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Rent ceilings threaten roofs

D.C. rent control law offers little relief for many tenants

(Published June 17, 2002)

By BENJAMIN DUNCAN

Staff Writer

Vincent Cremona moved from the third floor to the second floor of The Envoy apartment building in Foggy Bottom in 1988 after his first heart attack.

Weakened after bypass surgery, he figured he would never be able to endure the physical challenge of walking up two flights of stairs on a daily basis. So he contacted his landlord and arranged to give up his comfortable two-bedroom apartment for a small one-room efficiency – a move he said he hoped would spare his heart and save him some money.

He signed a new lease for the efficiency at $705 a month – $90 cheaper than his previous apartment.

Cremona understood that his rent control agreement would be nullified by switching apartments in the same building, but said he was sick, desperate and didn’t understand that the change would ultimately leave him vulnerable to larger-than-average rent increases. Fourteen years and a second heart attack later, he said he pays $872 a month for his efficiency, nearly the same amount he would be paying for his two-bedroom apartment, had he stayed put.

"I couldn’t believe it," Cremona said. "I thought: How could this be?"

His story is not unlike the experiences of many D.C. tenants who say they’ve been hurt by complex rental laws they don’t fully understand and rent increases they can’t afford.

These increases are most often based on an apartment’s rent ceiling, the maximum amount that can be charged for a given unit. Each time an apartment is vacated, a landlord can raise the rent ceiling by 12 percent or to the ceiling of the most expensive comparable unit in the building – an apartment of similar size.

Thus, apartments with high turnover rates can build up exorbitant rent ceilings. Then, the apartments with high rent ceilings can be used to raise the ceilings for vacant units in the same building, according to the "highest comparable" law. These high rent ceilings, in turn, can lead to unreasonably large rent increases for tenants.

"These increases can take effect even though you think you have a lease and think your rent is fixed," said David Conn, one of the principal authors of a recent legislative proposal drafted by the Tenants’ Task Force for Rent Control.

Conn said most leases don’t specify the rent ceiling, which can fool tenants into thinking that their rent can’t be increased beyond the amount they signed for. He said tenants should, but often don’t, ensure that their leases note the rent ceiling and how much the rent can be raised accordingly.

The proposal aims to amend the D.C. Rental Housing Act of 1985 in 17 areas – with particular emphasis placed on language concerning rent ceilings, rent increases and information disclosure.

Under the Rental Housing Act, a vacant apartment with a rent ceiling of $1,000 could become one with a ceiling of $5,000 if there was a comparable unit with that ceiling in the building. Many tenants say they are not told of the rent ceiling when they sign their lease, or don’t understand the significance of such a figure.

It’s a lesson Richard Bartel learned the hard way. When Bartel moved into the Quebec House in Northwest Washington five years ago, his monthly rent was slightly more than $500 and the rent ceiling was $1,000. On the day he signed his lease, his landlord gave him another agreement to sign, indicating that the new rent ceiling would be $6,800. Bartel said he assumed the ceiling was an annual figure.

"It was so absurd, it didn’t even cross my mind that it was per month," he said.

Although it is unlikely that his actual rent would ever come close to the rent ceiling, Bartel said he was unnerved by the possibility that his landlord could drop a rent increase bomb at any time.

"In theory, they could give me a 30-day notice and raise my rent to $6,800 and I would have no recourse," he said.

He also said that, starting two years ago, his rent was increased by $50 every six months – resulting in his current rent of $797 a month.

The Task Force proposal would eliminate the "highest comparable" provision that has contributed to astronomical rent ceilings. And it would restrict ceiling increases for a new tenant based on the number of years the previous tenant resided in an apartment. If a unit’s previous tenant had stayed for less than five years, a ceiling increase for the new tenant would be capped at 12 percent. Apartments vacated by long-term tenants would be eligible for higher ceiling increases, with a maximum allowable jump of 30 percent.

Tenant advocate Ken Rothschild said that although massive rent ceilings don’t often become the actual rent, he worries that if the market were to tighten, landlords across the city would seize the opportunity to bridge the gap between rents charged and high rent ceilings.

"When the next tightening of the market happens, all of the people with high ceilings are going to become aware of this problem," Rothschild said.

