Friday, October 3, 2014

Update on landlords vs tenants at 3501 13th Street: no meeting with tenants, rent increases monthly

I heard back from Steve Schwat with UIP, the company that bought 3501 13th Street NW and sued the tenants to double their rent. If I'm understanding the math correctly, it will actually go up by more than that, and so far it seems the company has had little interaction with the tenants as a group.

At the bottom is a statement he sent me. He also explained the rent increases: basically rents for each tenant will go up by 20% a month, which he said is allowed by law. Schwat explained it as a $180 increase each month for someone currently paying $900 a month, or $2160 in one year. That actually seems like more than I expected.

At the bottom is Schwat's statement. In response, I asked if he expected residents to remain as their rents are almost doubled, have they met with the residents before this filing, and what options are you offering them? Here are his responses to those questions:
We have not met with the Residents as a group yet. We have met with individual residents
Options are presented after we are contacting by the Tenants association if they have one or by a group of tenants. We like to work with an organized group.

It is not my decision as to whether Tenants stay or go. Our goal is to improve the housing so it is safe and clean and delivers a good quality of life in the building. Tenants can choose to stay or leave that is up to them.
And his email to me:
There is no “law suit”. A Capital Improvement Petition was filed with the city to request increased rents in consideration of significant improvements that the building requires. It is not a law suit. 
UIP has a strong and repeated record of working with tenants in DC and helping them take advantage of their TOPA and other rights as DC residents. The Capital Improvement Petition is limited to a 20% increase on any rent amount. The amounts noted in the petition are based on an 8 year amortization. The actual length of time the improvements will be charged can increase so that the monthly increase does not exceed the 20% limit. When filing a CIP, the forms require an 8 year amort. and the rent administrator can increase that amount of time. 
The building was purchased at foreclosure, the conditions in the building are terrible. Housing providers have an obligation to keep housing accommodations is good order; safe, clean, up to code. The previous owner did not do this. Now, we must. Part of the problem in keeping a property like this in good condition, is the substantially low rents in the property, due to many years of limited or zero rent growth and failure of previous owners to file for rent increases. 
Our goal is to work with the tenants in the building, offering them numerous options. That is what UIP does and what we are known for. The CIP is a formality that makes clear to the city (and the public) that the property is, in fact, in need of significant improvements. We anticipate meeting with and working with the tenants at the property.
And on the subject on the rent increases, I was confused so we emailed a few times. He was quite responsive once he emailed back:

Schwat: "It would go up 180 a month assuming the rent is currently 900 a month
The maximum allowed increase under a CIP is 20% (per year or per month – it’s the same)"
Me: "Ok, gotcha. So for a person paying 900, it would go up to 1080 for a year, then 1260 the next year and so on?"
Schwat: "No. For a person Paying 900 a month their rent would go up by 180 a month or 2,160 a year"

And on the subject of lawsuit or not, to me it seems like semantics -- one party has filed against another party, which must defend itself in front of a judge. That sounds like a lawsuit to me, even if it's officially not one.

15 comments:

Anonymous said...

It's not technically a lawsuit because it's in no way a lawsuit. And to put a headline that the landlord is suing the tennants is disingenuous and meant to promote an agenda. How else are they supposed to raise rent? The only way to do it and be comply with the law is to submit this filing. And no one is obligated to appear or "defend" themselves which is obviously necessary for a lawsuit. There is a connotation of "suing" someone that is negative and it was clearly intended to try to sway the reader. It is factually untrue to even imply it is a lawsuit and it is at the limit of what most would consider journalism.

Andrew W said...

Anon, I'm not a lawyer. This very post states that it is technically not a lawsuit. A headline that reads "UIP files capital improvement plan petition to double rent..." doesn't make any sense to anybody who isn't already very familiar with real estate jargon. The person who sent me the legal document described it as a lawsuit and it seemed like a lawsuit to me, with two parties and a judge deciding, which is why I called it a lawsuit.

You also might notice that this is a neighborhood blog, not the New York Times. To make you happy, I have added an update to the previous post.

Anonymous said...

This is one of several tactics that have been in use in Columbia Heights over the last 10 to 15 years designed to displace residents in large numbers. Many projects used condo conversion laws to displace residents only to revert back to rental. What is really different this time is the process is visible. But this is the New Columbia Heights.

William

Anonymous said...

There seems to be some misunderstanding here - I find it hard to believe that the rent would increase monthly!

My understanding is that the rent increases once per year, by 20%. So the first year it would be 900/month, the next year the rent would be 1080/month, the following year the rent would be 1260/month, and so on until the monthly rent reaches the target that is proposed by the petition.

Anonymous said...

4:32 Anon is absolutely correct. This is how it works. Rent is not increasing by 20% each month. It is increasing 20% per year. The petition is not a lawsuit. Just because it looks like a lawsuit to you doesn't make it one, or mean it is easier to understand if you refer to it as one.

Anonymous said...

I feel like increasing the rent per month is illegal. I have always been told that the rent can only be increased 20% yearly. If I am the tenants, i take this to court, and also let their council member know.

