Raising Rent on Rent-Controlled Properties
Learn how to manuever around rent control.
The Rent Stabilization Ordinance (RSO) was designed to protect tenants from excessive rent increases while allowing landlords a reasonable return on their investments. The rent for a rental unit may be increased without the permission of the Rent Adjustment Commission (RAC) or the Rent Stabilization Division under the following circumstances by:
- Three percent (3%) to eight percent (8%) every 12 months in accordance with the annual rent increase percentage, which is based on the Consumer Price Index (CPI) average for the twelve (12) month period ending September 30 of each year. The annual adjustment may be applied once each year. The 3% to 8% annual increase is NOT cumulative or retro- active.
- An increase of 3% to 8% of the security deposit is allowed at the same time and by the same percentage as the annual rent increase.
- An additional 1% for gas and 1% for electric service into the dwelling unit when service is provided by the landlord.
- Nineteen percent (19%), plus 2% if the landlord provides the gas and electricity, for a rental unit which has not had a rent increase since May 31, 1976.
- Thirteen percent (13%), plus 2% if the landlord provides the gas and electricity, for a rental unit which has not had a rent increase since May 31, 1977.
- Ten percent (10%) for each additional tenant exceeding the number of tenants allowed by the original rental agreement. Owners must notify the tenant/s of the rent increase within 60 days of having obtained actual or constructive knowledge of the new tenant. A coresponding reduction in rent is required when the additional tenant vacates the unit. Security deposits may also be increased by 10% for the additional tenant/s.
- A landlord may collect a monthly surcharge of $3.61 from the tenant to recover the paid Systematic Code Enforcement fee.
- A $12.25 surcharge may only be collected in the month of June with advance notice to recover half of the $24.51 paid registration fee. Landlords are required to serve tenants with a written 30-day notice for rent increases that are less than 10% of the tenant’s rent, or a 60-day notice for rent increases over 10% of the tenant’s rent within a 12month period.
Rent Adjustments That Require Approval
The rent for a rental unit may also be increased through the proper submission to and approval of an appropriate cost recovery application to the Rent Stabilization Division for:
- Capital Improvement – Additions or replacements to the rental unit or to the property’s common areas, provided that the improvement has a useful life of five years or more.
- Rehabilitation Work — Work or repairs done by the landlord due to changes in the housing code since January 1, 1979, or to repair damage resulting from fire, earthquake or other natural disasters.
- Just and Reasonable Rent Increase — Based on a financial review of the Net Operating Income (NOI) for a property when the automatic adjustment prescribed by the RSO does not provide a just and reasonable return on the rental unit or units. (Refer to the Just and Reasonable Regulations issued by the Rent Adjustment Commission.)
- Primary Renovation — Upgrades to major building systems which require a permit such as, but not limited to, central heating/air conditioning, water and sewage piping, wiring inside walls, elevators, or reinforcement of the building structure. It also includes work that is undertaken to abate hazardous materials such as lead-based paint or asbestos. Requires a Tenant Habitability Plan (THP) accepted by the Department in advance of commencement of work.
Rent Level After A Vacancy
The allowable rent level after a vacancy depends on the reason for the vacancy. The RSO provides that the rent may be raised to any amount upon re-rental if the vacancy resulted because:
- The tenant voluntarily vacated the unit.
- The tenant was evicted for non-payment of legal rent.
- The tenant was evicted for violating the terms of the rental agreement and failing to cure the violation.