On November 13, the DC Council gave preliminary approval to a bill that’s intended to help tenants in rent-controlled units avoid larger-than-expected price increases by curbing landlords’ use of concessions.
If you aren’t familiar with rent concessions, I described them last year:
Let's say a rent-controlled apartment is registered with the DC Department of Housing and Community Development as costing a certain amount per month. The landlord may advertise it and rent it out at a lower amount. Then, when it's time for the annual rent increase that's allowed under the rent control law, the landlord may calculate the new rent as a percentage of the higher amount registered with DHCD, rather than as a percentage of the lower amount that the tenant was actually paying.
The legislation would enshrine a ruling by the Rental Housing Commission into law. The commission hears appeals of disputes raised by tenants who say a landlord has raised rent higher than what’s allowed under the city’s rent control law. In January, the commission determined that a tenant’s rent increase should be based on “the amount actually demanded, received, or charged” by a landlord.
The bill builds on the commission’s decision by defining the “rent charged” that a landlord may use as the basis for a rent adjustment as “the entire amount” that a tenant is required to pay for a rental. This means whatever someone actually pays is the amount that’s used to calculate a rent increase.
That’s problematic because it eliminates a tool available to landlords that helps them adapt to market fluctuations, industry representatives told the DC Council’s housing committee during a hearing on the bill on October 29.
However, the bill only applies to units that are covered by the city’s rent control law. In general, rent control covers any rental property built before 1975 owned by a landlord who has five or more rental units in the city. Publicly subsidized units aren’t covered, and there are a few other exemptions.
Councilmember Anita Bonds (D-At large) is the bill’s sponsor. When she introduced it in October, she gave an example of a sharp increase tenants may experience under the current system. Bonds described a situation where the landlord says the unit costs $2,500 and gives the tenant a $500 concession, so the tenant pays $2,000.
Applying the current year’s rent control cap of 3.4% for most tenants, Bonds said a landlord in this scenario might notify the tenant that the rent is going up to $2,585, when the resident expected it to rise no higher than $2,068.
That’s effectively a 29.25% rent increase. The Rent Charged Definition Clarification Amendment Act of 2018 would prohibit such a hike.
Concessions help landlords offer competitive rents and respond to market fluctuations, an industry group says
Arianna Royster testified at the bill’s hearing on behalf of the Apartment and Office Building Association of Metropolitan Washington. She’s executive vice president of Borger Management, which manages more than 4,000 rental units. AOBA members own and operate more than 74,000 multi-family apartment units in the District.
Royster says concessions give landlords flexibility to respond to the seasonal nature of rental housing. Landlords may want to offer them during winter months, when there are fewer move ins and outs. They also let landlords offer lower prices so they can compete, while preserving the ability to raise rent when the market fluctuates, she said.
“For some buildings, recent market forces have pressured some housing providers to lower rents, which they are free to do,” Royster said. “If the supply and demand forces reverse course in the future, housing providers would expect to be able to increase the rents in a free market environment.”
And the legislation doesn’t address different types of discounts a landlord may offer, Royster said. For example, it isn’t clear how the bill would affect a landlord offering a markdown on the first month’s rent, followed by the regular price in subsequent months, she said.
Harry Gural, president of Van Ness South Tenants Association, said part of the problem is that a tenant’s claims that a landlord isn’t following the rent control law is adjudicated in DC’s Office of Administrative Hearings. OAH resembles a court, but it doesn’t allow tenants to band together to litigate a claim as a class action. Attorneys are unlikely to agree to represent a single tenant at OAH because it wouldn’t earn much in legal fees, leading to lopsided legal matches, Gural said. “The tenants go against corporate attorneys that have all the power,” he said.
Van Ness South represents residents of the apartment building at 3003 Van Ness Street, which is the the property that is the subject of the Rental Housing Commission ruling that inspired Bonds’ bill. It is also the subject of a separate ongoing lawsuit Attorney General Karl Racine (D) filed against the landlord, Equity Residential Management, LLC.
“Our lawsuit takes the position that the landlords have not been transparent in really identifying what the rent is and that a reasonable tenant assumes that the rent is the amount of money that they pay a month, Racine said on WAMU-FM’s “Politics Hour” on November 16. He charges in the consumer protection complaint that Equity misleads tenants about the cost of rent.
Equity didn’t respond to my request for comment.
The bill has cleared some Council votes, and the Bowser administration backs it
The bill won approval from the Committee on Housing and Neighborhood Revitalization during a November 7 meeting. There was no discussion of the measure before Chairperson Bonds and Councilmembers Robert C. White, Jr. (D-At large) and Trayon White, Sr. voted yes. Committee members Elissa Silverman (I-At large) and Brianne K. Nadeau (D-Ward 2) were absent.
The legislation received the full council’s approval November 13 as part of a batch of bills and resolutions on the Council’s consent agenda, which signals that lawmakers think it isn’t controversial. Other housing legislation approved on the consent agenda include a bill to make it easier for condominium owners to split a unit into multiple properties and a bill to ban smoking in a rental building's common areas.
The rent concession legislation needs a second vote before it can become law, per legislative requirements. A final vote is expected at the Council’s December 4 meeting, and if it’s approved, it will head to Mayor Muriel Bowser (D) for her signature or veto.
The Bowser administration supports the legislation, Polly Donaldson, director of the DC Department of Housing and Community Development, said at the bill’s hearing.