Mountain View Rental Housing Committee clarifies base rent calculations. Why is it important? | New
Imagine that you are a tenant in Mountain View whose apartment falls under the city’s rent control ordinance. A year ago, you signed a one-year lease for $1,000 per month with a 25% discount. The pandemic market prompted your landlord to offer this discount, and you took it.
For a year, you’ve been paying $750 a month. But now your landlord is trying to raise your rent by 25%, claiming he’s just restoring your rent to its pre-pandemic rate. Is it allowed?
According to a clarification passed by the Mountain View Rental Housing Committee last month, that is not the case. Mountain View landlords who offer a tenant discount, a practice that has increased dramatically during the pandemic, are not allowed to raise those rents above what is allowed under the city’s rent control law, which is currently 2% and which will increase from September 1 to 5%.
“Last year, due to the pandemic, there were a lot of vacancies and in some cases landlords lowered their prices,” RHC member Emily Ramos told The Voice. “In other cases, some of them got people to rent their units with these concessions.”
Fast forward to a year later, with rents rising rapidly across the country. Ramos said the city was getting an increasing number of calls from local tenants whose landlords were raising their rents far more than rent control allowed. These landlords argued that the base rent is the original price and not the reduced rate.
“Based on CSFRA staff’s reading, they told tenants that landlords couldn’t do this,” Ramos said. “But they started getting a lot more calls,” prompting the RHC to clarify the rules.
According to a California Housing Partnership report, the average monthly rent in Santa Clara County is $2,848, which is considered affordable for renters earning nearly $55 an hour. Based on this ratio, someone earning Mountain View’s minimum hourly wage of $17.10 could afford $890 in rent.
Taking the example of a rent of $1,000 reduced by 25%, the base rent becomes $750, according to the clarification established during the June 20 committee meeting. Tenants who earned Mountain View’s minimum wage could afford it, and thanks to rent control, they could continue to pay it even if their rent increased at the end of the lease.
At the July 18 committee meeting, members further clarified the rules for free first-month incentives that have become even more prevalent during the pandemic: landlords do not need to recalculate base rents to include this reduction . But if the reduction offers two or more months without rent, the base rent must be adjusted. In the case of rent of $1,000 per month with two months free, the base rent would average $833 over 12 months.
why is it important
Base rent is “probably the most important aspect of our rent control law,” Ramos said. That’s because it’s the starting point for determining how much landlords are allowed to raise rents each year.
Each year, the RHC establishes the Annual General Adjustment (AGA) for existing rent-controlled housing leases. The calculation is based on the percentage change in the cost of living (also called CPI) compared to the previous year. Thanks to the AGA, landlords can increase rents from September 1 to August 31 of the following year.
Due to the pandemic, the city’s AGM was 2% in 2021 – the lowest since rent control was established in Mountain View. This was great news for tenants in rent-controlled housing, as rents could not increase by more than 2%.
But from September 1, the AGA will rise to 5%, the highest ever in the city. The CPI was actually a bit higher at 5.2%, Ramos said, but the rent control law does not allow the AGM to exceed 5%. The last time the CPI was above 5% was in 2001, she said, just as the dotcom bubble was about to burst.
What’s important for renters to know is that they could see painful rent increases over the next year, due to inflation pushing up the CPI. But without rent control, those increases likely would have been higher, Ramos said.
Asking rents in the county, according to the California Housing Partnership report, rose 6.3% between the last quarters of 2020 and 2021. But in Mountain View, under CSFRA, rent increases have peaked. 2.9% (the AGA 2020) from September 1, 2020 to August 31, 2021 for residences with controlled rents.
“Before rent control, landlords could raise their rent as much as they could squeeze out of the tenant,” Ramos said. “By putting a limit, you don’t force the landlord to increase the rent. You simply limit what the owner can lift up to.