Annual Allowable Rent Increase
March 1, 2016 – February 28, 2017 = 1.6%
In San Francisco, most tenants are covered by rent control. This means rents can only be raised by certain amounts per year and the tenant can only be evicted for “just causes.” In addition, some rental units have restrictions on how much the landlord can charge the new tenant due to previous evictions. Tenants who do not have rent control can have their rent increased by any amount at any time with a proper written notice.
Rent control is administered by the San Francisco Rent Board. The Rent Board website has extensive information and you can download the San Francisco Rent Ordinance and Rent Board Rules and Regulations.
Major Components of Rent Control
- Landlords can only raise a tenant’s rent by a set amount each year (tied to inflation). Landlords can also petition for other increases. Notably, capital improvements can be passed through to the tenant for a maximum increase of 10% or increased operating and maintenance costs for a maximum increase of 7%, but these rent increases must be documented and approved by the Rent Board before they can be imposed.
- Tenants can petition the Rent Board to decrease their rent if the landlord has failed to provide agreed upon or legally required services—e.g., the landlord takes away storage space, parking, washer/dryer, etc. or the landlord fails to maintain the premises as safe and habitable (e.g. the apartment has uncorrected housing code violations).
- Tenants can only be evicted for one of 16 “just causes.” Most of these deal with allegations the tenant can dispute (e.g., tenant is violating the lease) but some are “no-fault” like owner move in or an Ellis Act eviction. See the Evictions section for more information on evictions.
Rent Control Coverage
San Francisco’s rent control law covers most rental property in San Francisco. If you live in San Francisco, you are usually covered by rent control. The major exceptions are:
- You live in a rental unit with a certificate of occupancy after June 13, 1979, with a few exceptions. This “new construction exemption” is the biggest exemption in San Francisco. The Assessor’s database, is where you can usually find out the date your building was constructed which will give the approximate date for the certificate of occupancy. Illegal units do not have a certificate of occupancy, so are covered under the Rent Ordinance unless exempt for other reasons. Some in-law units in San Francisco Supervisor Districts 3 and 8 and still covered under rent control despite having a certificate of occupancy issued after June 13, 1979. (SF Administrative Code Section 37.2(r)(4)(D))
- You live in subsidized housing, such as HUD housing projects. Tenants with tenant-based assistance such as Section 8 vouchers are still covered by the eviction protection of the Rent Ordinance, and sometimes covered by the rent control of the Rent Ordinance. Make an appointment with the Housing Rights Committee of San Francisco for assistance.
- You live in a residential hotel and have less than 32 days of continuous tenancy.
- You live in a dormitory, hospital, monastery, nunnery, etc.
- You live in a single family home (see below).
Single Family Homes Including Condos Have Limited Rent Control Coverage
You do not have full rent control protection if you live in a single family home (a single family home with an illegal in-law unit counts as a 2-unit building) or a condominium and you (and your roommates) moved in on or after January 1, 1996. While these units do not usually have limits on rent increases, they do have “just cause” eviction protection (unless otherwise exempt for reasons such as above), meaning you can only be evicted for one of the just causes.
Exception: If you moved into a single family home which was vacant because the previous tenant was evicted after a 60 or 30 day eviction notice (a no-fault eviction), then you have full rent control protection. (You can find out if there was a previous eviction by going to the Rent Board website or searching for the landlord’s name on the California Superior Court’s website.)
Exception: If you moved into a single family home or condo which had housing code violations that were cited and uncorrected for at least 6 months before the vacancy, then you have full rent control. You can find out the code violation status of your building at the Department of Building Inspection’s website.
Exception: If you live in a condo where the subdivider of the building still owns the condos, you have full rent control protection, unless it is the last unsold unit and the subdivider lived in the unit for at least a year after subdivision.
Commercial Units Used as Residential with the Landlord’s Knowledge Are Not Exempt from Rent Control
Commercial spaces or live/work units in which tenants continue to reside in a nonresidential unit with the knowledge of the landlord are covered by rent control unless exempt for other reasons. Whether the landlord actually knows that people live there and allows the tenants to live there is what counts.
Tenants with rent control can only be given rent increases based on what the law allows. Each year, a landlord can give tenants an annual rent increase, which is based on the Bay Area Consumer Price Index (i.e. inflation). Landlords can also pass on some costs to tenants automatically (without having to petition the Rent Board), including 50% of recently adopted bond measures, increases in PG & E costs (when paid by the landlord), and a portion of the annual “Rent Board Fee” which funds the Rent Board, In addition, landlords can petition for “capital improvement” rent increases and “operating and maintenance” rent increases. If tenants believe they have received an illegal rent increase (now or in the past) you should come in to the SFTU drop-in clinic and you can file a Unlawful Rent Increase petition at the Rent Board to get your rent overpayments refunded and your rent set correctly.
Annual Rent Increases
The annual rent increase can be imposed on or after the tenant’s “anniversary date.” The rent increase cannot be given sooner than 12 months from the last increase, the “anniversary date.” It can be given after, in which case that date becomes the new anniversary date. Annual increases can be “banked” by the landlord and imposed in later years. (For elaboration on this see your Tenants Rights Handbook or come in and talk to a counselor.)
