DC Rents Out of Control, Despite Rent Control

The District of Columbia’s rent control law is stronger than just about any other in the country, I’m told. But it has loopholes that leave lower-income residents vulnerable to rate spikes — and perhaps homelessness.

We generally see “loophole” used to refer to provisions in the tax code that allow corporations and/or individuals to pay far less than they’d otherwise owe — or nothing at all. Everybody who cares to knows about these.

Not so for the loopholes in the rent control law. But some nonprofits, including several that provide free legal services to low-income residents have discovered them. And they’ve developed an agenda to reform the law.

A fact sheet distributed at a recent briefing I attended listed well over a dozen changes. Far more than I can take on here. So I’ll confine myself to a relative few fixable problems that have broad impacts.

Caps on Rent Increases

First off — and to me, the biggest surprise — the rent control law doesn’t apply to units built after the original version of the law was passed in 1975 or to units vacant then. The law exempts other units too, but this seems to me the biggest loophole, if one can call it that.

For units not exempt, landlords may increase rents for most tenants by the percent increase in the Washington metro area consumer price index the Social Security Administration uses, plus an additional 2%.

No extra 2% for elderly and disabled tenants whose incomes don’t exceed $40,000 a year. And no increase greater than 5% when the CPI rises by more. They’ve got to file a form to get this relative protection, however, which means they need to know this much of the law.

When a unit becomes vacant, the cap, whatever it be, increases to 10% or to what a “comparable unit” rents for, provided the increase isn’t greater than 30%. Comparable units are defined by physical characteristics, e.g., overall size, floor plan, equipment, condition.

Lots of units have come into the market in the last 30 years, of course. And lots rent for goodly sums, especially now that more high-earners have chosen to live in the city.

So landlords have an obvious incentive to choose tenants unlikely to stay for more than a couple of years, if that, e.g., students, employees on short-term assignments away from their home base.

Case-by-Case Exemptions

Just because tenants live in covered units doesn’t mean they won’t get hit with large increases. Landlords can petition for exemptions from the caps.

They may, for example, claim that they’ll suffer “hardship” if they can’t collect more than the allowable rent. They don’t have to allege a potential loss — only that they won’t earn a 12% return on what they’ve invested in the property.

They’ve sought rent increases upwards of 100%, the DC Legal Aid Society has testified. And they can get them before the District has audited their paperwork and made a final decision on their claims.

Meanwhile, tenants are likely to leave or to fall behind in their rent, giving the landlord grounds to evict them. Cleaning out the building has advantages I’ve already mentioned.

Landlords have several other options for getting permission to charge far more than the law would ordinarily allow. They can, for example, petition for an annual 20%  increase to cover the costs of capital improvements, i.e., upgrades or renovations beyond ordinary repairs.

Capital improvement increases are supposed to last only until the landlord recovers the costs. Another option allows for a permanent increase when the costs of a “substantial rehabilitation” are considerably higher than the property’s assessed value. The increase in this case may be as high as 125%.

Landlords don’t necessarily rely on the success of these petitions, however. They can instead used the prospects of rent increases to get tenants signed onto voluntary agreements. These protect tenants from all but the usual rent increases, provided they agree to much higher rents for future tenants.

In one reportedly popular scenario, landlords then offer tenants the option of a buyout — some cash to clear out of their units. Every unit freed up becomes subject to the large increase, followed by the usual ongoing CPI-based increases.

Affordable Housing Losses Offset Gains

Even this over-simplified wade into the weeds shows one reason the District lost nearly half its lower-cost rental units during a recent 10-year period. Only about a fifth were still affordable for households with two full-time minimum wage workers.

Mayor Bowser has committed to substantial investments in new affordable housing construction and renovations to preserve some of what remains. Her administrators have other tools in the box as well, e.g., tax credits, conditions now attached to sales of publicly-owned lands.

But what’s built over here disappears over there — and apparently then some.

When the DC Council passed the rent control law, it intended to “protect low and moderate-income tenants from the erosion of their income from increased housing costs.”

What with one thing and another, the law covers, at most, roughly half the rent units in the city, according to somewhat dated Urban Institute estimates. That doesn’t mean all the tenants are protected, as we can see.

The Council now has two bills pending that would make the law work somewhat better. One would update and otherwise expand its protections for elderly tenants and those with disabilities. The other would partly, but only partly close the hardship petition loophole.

So there’s a lot more to do. The Latino Economic Development Center has a petition District residents can sign to support solutions the coalition I mentioned is advocating.

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