Pat Remick is bracing herself for a battle with her landlord.
A senior who qualifies for limited rent increases under D.C. law, she moved into 3003 Van Ness Apartments in 2012. The residential complex sits between the law schools of Howard University and the University of the District of Columbia in leafy Ward 3, and is composed of two highrises linked by a ground-floor lobby. It’s in a prime location—a five-minute walk from both the Van Ness-UDC Metro station and Rock Creek Park—and contains roughly 600 units, ranging from studios to two-bedrooms.
Built in the 1970s, the rent-controlled property has perks to boot: spacious rooms, a 24-hour fitness center, even an Olympic-size pool. And it’s relatively affordable for the tony ward.
Or at least it purports to be.
Remick learned this the hard way over time. While the former homeowner hopes to hold onto her one-bedroom apartment, she’s grown tired of rent negotiations with Equity Residential, the company that owns 3003 Van Ness. “They become more stressful year after year,” she explains.
Remick and half a dozen other tenants interviewed say Equity has a misleading practice of offering annual “concessions,” or discounts, on units, subject to its discretion. The custom undermines the meaning of “rent control,” residents say: It’s not what they signed up for.
District law limits increases for rent-controlled units to 2 percent plus the Consumer Price Index—a measure of inflation—once a year, and to the CPI alone for disabled or elderly tenants like Remick. She received a lease-renewal letter last September, when the CPI was set at 1.5 percent (today it’s 0 percent). So Remick anticipated a new rent of $2,030 a month, or 1.5 percent above the $2,000 she’d been paying. But the company’s memo, containing the letterheads of Smith Property Holdings—an Equity affiliate—and the Department of Housing and Community Development, showed a “new rent charged” of $2,783, effective at the end of December. Shocked by the new figure, Remick fought to get her rent lowered to $2,030 a month. She threatened to file a tenant petition with the city if Equity didn’t reassess.
“I find this to be a ridiculous exchange we have every year,” Remick says. “It’s all a charade. I don’t understand how a building can claim it’s rent-controlled when it’s not related to payments.”
That’s the crux of an ongoing dispute between the tenants of 3003 Van Ness and Equity, a $24 billion company founded by business mogul Sam Zell. Equity has more than 300 properties boasting upwards of 85,000 apartment units across the U.S., including Boston, New York, Seattle, San Francisco, and D.C. Its corporate office declined to comment.
Harry Gural, who heads the property’s tenant association, alleges that Equity “outmaneuvers” those unfamiliar with concessions, which he believes the company applies illegally. He suspects that the practice is “fairly widespread” within the District, equating it to a “bait-and-switch” scheme and “false advertising.” Gural says more than 30 units at 3003 Van Ness have contacted him about rent negotiations. There are probably many more going through the motions with Equity who are too afraid, uninformed, or old to push back, he adds.
On Equity’s webpage for 3003 Van Ness, rents and floor plans are depicted side-by-side. Scroll down further and Equity disclaims, “Quoted rent may include a concession.” It doesn’t specify how steep that discount would be, or from what value it would be subtracted. Tenants say those figures generally come up at the point of lease signing. Many agree to go through with the agreement when management tells them a higher, non-discounted rent is merely a formality or for internal purposes. Months later, renewal letters like the one Remick received describe that figure as a tenant’s “current rent charged,” which Equity uses to calculate a percentage “adjustment.”
This modification often results in renewal rates that are hundreds of dollars—and in some cases over $1,000—above the monthly rent a resident pays. Usually, that’s when an anxious or irked renter contacts the company, and negotiations begin. Although savvy tenants can achieve rent increases that fall within “2 percent plus CPI” of their payments, others aren’t as fortunate.
“The key issue here is what the word ‘rent’ means,” Gural explains. “99.9 percent of the people out there think it’s what you pay every month—or what they take out of your bank account every month. Equity says it’s what they wish it were, to have head room. People are getting screwed.”
To corroborate Equity’s rent policies, City Paper called the 3003 Van Ness leasing office as a prospective tenant. The property has “maximum rents that can be charged on an apartment,” an agent says, some of which are “way beyond what the market would bear.” When that’s the case, Equity offers concessions that reduce rent payments. “What you see [on the website] is absolutely what you would pay,” she says. For example, a one-bedroom advertised with a rent of $1,950 a month (utilities included) has a maximum of $2,352, so Equity would offer a $402 concession on it for one year. Such discounts are determined “based on the market,” the agent notes. But she’s unable to provide an average or median concession amount, adding that “at least 75 percent of the apartments” at 3003 Van Ness receive “competitive” ones.
Asked about future lease renewals, the agent says any increases would apply to the “maximum rent.” A tenant could “come and talk to us and we can figure out what kind of concession we can give” after receiving a renewal notice from Equity two to three months before a lease expiration.