60 Day Notice Required For Rent Increases Higher Than 10%
State law (California Civil Code Section 827) requires a 60 day notice for any rent increases which, alone or cumulatively, raise a tenant’s rent by more than 10% within a 12 month period. This covers both rent controlled and non-rent controlled units.
Capital Improvement Rent Increases
One of the more unjust parts of rent control is the capital improvement passthrough. Capital improvements are improvements for the building, the landlord’s investment, which tenants mostly pay for through a passthrough. Not only can the landlord get the tenants to pay for increasing the value of his or her investment, the landlord can then write the cost of the improvements off in their taxes. That said, here is a brief summary of a complex area (for more information you’ll need the Tenants Rights Handbook or to talk to a counselor at our drop-in clinic. Capital improvements are things like new windows, a new roof, painting of the exterior of the building, landscaping, new appliances (ranging from refrigerators to a new heating system) and other similar improvements to the property which generally are additions or replacements as opposed to repairs. Landlords must complete the work, petition the Rent Board and win approval of the rent increase before the cost can be passed on. Tenants can contest the increases at the hearing on certain grounds, like that the work was never done, or was not necessary, or was done to gentrify the building, but it is difficult to stop such a passthrough in its entirety.
Once the capital improvement has been paid for, then the tenant’s rent reverts to what it was prior to the passthrough (plus any allowable increases in the interim); capital improvement rent increases are not part of your “base rent,” meaning the annual increase percentage calculation does not include the capital improvement passthrough.
Capital Improvement passthrough rent increases differ based on the size of the building:
Tenants in Buildings with 5 or Fewer Units
Tenants in these smaller buildings will have to pay off 100% of the cost of the capital improvement with rent increases of 5% per year until the entire amount is paid off. For example, if the new roof costs $5,000 in a 2 unit building, each tenant has to pay $2,500 and will have their rent increased 5% per year until their share ($2,500) has been paid.
Tenants in Buildings with 6 or More Units
Tenants in these larger buildings (where most large capital improvements rent increases happen) have a choice of either paying for half of the capital improvement (i.e. landlord pays 50%, tenant pays 50%) and then getting annual rent increases of 10% until the capital improvement is paid off or the tenant can choose to pay for 100% of the capital improvement and get annual rent increases of 5% per year, up to maximum of 15% (or the equivalent of 3 years of rent increases). The choice in these larger buildings can be made individually by each tenant and which one is best will depend on factors such as the cost of the capital improvement, what the tenant’s base rent is, and how long the tenant plans on living there.
Operating & Maintenance Passthroughs
Operating and maintenance passthroughs are for increases in the landlord’s cost of operating the property. For the landlord to be able to pass on one of these Operating and Maintenance Passthroughs, the increased landlord expenses must exceed the annual rent increases. In other words, if the landlord’s expenses increased 2% and the annual increase that year is 2.2%, then the landlord would not be eligible for this passthrough. In determining whether or not a landlord can get an Operating and Maintenance Passthrough, the expenses are aggregated, or looked at in total. In other words, an increase in one area (e.g. taxes) may be offset by a decrease in another area (e.g. repairs). If when all is calculated the landlord can get the Operating and Maintenance Passthrough, the passthrough is only the amount over the annual increase. So if the annual increase is 2.2% and the landlord’s expenses go up 3.2%, the landlord could get a 1% Operating and Maintenance Passthrough. The tenant’s rent will not increase by more than an additional 7% beyond the annual allowable increase and the increase becomes part of the base rent. Operating and Maintenance Passthrough increases typically only occur when the landlord has a big increase in one expense area, most commonly a new and higher mortgage.
Tenants who do not pay for PG & E separately (i.e., it’s included in the rent), can have their rent increased when PG & E costs go up. PG & E passthroughs should be part of the Operating and Maintenance Passthrough process but instead became a separate automatic passthrough when rent control was passed in 1979. These, too, are very unfair as tenants already pay for utility increases as part of the annual rent increase, which is based on the Consumer Price Index (CPI). Energy costs are typically the single, biggest component of the CPI and when gas & electricity prices go up or down the annual increases will increase or decrease dramatically. But landlords get to collect twice from tenants and can pass on these costs again via the PG & E passthrough. The Rent Board has lengthy, complicated regulations on how these passthroughs are calculated. Generally, if the landlord is calculating the increase based on the past 2 calendar years, the landlord must file a petition with the Rent Board before passing on the increase to tenants. If, however, the landlord uses an earlier “base year” (as most landlords do), they do not have to file a petition with the Rent Board but must file their calculation worksheet with the Board (and attach a copy to the tenant’s rent increase notice). The “base year” for calculating the increase is 2002 for any tenancies existing as of 12/31/2003 and the year preceding the move-in date for tenancies which began after December 31, 2003. Tenants can file a petition challenging the increase and get a hearing if they disagree with the landlord’s calculations.
Rent Board Fee
The Rent Board is funded by an annual fee assessed on rental units covered by rent control. Landlords can pass on to tenants 50% of the fee. As with the annual rent increase, the Rent Board Fee can be banked. Click here for amounts of the fee. Landlords can deduct the Rent Board fee from security deposit interest or bill tenants directly. Tenants cannot be evicted for nonpayment of the Rent Board fee.
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