Daly Legislation a Breakthrough for Low-Income Tenants

by Paul Hogarth on March 5, 2009

Supervisor Chris Daly has introduced a series of amendments to the SF Rent Ordinance, designed to help tenants weather the storm of the recession. Some are similar to prior measures (i.e., expand the current protections for family tenants to include unrelated roommates), and are rather incremental. But two ordinances are a major breakthrough for the City’s poorest renters – and constitute the kind of change we need. One would limit “banked” rent increases to 8% a year, a big problem for Tenderloin residents. The other measure – allowing tenants to file “hardship exemptions” on a rent increase – could streamline an existing Rent Board practice, making it far more accessible for renters who need it to get relief. As a lawyer and tenant organizer for the Tenderloin Housing Clinic, I represent tenants who file “hardship appeals” on capital improvement petitions – a tedious process that cries for reform. Daly’s bill could be just what we need.

Controlling “Banked” Rent Increases

I’ve worked in the Tenderloin since 2000, and banked rent increases are always tough for residents on a fixed income. The Rent Board sets the allowable annual rent increase, but it’s up to the landlord to exercise that right. If your tenants are all on disability (and the state budget routinely denies cost-of-living adjustments for their paychecks), it sometimes doesn’t make sense to give them a rent increase each year. Or maybe the tenants have a good relationship with the landlord, so they live there for 10-15 years without a rent increase.

Then, the building gets a new owner – usually Skyline Realty – who wants to maximize every cent out of the building. The landlord notices the tenants haven’t had a rent hike in years, and decides to give them a “banked” increase. Because these are allowable rent hikes that were never used, the Rent Ordinance naturally gives landlords the right to impose them. But for a fixed income tenant – or a working-class renter who just lost their job – getting a 25% rent increase all at once can be devastating.

Daly’s plan would not prohibit banked increases – after all, the landlord is still entitled by law to impose them (and it’s probably unconstitutional to restrict them altogether.) But it would limit them to 8% a year, so a property owner who wants to recover on unused rent increases could phase them in over a few years. Given the bad economic climate, that’s an eminently reasonable approach – and could prevent some egregious examples.

Rent Hikes: Financial Hardship Exemptions

Despite the hysterical reactions of SFGate readers about this proposal, the SF Rent Board already has a process for tenants facing hardship who get a rent increase. If a landlord gets a “pass-through” in a building for capital improvements, operating & maintenance costs or utility increases, tenants paying more than a third of their income can petition to have their unit exempt. I’ve helped many such tenants navigate this process, and practically all of them eventually won. But it’s a frustrating process that needs to be streamlined …

First, tenants can’t apply for a hardship appeal until after the Rent Board has approved the landlord’s petition for a “pass-through.” How long does that take? Months, and in the meantime the tenant pays the rent increase. While the rent hike is unenforceable until the Rent Board concludes the matter (so the tenant can’t get evicted for not paying it), I generally advise my clients to do so. Because if they lose, the rent increase is retroactive – and they could owe thousands of dollars in back rent.

Many tenants want to fight the landlord’s “pass-through” on the merits of the case, rather than wait months to file a hardship appeal. But that’s an extremely tedious process, and chances of winning are nearly impossible. If the landlord proves they actually did the capital improvements, the Rent Board is likely to okay it. Even if the work was caused by the landlord’s deferred maintenance, the tenant must prove it – and unless they called a Housing Inspector who cited the landlord before the work started, they’re likely to fail.

Even worse than capital improvements are O&M petitions (“operating & maintenance.”) Landlords can petition to raise the rent by up to 7% because of increased costs. While it’s one thing if we’re talking about sewage costs, routine maintenance and garbage collection, the Rent Board regulations even allow for O&M increases due to a change of ownership. A new owner pays higher property taxes than their predecessor – which is something they should have prepared for when buying the building – but they can then pass it on to tenants as higher rent. Every time property changes hands, tenants suffer.

I’ve had discussions with the Rent Board about letting tenants who clearly qualify for a “hardship appeal” file at the start of the process – when the landlord has petitioned for a “pass-through.” Why go through the trouble of fighting (and losing) the merits of the landlord’s petition, when the tenant’s income status clearly shows they will be exempt from the rent increase? But the Rent Ordinance isn’t written in a way to allow for that.

Daly’s amendment would let tenants file a petition for “economic hardship” when they first get the rent increase notice, and are already paying more than one-third of their income. While there are a few legal problems with the proposal’s scope (it would apply to all rent increases, including vacancy rent hikes under state law), giving tenants the affirmative right to file hardship petitions is timely and necessary. Opponents who mock the proposal and say “maybe I should quit my job and pay zero rent” are confused, and don’t understand the amendment. It only applies if you get a rent increase notice.

As Daly said this week, homeowners are getting a lot of help with the federal stimulus. In a city of renters, San Francisco should step up to the place and help tenants.

EDITOR’S NOTE: Paul Hogarth was an elected Commissioner on the Berkeley Rent Stabilization Board, before he moved to San Francisco and now represents tenants at the City’s Rent Board.

Filed under: Archive