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Rent increases banned in 2003

By Matthew Artz Daily Planet Staff
Wednesday October 23, 2002

Good news for tenants. There will be no rent hikes next year. 

The Berkeley Rent Stabilization Board – for only the second time in its 22-year history – voted to deny landlords the ability to raise annual rents Monday. 

The ruling of the nine-member elected rent board means that in 2003 landlords may not increase rents for current tenants at apartments built before 1980. Tenants who moved into private houses after 1996 or live in new developments are not protected under Berkeley rent control law and will not benefit from this week’s ruling. 

The rent board is mandated to set the annual rate increase, also known as an Annual Generalized Adjustment, for rental properties to ensure that landlords get a fair return on their investment. 

According to rent board calculations, the cost of being a landlord actually dropped slightly in 2002, due to lower energy costs and deflation. 

“The board acted very responsibly in not voting for a rent decrease,” said board Executive Director Jay Kelekian. 

Landlords, not surprisingly, disagreed. “It’s a joke,” said Robert Englund of the Berkeley Property Owners Association (BPOA). The landlord group recently filed suit against the board, which it views as unabashedly pro-tenant, arguing that annual rent increases from 1996 to 2002 have been unfairly low. 

The case is scheduled to go to trial this February in Alameda County Superior Court. If landlords win, a judge could order the rent board to approve greater hikes in future years to offset previous losses. 

Landlords and the rent board have fought bitterly in recent years over the yearly rent hike. Since taking control of the board in 1995, the pro-tenant majority has kept annual increases low, averaging about 1 percent. 

According to Kelekian, the rent board uses a long-standing and legally valid formula to determine rent increases. Board members consider year-to-year cost variations for 29 different owner expenses, including water service, insurance, property taxes and utility bills. That total is then added to fluctuations in the cost of living index from the previous year to arrive at a final total. Rent board commissioners maintain some discretion to opt for a higher or lower increase, which they insist they do fairly. 

Had the rent board chosen to average 2002 owner expenses and cost of living decreases, Kelekian said the result would have been a one percent across-the-board rent decrease. In 2002, the board granted landlords a 3.5 percent or $30 per month increase to offset higher electricity costs. 

But landlords say the rent board has failed to take into account new landlord expenses, including a recent city requirement that landlords have gas heaters inspected. 

According to a letter from Theadore Edlin, many owners were not able to get PG&E to do the inspection for free, and instead had to pay private consultants at $50 to $100 per unit. 

Kelekian said Edlin’s figures were inflated, and that the rent board viewed such fees as maintenance costs which responsible owners should have been doing before it became a city requirement. 

Landlords insist that the rent board’s formula is biased. Their lawsuit contends that since 1995, the board has intentionally limited their rightful cost of living increases due to inflation. 

The rent board argues that it has limited the increases to compensate for unfairly high inflation increases passed to tenants when landlords controlled the rent board from 1990 through 1994. 

Although current tenants are now exempt from a rent increase, Robert Cabrera, president of the BOPA said low annual rent increases ultimately hurt all Berkeley residents. 

“Property owners won’t [ever] lower rents [on vacant units] if they think they are going to be stuck with it forever,” he said in an earlier interview.