MOUNTAIN VIEW — With the city confronting soaring rents, Mountain View could soon require landlords to limit rent increases for certain tenants with pandemic-era discounted lease agreements to avoid an exorbitant jump in monthly rent when their lease ends.
Tenants who received discounts during the pandemic — such as first month free rent or a dollar amount discount — when the rental market in Mountain View suffered and vacancies went through the roof may be entitled to a lower increase in rent as members of the Rental Housing Committee considered amending the city’s five-year-old rent control law.
The committee oversees issues such as rent control and eviction protections and makes the determination every year of how much the increase in rent should be for next year’s term, according to the Community Stabilization and Fair Rent Act. Earlier this year, the group approved the highest allowable rent increase in its history at 5%, which goes into effect on Sept.1.
Since the pandemic, when move-in specials were offered to renters to fill vacancies, landlords and tenants have questioned how to determine the base rent “when a concession, in the form of discount or reduction of the rent, is offered during the initial term of the tenancy,” according to a city report.
As the Bay Area continues to deal with skyrocketing rents, several cities have relied on rent control to keep costs stable for renters as landlords associations and homeowners continue to seek to strip cities like Mountain View of renter protections that many say could keep housing costs down in one of the most expensive places to live in the country.
These new potential protections — which seek to keep rent increases somewhat reasonable — came as the Rental Housing Committee this week approved its $2.1 million budget along with a rental housing fee for the next fiscal year. Even though the fee is lower than last year’s, some landlords still think it is too high as they warn of an exodus of owners willing to rent.
The budget will be funded by a $96 per rental unit fee that will have to be paid by the landlord. Last fiscal year that rental housing fee was $102.
Back in March, the RHC postponed amendments to the rent control law that would set a statute of limitations on back rent for tenants who received a discount on their rent or had an agreement with the landlord for a reduction in rent in order to get input from renters and landlords. After multiple meetings and a public hearing on May 23, the committee held a study session this week to determine if those move-in specials should count toward base rent.
In a 3-2 vote, the board decided to move forward with discussions to set the base rent as the amount of rent actually demanded to be paid by the tenant over the term of the initial tenancy and dividing the sum by the number of months in the initial tenancy.
So, for example, if a tenant signed a twelve-month lease for $2,400 per month but received a 25% discount, then the base rent for calculating a rent increase must be the total amount including that discount, so about $1,800 per month. This year’s rent increase of 5% would then be applied to the lower figure.
The statute of limitations would allow tenants to retroactively sue for overpayment of rent beginning from tenancies that started last year.
Such a move prevents folks from getting a rent hike higher than what the rent board approves, said Vice Chair Emily Ramos, and to get compensation from landlords trying to skirt the law for profit.
“The concern I largely heard was renters who signed a lease with a move-in bonus with a ‘your real rent is this amount but you’re getting 25% off,’” Ramos said. “It’s now one year since they moved and suddenly they’re faced with a 25% increase. That’s not okay with me. On a bare minimum basis, not okay with me.”
The committee must still decide whether to make these protections permanent, and there’s some controversy around whether move-in bonuses like a month off should be included.
Committee Chair Nicole Haines-Livesay wants to keep the discussion open about month-off bonuses as many landlords give months off “in good faith,” but thinks that landlords who give out dollar-figure discounts are knowingly setting up tenants for a huge increase in rent at the end of their term.
“I think someone who says ‘your rent is $3,000 but you really only have to pay me $2,500 a month’ knows exactly what they’re doing,” Haines-Livesay said. “And candidly, they are offering that lease to someone who they don’t feel is sophisticated enough to figure out what they are doing so they are taking advantage of someone else. That’s the definition of bad faith.”
Julian Pardo de Zela, who is a real estate attorney at Messner Reeves LLP, said this possible regulation “furthers the atmosphere of encouraging landlords to leave” Mountain View, adding that if in a year from now “landlords in Mountain View are no longer offering concessions, we can’t scratch our heads and ask why this happened.”
“Not having concessions is going to hurt middle-income people and people who are low income,” he said. “For some people, it’s a thing of if they can rent or not. It’s going to make it harder for working-class people to live in Mountain View.”