Owning Investment Properties In DC

Rent Control and Rent Stabilization
The shared goal of DC rent control and rent stabilization is to keep tenants in affordable housing. Rent stabilization refers to rent increases in qualified units, which are subject to a set percentage rate determined by several factors, including market rates, location, and local economy.

Rent control refers to the rental rate becoming capped at a certain value.

Housing Categories

• Apartment
• One Family Rental
• Two Family Rental

Requirements

• Corporate Registration (If Applicable)
• Tax Registration
• Basic Business License Inspection Requirement
• Certificate of Occupancy
• DHCD-Stamped Rental Accommodations Registration

• A Certificate of Occupancy is required for Apartments and Two Family Rentals.

  An applicant for an Apartment must register with the DHCD after the Basic Business License has been accepted by the Department of Consumer and Regulatory Affairs (DCRA). Upon registration with DHCD, the applicant returns to DCRA with the DHCD-stamped RAD Form in order for the license to be issued.

  One Family Rental and Two Family Rental applicants must register with DHCD after the license has been issued by  DCRA.

To clarify, because DHCD and RHC do not make it clear and publishes language that varies, the rent control exemption: is for buildings containing 4 or fewer units, or an aggregate of 4 or fewer rental units owned by an individual. any rental unit in any housing accommodation of 4 or fewer rental units, including any aggregate of 4 rental units whether within the same structure or not, provided:

(A) The housing accommodation is owned by not more than 4 natural persons;

(B) None of the housing providers has an interest, either directly or indirectly, in any other rental unit in the District of Columbia;

(C) The housing provider of the housing accommodation files with the Rent Administrator a claim of exemption statement which consists of an oath or affirmation by the housing provider of the valid claim to the exemption. The claim of exemption statement shall also contain the signatures of each person having an interest, direct or indirect, in the housing accommodation. Any change in the ownership of the exempted housing accommodation or change in the housing provider’s interest in any other housing accommodation which would invalidate the exemption claim must be reported in writing to the Rent Administrator within 30 days of the change;

So: if you own various rental properties, each with less than for units, you are still capped at 4 regardless of whether or not they are in the same building. Also, you are only exempt if you file the exemption. Those who do not are automatically rent-controlled!

Here are the statutes, details and other exemptions: https://law.justia.com/codes/district-of-columbia/2018/title-42/chapter-35/subchapter-ii/section-42-3502.05/.

The Rental Housing Commission writes regulations under the Act.

Rent Control Terms Under the Act:

An apartment building or apartment complex is called a housing accommodation

• A single apartment or house is called a rental unit
• A tenant is a tenant
• A landlord is referred to as a housing provider.

Applicability

The Act applies to all housing accommodations in the District of Columbia, unless they are specifically exempted by the Act, as described at the top of this page. Rental units that were vacant when the Act took effect, and housing accommodations under a building improvement plan and receiving rehabilitation assistance through DCHD.

Registration

Every housing accommodation or rental unit must be registered with RAD by filing a RAD Registration and Claim of Exemption form. Once registered, the housing accommodation or rental unit is assigned a registration number if it is subject to rent control. If it is exempt, it is assigned an exemption number. If a housing accommodation was initially exempt from the Act but later becomes subject to the Act, the housing provider must amend the RAD Registration and Claim of Exemption form at that time. Changes in ownership or management must be filed with RAD within 30 days of the event.

Increases in Rent Under the Act

Any increase in rent must meet these conditions:

1. The new rent charged may not be more than the prior rent plus an allowable increase, as described below. What You Should Know About Rent Control in the District of Columbia Department of Housing and Community Development 1800 Martin Luther King Jr. Avenue, SE Washington, DC 20020 (202)442-7200

2. The increase in rent charged cannot be more than the increase allowed under any single section of the Act.

3. The last increase in rent must have been at least 12 months ago (unless the unit is vacant).

4. The increase must not violate the terms of the lease.

5. The housing accommodation must be properly registered with the RAD.

6. The rental unit and the housing accommodation’s common elements must be in substantial compliance with housing regulations.

7. The housing provider must give a 30-day notice of any increase in rent.

Allowable Rent Increases

The most common allowable increase in rent is an annual adjustment, based on the increase in the Consumer Price Index (CPI-W). The most that rent can increase is the CPI-W percentage plus 2%, but not more than 10%.

For tenants who are elderly or disabled, the maximum increase in rent charged is the CPI percentage only, but not more than 5%.

Allowable increases based on CPI are sometimes called automatic — because no petition or other special steps are required.

Rent Increases When a Unit Becomes Vacant or “Vacancy Increase”

The only exception to the limit of one rent increase per year is when a rental unit becomes vacant. The housing provider can raise the rent charged upon a vacancy to 10% more than was charged to the former tenant, or rent for a comparable rental unit, but not more than 30%. Comparable rental units have essentially the same square footage and floor plan; comparable amenities and equipment; comparable locations with respect to exposure and height (if exposure and height have previously been factors in the amount of rent charged) and comparable physical condition. Once there has been a vacancy increase in rent, the housing provider cannot make another increase in rent for 12 months, even if another vacancy occurs.

