases are set by an independent government board or agency. They are often pegged to annual cost-of-living adjustments.

In the District, rents in rent-controlled apartments can increase by the Consumer Price Index—a measure of how much the price of a basket of consumer goods increases over time—plus two percent. However, rental increases cannot exceed 10 percent annually.

For tenants who are elderly or disabled, the maximum increase is the CPI alone. Rents for these tenants cannot increase by more than five percent.

With special approval from the Rental Accommodations Division (RAD) of the DC Department of Housing and Community Development (DHCD), landlords are permitted to make larger increases to rent-controlled units. These increases are typically approved only to compensate for major improvements or upgrades to a building.

When a rent-controlled apartment becomes vacant, landlords are permitted to raise the rent beyond the rent control limit. Before renting to the next tenant, they can raise the rent either 10 percent or to a level comparable for similar units. However, landlords in the District cannot increase the rent to more than 30 percent of the rent charged to the previous tenant.

In Washington, DC, nearly 80,000 apartments are rent controlled.

These rent controlled apartments are typically in older apartment buildings with at least five units.

There are many other rental apartments in the city that are not subject to rent control. For example, buildings built after 1975 are exempt from rent controls. This means that newly constructed buildings throughout the city are not subject to these regulations.

Apartments owned by landlords who own fewer than five units are also exempt from rent control measures.

Several years ago, a study by the Urban Institute estimated that there were 79,145 rent-controlled apartments in 4,818 buildings in the city.

Proponents of these policies argue that rent control is a simple, straight-forward way to keep housing affordable for families in rent-controlled buildings.

Rent control policies ensure that rents do not skyrocket from year-to-year. Like homeowners paying a fixed-rate mortgage, renters living in a rent-controlled apartment can predictably know their rental costs over the long term.

Photo by Kheel Center on Flickr.

Similarly, these measures help to ensure that rents do not rise more quickly than incomes. By pegging rent increases to cost-of-living adjustments, the share of income paid by tenants should remain relatively steady over time.

This addresses concerns about housing cost burdens, where renters pay an excessive share of their income toward rent.

Finally, rent control regulations help to de-commodify housing by taking it out of the market processes.

Tenant advocates note that housing is increasingly used as a way for speculators and developers to earn a profit. By taking housing off the market, rent control measures can ensure that the goal of housing remains the provision of decent, affordable shelter for individuals, rather than simply investment opportunities for landlords.

To this end, many housing activists argue that housing should be a right, not a commodity.

However, opponents of rent control regulations argue that these programs make the rest of the housing market more expensive.

In fast-growing cities like DC, the demand for housing is outpacing the supply. New housing construction is limited by the fixed boundaries of the city, various zoning regulations and the restrictions imposed by the Height Act.

Because rent control takes a large share of units off the market, people searching for apartments have fewer apartments to choose from. With the supply of housing more restricted as the demand for housing grows, prices rise faster than they otherwise would.

Photo by Ted Eytan on Flickr.

Critics also contend that rent regulations impede the natural filtering of households from one rental unit to another. We would expect households to move into more expensive—and higher quality—units as their incomes increase. However, households in rent-controlled apartments may be disinclined to upgrade their apartment, even as their incomes increase, because their rental payments are capped.

As a result, apartments in rent-controlled buildings may not become available to low-income families or people at the bottom of the housing ladder.

Opponents also contend that rent controls do not create long-term affordability because landlords can return units to market rents once they become vacant. Although rent control programs keep housing affordable for a specific tenant in a specific unit, the landlord can substantially increase the rent for the next tenant.

Finally, some cities—like Berlin—are experimenting with citywide rent controls. These policies cap rents for all apartments in the city rather than just some of them (which is what happens in DC). Critics worry that citywide rent controls will halt development because developers will see fewer opportunities to earn a profit from building new apartments.

Rent control policies remain controversial. Although there are many ways to limit annual rental increases, the District has a system that caps rent only for a portion of apartments. While these policies help to keep rents affordable for households living in rent-controlled buildings, they also risk driving rents up on other units throughout the city.


Takoma Park progressives are for progress

Tim Male, a City Councilmember in Takoma Park, Maryland, sent us this response to Dan Reed's recent article, "Sometimes, it's okay for progressives to embrace progress."

