It’s not cheap to rent an apartment in Washington, D.C., which is why rent control is important for potential tenants. A rent-controlled unit is intended to keep housing costs low by allowing the local government to limit the amount of money a landlord can charge a tenant to rent the house or apartment. Rent control isn’t permanent, though, and what housing units are rent-controlled are determined by local laws. Here is a look at the history and future of rent control in Washington, D.C.
The History of Rent Control in Washington, D.C.
The D.C. government first instituted rent control in the 1970s in an attempt to address a shortage of affordable housing in the district. Since then, median rents have increased and the number of low-cost apartments has diminished. At one point, Washington had 130,000 rent-controlled units within its borders but since 1985 the number has declined by about 50,000 units. And the remaining 80,000 rentals that are rent-controlled may be disappearing at the end of the year.
The Rental Housing Act of 1985
The Rental Housing Act of 1985 is the reason why D.C. lost more than one-third of its rent-controlled units in the last 35 years. The limits the rent increases a landlord can institute in apartment buildings that were constructed before 1975. It guarantees landlords a 12% rate of return on their investments, but there are exemptions to what qualifies as a rent-controlled unit. Rentals that are exempt include:
- Units that are federally or district-subsidized
- Vacant when the act took effect, July 17, 1985
- Owned by a person (not a corporation) who owns four or fewer rental units in Washington, D.C.
Rent Control Laws in D.C.
Washington D.C.’s rent control laws generally limit rental increases to once per year, based on the increase of the Consumer Price Index (CPI-W). Specifically, the maximum allowable rent increase is 2% more than the CPI-W percentage — not to exceed 10%. For elderly or disabled tenants, the increase is limited to the CPI-W percentage itself, with a cap of 5%.
The one exception to an annual increase is when a rent-controlled unit becomes vacant. In such a case, the landlord can raise the rent charged to the subsequent tenant, with a limit of 10% more than what was charged to the previous tenant, or the landlord can raise the rent to what is charged for a comparable rental unit — but not more than 30%.A “vacancy increase” is limited to once per year, even if the unit has multiple vacancies during that year.
Petitioning for Other Rent Increases
In addition to the automatic increases described above, a landlord may petition for a larger increase under certain conditions:
Housing providers can raise rents enough so that they earn a 12% rate of return on their rental property investment. In order to obtain a hardship increase, the landlord must document his or her operating expenses for 12 of the preceding 15 months prior to filing the petition.
A landlord can raise rents enough to cover the amount spent on capital improvements to the property, which includes renovations or improvements above and beyond ordinary repair or maintenance work.
Services and Facilities
Rents can be adjusted when the landlord increases or decreases the services or amenities offered to tenants. The petition is approved or denied based on:
- Tenant’s cost of buying comparable services
- Housing provider’s operating cost
- Fair market value of comparable services
If the property owner makes a substantial rehabilitation to the property — defined as proposed rehab costs representing at least 50% of the unit’s real property tax assessment — then a petition can be filed for a rent increase. Among the factors considered in determining whether to approve the petition is whether the improvements are in the tenants’ interest.
70% Voluntary Agreement
The 1985 act also allows for a rent increase if tenants enter into a voluntary agreement with the landlord to establish the rent.
The End of Rent Control in D.C.?
The 1985 act limited the length of time that apartments in the district could be rent-controlled — and that end date is Dec. 31, 2020. That means that rent control in Washington, D.C., is scheduled to end at the end of this year. But the D.C. Council is looking to change that. Last year, the Council introduced legislation that would extend the rent-control program by another decade, to take it through 2030. At-Large Councilmember Anita Bonds, the chair of the Council’s housing committee, authored the legislation, calling it a “supply-demand issue” and pointing out that rent control is D.C.’s most widely used affordable housing program. Rent control, according to Bonds, “promote(s) neighborhood stability and maintain(s) our diverse population & healthy economy.”
Advocates Against Rent Control
Some advocates believe that rent control isn’t effective in promoting housing affordability, but that it even worsens the housing shortage — raising rent prices and forcing residents out of their residences. That is partially due to the use of the voluntary agreements, which some landlords use to do away with rent control in their buildings completely. Existing tenants in rent-controlled buildings sign off on the agreements allowing the landlords to raise rent on future tenants, not existing tenants — effectively taking the units out of rent control.
With future rent increases locked in — and averaging about $1,500 — landlords try to encourage existing tenants to move out of their properties. Since 2006, 240 voluntary agreements have been signed, raising an additional $6 million in rental income for property owners of 6,000 rent-controlled units. While the voluntary agreements aren’t illegal, using them to essentially take a unit out of rent control is effectively a loophole that isn’t what was intended when the D.C. Council first instituted the use of the voluntary agreements.
As you can see, there are pros and cons of rent control in D.C. It is intended to provide affordable housing for people who need it, but there are ways for landlords to find loopholes in the law that allow them to raise rents above what is generally allowed under the law. Especially with the future of D.C. rent control in question with its expiration approaching at the end of the year, it is not an always an easy topic to understand. If you would like to get a better understanding of rent stabilization, be sure to contact a property management professional today. Our team at Nomadic Real Estate is here to help you navigate the confusing world of property management in the Washington, D.C., area through the Nomadic Approach.