Other Allowable Rent Increases

A housing provider may choose to seek larger allowable increases under other provisions of the Act, including hardship, capital improvements, services and facilities or substantial rehabilitation, or agreement with 70% of the tenants. The other allowable increases, described in more detail below, are not automatic. The housing provider must petition or otherwise seek the consent of the Rent Administrator, and tenants may choose to participate in the process, often at hearings before an administrative hearing judge. Hardship Under the Act, housing providers are allowed to raise rents enough to earn a 12% rate of return on the housing provider’s rental property investment. To apply for this increase, the housing provider must document operating expenses for 12 of the last 15 months preceding the filing of the hardship petition. RAD will notify the tenants that a hardship petition has been filed and allow the tenants to designate a representative to support or oppose it. RAD performs an audit of the hardship petition and supporting documents. The Rent Administrator issues an order granting or denying the hardship petition. The housing provider and tenants may each submit exceptions and objections to the Rent Administrator’s order. If DHCD exceptions and objections are submitted, a hearing will be held with OAH to resolve the disputed matters. OAH then issues an order setting the rent increase.

Capital Improvements

A housing provider can petition to raise rents by an amount enough to cover the cost of capital improvements. A capital improvement is an improvement or renovation other than ordinary repair, repair or maintenance if the improvement or renovation is deemed depreciable under the Internal Revenue Code. A housing provider files a petition, serves copies to the tenants, and presents the case to the Office of Administrative Hearings (OAH). The capital improvement petition must be filed no later than 10 calendar days after the installation of the capital improvements. Tenants may support or oppose the petition. If OAH approves the surcharge, the housing provider performs the work and may then raise rents. OAH makes a ruling on the petition, based on:

• Whether the improvement will protect or enhance the health, safety and security of the tenants or the habitability of the housing accommodation;
• Whether the improvement will be depreciable under the Internal Revenue Code;
• Whether required governmental permits and approvals have been secured; and
  Whether the design and cost of the work are sufficiently documented. In addition to the work’s cost, the housing provider can include financing costs, including interest and service charges.

The housing provider must spread the costs of a building-wide improvement project for 96 months. For an improvement to one or more but not all rental units, the costs must be spread over for 64 months. Only units affected by the capital improvements are subject to rent increases. The surcharge may be no more than 20% of the prior rent charged for a building-wide capital improvement and no more than 15% for an improvement that does not affect all rental units. The Act allows a housing provider to continue the surcharge until the housing provider has recovered all costs, including interest and service charges, of the capital improvement. Certain low-income elderly and disabled tenants can be exempted from a capital improvement surcharge. The increase is terminated once the housing provider recovers all costs of the capital improvements. This type of increase in rent is called a surcharge.

Services & Facilities

The Act allows an adjustment in rents when related services or facilities supplied by a housing provider or a housing accommodation or for any rental unit in the housing accommodation are increased or decreased. A housing provider files a petition, serves copies to the tenants, and presents the case for the change at an OAH hearing. Tenants may support or oppose the petition. The OAH makes a ruling on the petition, based on:

• The cost to the tenant of buying alternate related services or facilities comparable;
• The operating cost to the housing provider of the related services or facilities;
• The fair market value of comparable related services or facilities.

Substantial Rehabilitation

The housing provider may submit a petition to raise rents for a substantial rehabilitation of the housing accommodation. A substantial rehabilitation petition is filed only when proposed rehabilitation cost equals or is more than 50% of the real property tax assessment of the rental unit or housing accommodation. The petition must include detailed plans, specifications and projected costs. The tenants are notified, a hearing is conducted, and the OAH issues a decision before the work starts. The maximum allowed rent increase is 125%. This rent increase is not a temporary surcharge, but a permanent increase. When determining if a substantial rehabilitation is warranted, OAH considers:

• Whether the substantial rehabilitation is in the interest of the tenants;
• The existing physical condition of the rental unit or housing accommodation as shown by reports or testimony of DC housing inspectors, licensed engineers, architects and contractors, or other qualified experts;
• Whether the existing physical condition impairs or tends to impair the health, safety or welfare of any tenant;
• Whether the existing physical conditions can be corrected by improved maintenance, repair or capital improvement;
• The impact of the proposed rehabilitation on the tenant or tenants in terms of proposed financial cost, inconvenience, or relocation.

70% Voluntary Agreement

The Act allows tenants of a housing accommodation to enter into a Voluntary Agreement with the housing provider to establish the rent, capital improvements, services and facilities, or repairs and maintenance. If the housing provider initiates the Voluntary Agreement, the tenants must be given at least 14 days to review it following the filing of the Voluntary Agreement with RAD and service on the tenants. The Rent Administrator must approve the Voluntary Agreement and any conditions in the Voluntary Agreement must be met, before rents can be raised. If approved, the Voluntary Agreement will affect all tenants, including those tenants who did not sign the Voluntary Agreement. Tenant Petition A tenant who believes that a rent adjustment is incorrect may file a tenant petition with RAD. When a petition is filed:

1. RAD accepts the Petition,

2. RAD sends the Petition to OAH for a hearing,

3. OAH conducts a hearing,

4. The tenant and the housing provider each present arguments

5. OAH issues a decision and order.

A tenant petition may address any perceived violation(s) of the Act. Protections for Elderly and Disabled People A tenant who believes he or she fits the definitions of elderly or disabled under the Act must file an application with the Rent Administrator and give a copy of the application to the housing provider. To qualify:
As elderly — a tenant must be at least 62.
As disabled — a tenant must have a disability as defined by the Americans with Disabilities Act of 1990 (title 42, section 12102(2)(A) of the United States Code). Act and Regulations This pamphlet is intended to outline the Act, but does not include every detail. Interested parties are encouraged to review the Act and its regulations, or to ask a lawyer or housing professional for more help.

• Rent Increase Information – Contact the Rental Housing Commission at (202) 442-8949 to determine how much you can raise rent
• Hardship Petitions for Landlords – Contact the Rental Accommodation Division at (202) 442-9505
• Capital Improvements – Contact the Rental Accommodation Division at (202) 442-9505