To mitigate those types of problems, Conn’s proposal would also limit rent increases according to the Consumer Price Index for Urban Wage Earners, which has often been no larger than 3 percent annually. If the legislation were passed, rent increases would be limited to 2 percent above the CPI-W and no more than $50 every six months. Conn said he knows tenants in the District who have had their rents raised by hundreds of dollars per month at one time.

Average rental prices in the District have jumped significantly in the past decade. The median rent in 1990 was $441, according to "Indices: A Statistical Index to District of Columbia Services," published by the D.C. government. By contrast, the cheapest apartments advertised on June 13 in The Washington Post cost around $450, for one-bedroom units in Southeast and Northeast Washington. The classifieds showed one-bedroom apartments in Northwest Washington running for as little as $550 and as high as $1,425.

Part of the problem with rent control laws is the fact that renters are often ill-informed by landlords about crucial rent stipulations, according to Betty Sellers, who worked closely with Conn on the Tenant Task Force proposal.

"Most of the time the tenant isn’t even told that the rent ceiling exists," Sellers said.

D.C. City Councilwoman Kathy Patterson, D-Ward 3, recently introduced one section of the proposal, the Tenants’ Rights to Information Act of 2002. The bill would require landlords to explain, orally and in writing, an apartment’s rent ceiling and the timetable for possible rent increases.

While city council members such as Adrian Fenty, D-Ward 4, and Phil Mendelson, D-At Large, have said they support many of the changes proposed by the Tenant Task Force, it appears unlikely that the bulk of the legislation will be considered before next year. Councilwoman Sharon Ambrose, D-Ward 6, who chairs the Committee on Consumer and Regulatory Affairs, said recently that the committee was backlogged with other bills and would be unable to give serious consideration to new rent control proposals any time soon. Given that fact, Mendelson said it would serve little purpose to push the issue now.

"What is the point of introducing something in June of 2002 when the chairwoman on this issue has said that it’s not going anywhere?" he said.

Conn’s proposal has received stinging criticism from groups representing landlords and building owners, as well as from other tenant advocacy organizations that have different ideas about rent control reform.

Jim McGrath, a spokesman for the D.C. Tenants’ Advocacy Coalition, said that any serious rent control changes would have to include rollbacks of unreasonably high rent ceilings and actual rent charges that have arisen during the last few years – something he said Conn’s proposal fails to address.

"It doesn’t do any good to say ‘We’ll put a ceiling on this thing here,’ when the ceilings have already moved to Pike’s Peak levels," McGrath said.

He said that his group wants to force landlords to eliminate unreasonably high ceilings that stem from recent increases.

While McGrath is pushing for more aggressive reform, members of the Apartment Owners’ and Builders’ Association are fighting to stop it in its tracks. Association Vice President Sean Pharr said that landlords should be able to play the market like investors in any other business.

"At some point people need to understand that rental housing is an investment vehicle," he said. "Housing providers are entitled to a certain rate of return like anybody else."

D.C. rental law states that landlords should be guaranteed a minimum 12 percent annual return based on the appraised value of a building. If they are unable to do that, they can file a hardship petition with the city, requesting that they be allowed to raise rents in order to make up the difference.

Pharr said that while most responsible landlords understand the value of treating their tenants well, the onus shouldn’t be on building owners or the city council to look after the financial interests of renters.

"How paternalistic do we expect the government to be?" he said. "I suspect that anyone paying $1,000 a month has the presence of mind to inquire about what their future is going to be."

One thing is certain: The future for some longtime D.C. tenants such as Vincent Cremona looks far different today than it did several years ago. Cremona said he is disinclined to stay in his cramped efficiency for the price he could be paying for his old two-bedroom, had he never moved and given up his rent controlled unit.

As a retiree on a fixed income, he said he couldn’t afford to move back into a bigger place in the building with an enormous rent ceiling. He said he thinks that his landlord consistently raised the price of his efficiency for one reason: to force him out and bring in a tenant who can pay more rent. Representatives from Borger Management Co., which owns The Envoy, were unavailable for comment.

"From a financial point of view, I see what they’re trying to do – get more money," Cremona said. "But from a retiree’s point of view – they’re living on a fixed income – what are they supposed to do? Go back to work?"

Copyright 2002, The Common Denominator