San Francisco has passed Supervisor Fewer’s proposal to eliminate “debt servicing” passthroughs to tenant’s rental rates. In general, a landlord can only increase the rent for tenants in rent-controlled apartments by a limited amount (which, in San Francisco, is a 60% of the increase in the consumer price index, as published by the US Dept. of Labor, in the preceding year). As of this post, for instance, this “annual allowable increase” is 1.6% of the tenant’s “base rent”.
To avoid confiscatory results of price controls, however, the Rent Ordinance has allowed additional increases based on things like utilities, taxes, capital improvements and… debt servicing. However, Supervisor Fewer aimed to close a perceived loophole in this rule, where owners would load a property with debt for the specific purpose of increasing the rental rate.
Ordinance 132-18 amends Rent Ordinance Section 37.8 (“Arbitration of Rental Rate Adjustments”) to prohibit rent increases based on increased debt.