As the U.S. economy continues to recover from the most recent recession, gentrification of urban neighborhoods has become a hotly debated issue. Gentrification occurs when there is a shift in the class structure of a community. Signs to look out for are new real estate development, well-funded investors emerging in the community and lower crime rates.
As new businesses surface and older buildings are converted into lofty condos, accessibility to the neighborhood is limited to those with higher incomes. Inevitably, people in lower income brackets are displaced, due to their inability to pay higher rents and property taxes.
Although many are in favor of gentrification because of the perception that it is improving the community as a whole, activists continue to oppose what is essentially economic eviction. One opposition strategy is to lobby the court or public authority to pass and maintain rent control ordinances. The laws limit the annual increase of rent to a percentage of the total rent, usually between 2% and 4%, depending on the following:
- Cost of living
- Consumer price index or CPI (weighted average of prices in urban areas)
- Rental unit type
Rent control helps to counteract unequal bargaining power between the tenant and the landlord, as well as maintain a fair housing market in urban communities. It also protects tenants from eviction, unless there is “just cause.”
However, not all cities use the regulations and, even if they do, the laws vary dramatically with respect to which properties are subject to rent control and the rules concerning evictions. For example, San Francisco, Los Angeles, New York and Washington, D.C. have some kind of rent control, while Chicago has no limits on rent increases. In San Francisco, only buildings built before June, 1979 are subject to rent control. If built after 1979, there are no limits to rent increases. Using San Francisco as an example, there are many loopholes for rent control and evictions, including:
- Vacancy Decontrol – When the tenant leaves the property it is no longer subject to rent control. Unfortunately, this results in landlords aggressively attempting to force the tenant to vacate the premises, either by evicting them or using tactics like harassment.
- Ellis Act (very common in San Francisco) Landlords evict the tenant by converting multi-unit buildings into single family homes (mansions) or condominiums.
- If the landlord performs substantial capital improvements to the building he can raise the rent up to 10% (otherwise the cap is 3%.)
- If the landlord carries out substantial rehabilitation, they may evict the tenant but must pay for relocation costs.
- If there are increased operating and maintenance costs, the increase can go as high as 7%.
- Subsidized housing, religious facilities and residential hotels (if your stay is less than 28 days) are not subject to rent control
- Other exceptions which will take the building out of rent control and allow the landlord to evict include:
- Late rent or violation of the rental agreement
- Lease has ended and the tenant refuses to sign a new one with the same provisions
- Only a sub tenant remains
- The owner move in
As rent control housing fades in major urban neighborhoods, the laws become ineffective and eventually non-existent. A number of cities are trying to come up with alternative ideas such as passing “inclusionary zoning” laws, requiring that a real estate developer set aside a certain portion of units as affordable housing. However, it appears that activists are slowly losing the fight and families are forced out of the communities they have called home for generations.
The rent control laws can be very complex and it’s to your benefit to consult an attorney if you suspect your landlord is violating existing rent control laws. It is also advisable to contact a lawyer before signing a lease. LegalMatch.com is dedicated to connecting tenants with experienced real estate attorneys, who will ensure their rights are protected.