In communications with tenants, Equity has argued that it isn’t doing anything illegal by offering concessions, a practice that’s becoming more common, housing advocates say. But a difference in interpretation of the District’s rent control laws seems to be at play.
Joel Cohn, legislative director for the D.C. Office of the Tenant Advocate, says rent-concession cases have formed a “groundswell” over the past several years, involving a “gray area” of laws governing rent control. So far, though, decisions by the Office of Administrative Hearings, D.C.’s small-claims court, haven’t favored tenants. And OAH’s rulings don’t set precedent.
Still, if such a case were to come on appeal, Cohn believes there’s a strong argument “that is yet to be heard in full that some rent concessions are operating as de facto rent ceilings.”
Rent ceilings were abolished in 2006 as part of housing reforms spearheaded by Jim Graham, then Ward 1 Councilmember. Before that, landlords had to report two numbers to the District for rent-controlled units: the ceiling, or maximum allowable rent, and “rent charged,” what a tenant paid each month. But because of loopholes that permitted owners to raise prices on these units, the discrepancies between the two were “getting so wildly large that tenants were being subject to huge increases,” Cohn recalls. For instance, one dubbed the “vacancy high comparable” allowed landlords to bump up a given unit’s rent to that of a similar unit when a vacancy occurred. Legal increase thresholds for units that become vacant are now lower.
“Say there’s a grandma in one unit with a low rent ceiling, and another [separate] unit with a lot of turnover—students tended to be there, say—where the rent ceiling would be way, way above the rent charged,” Cohn explains. “Within one fell swoop of grandma vacating her unit, the rent charged to that unit would jump to a much higher rent, leading to an instant loss of affordability.”
Cohn notes that owners use concessions as leverage during lease negotiations. While tenants have a right to go month-to-month after their first year, many of them feel pressured into signing annual leases with significant rent increases when an owner threatens to “whammy” them by reducing or eliminating concessions. “Rent control is supposed to mean that the rent increase is going to be manageable and predictable,” Cohn says, adding that concessions can “violate the letter and spirit” of D.C.’s laws. The facts that the term “rent concession” doesn’t show up in the books, and that “rent charged” isn’t explicitly defined, benefit landlords.
A 2011 report by the Urban Institute found that up to 80,000 housing units across approximately 4,800 properties in the District were “potentially subject to rent control.” Of those properties, 5.4 percent were located in Ward 3 (where 3003 Van Ness sits), the lowest share in D.C. Still, about a fifth of the rent-controlled buildings in that ward had 51 or more units—larger than those in other parts of the city.
All that’s to say that rent concessions affect thousands of D.C. residents. As Gural and Shirley Adelstein—a neighborhood commissioner who lives at 3003 Van Ness—point out, rents based on purported maximum numbers could be generating substantial profits for owners in the aggregate. “It often takes some time for people to become aware of what’s going on,” says the ANC commissioner, who moved into the Equity property two years ago. “People would contact Harry or me—or both of us—in a real state of stress and despair not knowing what to do because the increase that was proposed would have essentially priced them out of their home.”
(Over the weekend, Adelstein got a renewal letter showing a more than $1,000 increase in the rent she and her husband pay for their one-bedroom-plus-den unit. They plan to negotiate.)
One fix to the alleged distortions in prices at rent-controlled buildings could be an official investigation into owners’ policies and practices. Another would be a legislative clarification of existing laws. A spokeswoman for Ward 3 Councilmember Mary Cheh says her office is drafting a pertinent bill.
Meanwhile, residents are losing patience. Nick and Katie Pettet plan to leave 3003 Van Ness for another building in the neighborhood, less than a year after settling in. The newlyweds says they intend to file a tenant petition with the District, seeking to recoup some of their relocation expenses, after Equity tried raising their payments from a little under $1,800 a month to $1,930. According to documentation the two provided, Equity was basing that increase on a rent adjustment up to $3,468: precisely 2 percent above a “current rent charged” of $3,400.
At most, the Pettets were expecting a monthly uptick of $35 a month, not an effective 9-percent jump. Like other tenants, it seemed impossible to them that their one-bedroom could be worth $3,400. Though they’ve enjoyed living at 3003 Van Ness with their cat, they say they’re fed up.
“We just wanted to get out and not deal with this anymore,” Nick says, citing “financial and ethical” reasons. As a matter of principle, the couple notes, Equity betrayed their trust by brushing off their appeals to D.C. law during days of back-and-forth with the leasing office.
“We didn’t feel we could sign and say, ‘We agree with what you’re doing,’” Katie adds. “Then, what leverage would you have the next time?”
“The outcome we would like to see is that landlords raise rent based on the rent you pay, not just some other number,” she explains. “We feel taken advantage of, but we know we’ll be OK.”