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On Sunday, Scott Lynch returned home from vacation to his Columbia Heights apartment building to find a packet in his mailbox informing him that his landlord wanted to increase his monthly rent by $991.55. Lynch, who’s lived at 3501 13th St. NW “since 2007, when there were hookers out back,” currently pays just more than $1,000 a month for his rent-controlled one-bedroom. The legal documents, sent to him and the other tenants of the 42-unit building by the Office of Administrative Hearings, seemed to be telling him that his rent was about to double.
The source of this increase, first reported yesterday by the New Columbia Heights blog, was a so-called capital improvement petition filed by Urban Investment Partners, which bought the building for $6 million in June. Rent control applies automatically to market-rate buildings erected before 1975—-3501 13th St. dates back to 1927—-and whose owners control at least five rental units in the city, but there are a few ways building owners can get around it, or at least get away with a large one-time rent increase. They can reach a “voluntary agreement” with tenants to raise the rents for future tenants in exchange for benefits (or buyouts) for existing ones. Or they can petition the city for higher rents through a hardship petition (to guarantee up to a 12 percent rate of return), a substantial rehabilitation petition (if the cost of the needed renovations is more than half the building’s assessed value), or a capital improvement petition (for basic building repairs). UIP opted for the latter.
“That building is incredibly dilapidated,” says UIP principal Steve Schwat. “It has a lot of serious problems that need to be taken out and fixed. And that cannot happen for free.”
Landlords like Schwat argue that capital improvement petitions are a way to ensure that necessary repairs can be undertaken without breaking the bank; if rent control prevented them from charging additional rent, they simply wouldn’t make the repairs. But tenants like Lynch often see something different: an effort to push out longtime rent-controlled tenants in order to charge their successors more. Rent-controlled units generally can’t have their annual rents increased by more than the rate of inflation plus two percent—-unless they’re vacant. In that case, the rent can be increased as much as 30 percent, as long as there’s at least one comparable unit in the building with rent at least that high.
Lynch plans to stay in the building and challenge the rent increase, but he worries that some of his neighbors, particularly low-income immigrants fearful of waging a public fight, might just leave. “My conjecture is, they are trying to scare the people without papers out of the building,” he says.
The capital improvement petition process is complicated enough for tenants to wrap their minds around. But at 3501, things could get even more complex: According to Schwat, the petition is not likely to be the ultimate means to rent and facility changes. “Trying to push a petition through ultimately just is not tasteful,” he says. Instead, he prefers to work with tenants through the voluntary agreement process. A voluntary agreement requires the approval of 70 percent of the tenants, and typically allows existing tenants to remain without substantial rent increases in exchange for allowing rents higher than those usually permitted under rent control for future tenants. In order to bring in more of those future tenants, landlords often offer generous buyouts to tenants if they leave.
“The voluntary agreement is probably the most effective tool in the rent control toolbox that tenants should be interested in using,” Shwat says. UIP has often used voluntary agreements to spruce up old buildings and increase revenue. It’s a win-win-win for UIP (which gets to raise rents), the tenants who stick around (who enjoy building upgrades without rent increases to match), and the tenants who take a healthy buyout. But it does permanently raise the rents of the previously affordable units, which are still under rent control but starting at a much higher level—-meaning the city loses affordable housing at a time when it’s already in short supply.
In filing the capital improvement petition, Schwat says, he’s really hoping that it’s the start of a negotiation that leads to a voluntary agreement. “One outcome is that you ultimately get approved a capital improvement petition and do the work and increase the rent,” he says. “That’s a fine outcome. I don’t think it gives the tenants all the options a voluntary agreement does.”
Lynch doesn’t like the tactic, although he admits he could ultimately benefit from it. “Don’t get me wrong,” he says. “They’re probably going to pay me a bunch of money, and I’m going to move.”
But he questions the honesty of the capital improvement petition. In the petition, UIP states that it needs to replace the elevator, which is a “threat to tenant safety,” as well as the generator, all the windows, and the entry access system and cameras, in addition to lobby and hallway improvements. “The capital improvements will be beneficial to the tenants,” the petition states. The petition includes an estimate from a contractor that the repairs will cost $3,184,120.99. Add interest and fees, and divide that by the 42 units and spread it over the 96 months for which payment is allowed, and you get the near-$1,000 monthly increase per unit.
Schwat says the payment would end up being spread over a longer period of time such that monthly rents don’t increase by more than 20 percent, the maximum permissible under the law. But it might not be that simple. According to Joel Cohn, legislative director at the Office of the Tenant Advocate, while landlords can apply for extensions at the end of the 96 months if they haven’t covered their costs and continue to charge tenants extra rent, they can’t request an increase of more then 20 percent monthly at the outset, as UIP has done.
“I’ve got the city with a mass of inspectors, and the reality is, you have to keep these buildings in good shape,” says Schwat. “It takes a lot of money. And 3501 is a classic example of buildings that have suffered during the time, from 1970 t0 2000, when nobody wanted to live in the District of Columbia.”
The building is no one’s idea of luxury. The elevator is one of those old-fashioned ones with a grate door that needs to be pulled open upon entry and exit. The stairwells are bare, and the hallways smell funny. Lynch’s own apartment, while nothing fancy, is “a completely satisfactory living arrangement,” he says, and certainly a steal for the rent in a sought-after neighborhood. Lynch admits that some upgrades would be nice, but he doesn’t think his double-pane windows really need replacing, nor does he find the elevator dangerous. “These are ‘would like to haves,’ as opposed to ‘must haves,'” he says.
Unless the tenants and UIP reach an agreement before then, the Office of Administrative Hearings will hold a hearing on the petition on Oct. 24. Lynch and his neighbors will likely fight the petition, arguing that UIP’s true intent isn’t to improve the building but to drive out rent-controlled tenants. Schwat, who hopes to avoid the full petition process, denies that’s the goal.
“I hear what the cynicism is, and I read a lot of the posts online,” he says. “It’s a great story, right? ‘We’re throwing the tenants out of the building.’ Nothing could be further from the truth. We’re trying to improve the conditions in the building.”
Lynch has a different take. “I like where I live,” he says. “So they can go fuck themselves, frankly.”
This post has been updated to include information from Joel Cohn.
Photos by Aaron Wiener