The first rent increases allowed under new ceilings approved recently by the D.C. Rental Accommodations Commission, which could be as high as 9.4 percent, could go into effect June 1.
If the City Council allows the increases to stand, landlords will be able to send 30-day notices of rent raises to tenants on May 1 for a June 1 increase, according to a timetable established last week by the commission. Rents in an apartment building or house cannot be raised unless 12 months have passed since the last rent hike.
The commission voted to raise rent ceilings allowed under the District rent control legislation on a sliding scale, based on landlords' operating cost ratios, up to a maximum increase of 9.4 percent.
Landlords will be required to file details of their operating costs with the Rental Accommodations Office (RAO) before levying any rent increases, said rental commission attorney Paul Crumrine. The rental commission hears cases where parties appeal RAO decisions.
The RAO is not required to approve increases or check on landlords' cost figures, however, the attorney said. He added that a rent raise will be investigated only if tenants in the building complain to the RAO that it is illegal.
The City Council, which could pass legislation altering the rent increases and the regulations for their implementation, has not yet received the rental commission report on reasons supporting the hikes, said Jim May, clerk of the council's Housing and Economic Development Committee.
"We don't have anything to react to yet," he said.
The commission report to the council was due Nov. 15 but was delayed because of staff and funding shortages. A commission spokesman said the report will be delivered to the council next week. The Rental Accommodation Commission will publish regulations for implementing the increases in the March 30 edition of the D.C. Register, a publication in which official city documents are printed. The regulations will be adopted April 30, allowing the intervening 30 days for public comment, Crumrine said. No public hearings will be held during this time, but individuals may comment in writing to the Rental Accommodations Commission on the amount of the recommended rent increases and on procedures for implementing and challenging the increases, he said.
If the council does not act to change the size of the rent increases or the implementing regulations, the new rules will go into effect April 30.
The increases will apply to all rental units in the District that are covered by the rent control law. Apartments and houses are covered if the landlord. owns, individually or in partnership, five or more rental units in the city.
The extent of a prospective increase will be tied to a building's operating cost ratio (OCR), which is established according to a formula designed to measure the profitability of the property. The OCR is computed by dividing a building's operating expenses by its gross income, and it expresses the proportion of each rent dollar that is required to cover the costs of operating the building.
In determining the OCR, several variables may be considered, including maintenance and operating expenses, utility costs, taxes, insurance, rental income and vacancy losses.
For example, if a building has total operating expenses of $500 and gross income of $1,000, the OCR is $500 divided by $1,000, or.500. An OCR of.500 means that a landlord pays 50 cents for expenses out of every dollar of rent that is collected. If a building has an OCR of.900, the landlord is spending 90 cents of every rent dollar for operating expenses.
The 9.4 percent maximum increase will be allowed for all buildings with an OCR of.576 or above. The lower a building's OCR, the lower will be the increase allowed.
"The 9.4 percent increase (for buildings with an OCR of.576 or less) will absorb the 16.4 percent increases in costs that landlords have experienced over the 18-month period ending Dec. 31, 1978, that the increases are supposed to cover," he said.
A landlord can elect to file a hardship petition with the RAO, seeking a higher increase than the maximum allowed under the OCR formula if he is making less than an 8 percent rate of return on the building.