D.C. lawmakers, landlords split over rent-control measures

Lawmakers and landlords in the District are at odds over housing legislation that some say would empower low-income tenants and others say would punish property owners already operating at low profit margins due to rent control.

A number of bills have been introduced over the last month that would reduce the amount a landlord can raise rent each year for 80,000 rent-controlled apartments and cap landlord hardship requests for rent-controlled buildings that aren’t making a 12 percent return on investment.

The District’s rent-control laws were updated most recently in 2006.

Housing industry leaders in the District have said the new regulations not only would cripple landlords who rely on rent for their livelihood, but also would damage a dwindling supply of affordable housing in the city.

The two measures with the biggest potential impact would cut financial protections for landlords who own rent-controlled buildings.

Currently, apartment landlords can raise the rent linked to the Consumer Price Index plus an additional 2 percent. The D.C. Council is considering legislation that would eliminate the 2 percent add-on and link rent increases only to the index.

The current Consumer Price Index, which measures changes in prices for basic goods and services, is zero. If the bill were enacted, property owners of rent-controlled buildings would not be able to raise the rent.

Another bill would cap a landlord’s hardship petitions. Under current law, landlords must ask the city for permission to raise rent in rent-controlled buildings beyond the standard limit if they are making less than a 12 percent return on investment.

Before 2014, landlords could ask to raise the rent by any amount they felt necessary, but emergency legislation passed by the council that year capped the increase at 5 percent. The bill before the council would make that limit permanent.

Kirsten Williams, vice president of government affairs for the Apartment and Office Building Association of Metropolitan Washington (AOBA), said the cumulative effect of those bills and other legislation puts an incredible strain on owners of rent-controlled buildings.

“A balanced approach to preserving rental homes is critical to continued investment in existing rental housing,” says an Oct. 18 joint letter to the council from AOBA and the D.C. Building Industry Association. “Piecemeal changes like those proposed in these bills are already creating uncertainty among investors willing to provide critically important financing for improvements to an aging housing stock.”

Without those investments, owners of rent-controlled properties, many of which are upwards of 70 years old, won’t be able to keep the buildings safe and habitable for residents, the groups said.

“If they cannot show to their lenders that they have the ability to recover investments, then they won’t get the money to reinvest in those probably,” Ms. Williams said. “The reality is that these are not new properties. They inquire not only reinvestment, but also continued investment. And it’s not hundreds of dollars, these are major upgrades having to be put in the units.”

But housing advocates, including council member Anita Bonds, who introduced the bills and chairs the Housing and Community Development Committee, say the legislation will protect the city’s many rent-burdened, low-income residents.

“Over the past several years, the cost of housing in the District has skyrocketed, but incomes have not kept up. This trend cannot continue if the District is to remain diverse,” Ms. Bonds, at-large Democrat, said at a public hearing on the bills late last week. “It is important not only to me but for the economic well being and growth of our city to ensure that those currently residing in the District who want to stay here are able to afford to do so.”

Advocates point to a 2015 report by Harvard’s Joint Center for Housing Studies that says nearly half of D.C. residents are considered rent-burdened, meaning they spend more than 30 percent of their income on housing. And more than 20 percent are severely rent-burdened — spending more than 50 percent of their income on rent.

The cap on hardship petitions also would put a stop to fraudulent claims from those who have profits margins higher than the 12 percent threshold for filing a petition. A D.C. Legal Aid Society report shows that of the 95 hardship petitions filed between 2007 and 2015, about 36 percent of those owners reported profit margins of more than 15 percent.

Scott Bruton, housing policy director for the Coalition for Nonprofit Housing and Economic Development said eliminating the extra 2 percent rent increase above CPI for rent-controlled buildings will work immediately to improve housing affordability in the city.

“With the extremely high cost of housing in the District, allowing the rents to go up 2 percent more each year than the average increase in wages guarantees that rent-controlled apartments will eventually become unaffordable for the tenants residing in them,” Mr. Bruton said.

Interim council member Robert White said the rent and hardship caps for building owners could keep the city from pushing out longstanding residents who want to stay in the District, but can’t afford to without rent-control.

“There is no question that city is becoming completely unaffordable and exclusive. We are excluding people who have lived here for many generations,” said Mr. White, at-large Democrat. “What we may ultimately be left with is a situation where we have priced out the people who were here to stay, and then the people who are going to move here have decided to go somewhere else.”

Mr. White did concede that the city also needs to make sure building owners have the tools they need to keep rent-controlled buildings from going into disrepair.

“What we’re looking to find is that balance,” he said.

But AOBA and its members think rushing a package of major rent-control reforms could be bad for everyone, even resulting in the degradation of affordable housing for the District’s low-income residents.

“Fast tracking this process could produce severe unintended consequences that could also hurt tenants,” Ms. Williams said.