Dan Reed wrote recently about the link between development and progressiveness in and around the area of Takoma Park, but the narrow coverage missed the real story of what is going on.

Takoma-Langley Crossroads, at the edge of Takoma Park. Photo by thisisbossi on Flickr.

Its true that City residents worked to oppose a proposed development that would have eliminated green space at the Takoma Metro in favor of townhouses with two car garages and less bicycle and bus access. Somehow that didn't sound like smart or progressive growth to us.

However, at the same time, development plans on nearby previously developed but underused sites have been moving forward near the Metro.

Elsewhere, the City of Takoma Park has been working to facilitate mixed commercial and residential space along the University and New Hampshire Avenue corridors to make more housing and affordable housing available on mass transit and future Purple line routes. These are developments that take advantage of underutilized commercial and retail space to build new capacity and energy into an area—and new housing.

In both cases, the City is supporting more density where it makes sense. In fact, if you actually watch the video about Melbourne, Australia's urban development plans that Alex Steffen refers to, they did precisely what Takoma Park has been promoting—Melbourne avoided developing on any green space or historic areas and reused vacant commercial and retail to get more housing density.

And in reference to the claims of Takoma Park pushing poor people out, we have great data from the Community Indicators Project that shows just the opposite. We have a higher proportion of low and moderate income families than the rest of Montgomery County—34 percent of our households are low income compared to 19 percent for the County and the average rent for a vacant unit in Takoma Park was more than $400/month cheaper than the County.

Part of this is because since 1980, the City has had a rent stabilization policy in place that has been an effective way to keep rents down and not without sacrifice from other residents who end up paying a higher property tax burden.

The point is, not all development is progressive and if you look a little deeper, you will see a lot more evidence that Takoma Park knows how to balance quality of life, diversity and development far better than Mr. Reed suggests.


Vince Gray talks IZ, New Communities, and rent control

At the recent blogger roundtable, Mayoral candidate Vince Gray talked about his goal to unite residents in "One City."

Photo by Geoff Hatchard.

He noted that while DC is currently "very divided by geography, age, gender, and race," ultimately "people have got to feel like there's a place for them." While education, economic development, and workforce education are pieces of this puzzle, without suitable and ample housing for all, we will continue to struggle as a divided city.

Gray noted that he pushed for inclusionary zoning from the start of the two-and-a-half year struggle to get the regulation on the books, working through one emergency legislation after another while the Fenty administration delayed implementation. Lamenting the loss of potentially hundreds of affordable housing units during the hold-up, Gray says that if elected mayor, he will "aggressively implement" IZ.

Another housing issue we discussed was rent control. Under current legislation, which Gray co-sponsored, rent control is up for re-authorization every five years. Gray promised that, as mayor, he would work to make rent control permanent, though he acknowledged it could potentially be challenged as unconstitutional.

Avoiding displacement is perhaps one of the most daunting challenges to housing equity. Under federal programs like HOPE VI, new mixed-income, and sometimes multi-use, developments are built with the intention of providing homes for both current and new residents of the community. A hiccup comes when low-income residents "temporarily" move to make room for new construction.

Under the New Communities Initiativeestablished at the end of Anthony Williams' administration—Barry Farm (Ward 8), Lincoln Heights/Richardson Dwellings (Ward 7), Northwest One (Ward 6) and Park Morton (Ward 1) are to "transform [from] highly concentrated low-income neighborhoods into healthy mixed-income neighborhoods." Perhaps the most important component of this initiative is the guiding principle of "build first" which "calls for new housing on publicly-controlled lands to be built prior to the demolition of existing distressed housing to minimize displacement."

When asked how best to retain current residents while improving housing, education, and economic opportunities, Gray pointed immediately to New Communities. While not a new initiative, it is one we seem to have lost track of as the economic boom turned into a bust. The reality is that while most of us are facing challenges in the current climate, many residents in our city who were struggling at the peak are in further distress now.

Gray, at least on the campaign trail, is able to recognize this gulf that continues to divide DC, and he seems to be genuinely interested to continue to push for solutions that have been staring us in the face for years now. Issues like inclusionary zoning, rent control, and New Communities are all ways the city can help bridge that gulf—they just need to truly be championed in order to work. It will take serious sustained effort from all the city's leadership to accomplish these goals.

Cross-posted at The District Curmudgeon.

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