Andrew W said...

Schwat from UIP said it would go up each month by 20%, so I'm going with that. I asked for clarifications and the quoted text above is what I got. Unless he misspoke, but his firm is the one doing the non-lawsuit-in-front-of-a-judge. And again, I say in this very blog pos that is it not a lawsuit.

Anonymous said...

Dear idiots: Rent increasing 20 percent per year is the same as 20 percent per month.

No wonder the natives hate New Columbia Heights millennial so much. And if this is their average math skills, our country is so screwed.

Anonymous said...

I've read a few stories on this. Biggest problem is that the building doesn't seem to have any sort of tenant association, which is key. Another example of why buildings should have tenant associations beforehand instead of waiting for crisis to arrive.

Andrew W said...

Anon at 10:57, don't be a jerk.

Schwat: "No. For a person Paying 900 a month their rent would go up by 180 a month or 2,160 a year"

Andrew W said...

Anon at 4:23, I asked that question and he said no:

Schwat: "It would go up 180 a month assuming the rent is currently 900 a month
The maximum allowed increase under a CIP is 20% (per year or per month – it’s the same)"
Me: "Ok, gotcha. So for a person paying 900, it would go up to 1080 for a year, then 1260 the next year and so on?"
Schwat: "No. For a person Paying 900 a month their rent would go up by 180 a month or 2,160 a year"

Anonymous said...

Of course a single overall rent increase is the same whether you calculate monthly or yearly, but that is not the confusion. The question is how frequently will the rent increase? There are two options:

A) The rent increases once per year, so the first year the tenant pays 12*900 = 10800 in total, the second year they pay 12*1080 = 12960 in total, and so on.

B) The rent increases every month by 20%, meaning they pay 900 the first month, 1080, the second month, 1260 the third month, and so on until it reaches the proposed amount, resulting in a much larger yearly total than option A) (too lazy to figure this out at the moment)

Option B) seems absurd (and probably illegal) to me, but that is what the OP is claiming. I think he needs to double-check again with UIP.

Anonymous said...

Of course a single overall rent increase is the same whether you calculate monthly or yearly, but that is not the confusion. The question is how frequently will the rent increase? There are two options:

A) The rent increases once per year, so the first year the tenant pays 12*900 = 10800 in total, the second year they pay 12*1080 = 12960 in total, and so on.

B) The rent increases every month by 20%, meaning they pay 900 the first month, 1080, the second month, 1260 the third month, and so on until it reaches the proposed amount, resulting in a much larger yearly total than option A) (too lazy to figure this out at the moment)

Option B) seems absurd (and probably illegal) to me, but that is what the OP is claiming. I think he needs to double-check again with UIP.

freemarketer said...


Schwat seems to be pretty clear in his email responses that the author provided. You can also read about CIPs (I did) and it is clear that these increases stay flat for the duration of the time so that the owner can get their money back and a return on their invesment over that time. In this case, if approved - the rent would go up by 20% for existing tenants and stay that way for 8 years. If existing tenants leave for one reason or another, then UIP can use the other Rent Control mechanisms to raise the rent for teh new tenants and still get the CIP for the remaining time granted. The DC govt may be able to stretch it out - for example 10% increase that would last for 16 years (maybe slightly higher to give UIP a return on their funds for the longer duration).

It seems to me that the city should address fair housing through the tax base and it should not incentivize current tenants to take deals that only help them - to the detriment of the tenants that follow later on. Property owners that are willing to buy and invest in buildings like this one actually take large risks with their capital and must keep up the buildings or risk fines. What is the incentive for companies like UIP to spend the time and money if they can't make money doing it?

We need to get back to fair market rules in DC and if we want to assist people because the cost of living is so high here then let's come up with legislation to help those people. We should not punish the landlords when they try to improve properties and to achieve their goals to invest for profit. Eventually, this Rent Control system will break the backs of landlords and I fear that more properties will fall further into disrepair and won't be safe and sound for tenants.

If you restrict returns on investment; fine companies that invest for trash violations; and pre-existing conditions like lead paint and underground storage tanks, etc. but give them no opportunity to benefit from improving the real estate - then who will step up and take the risk? Should the DC government use eminent domain and take all of these older buildings and be in charge of renting and maintaining them? I am a free market guy and my view is this type of Rent Control is actually a big part of the problem and is not a good or fair solution. I welcome your comments.

Anonymous said...

Freemarketer, thank you for attempting to inject the facts and some common sense here. DC has an inordinately old rental housing stock; and its leaders decided to erect and maintain a stringent rent control scheme that governs those properties, which, all the new stuff notwithstanding, still constitute the majority of the city's housing. As such, it is part of a tiny number of jurisdictions that do so-- four states and the District allow it, 38 states have explicitly prohibited it as housing (or social) policy because of its adverse effects on housing investment. If I have money to invest in a rental property, why would I do so in the District, when I've got a million non-rent controlled options elsewhere? If I already own one or more in the District, how long am I going to do so if the system is so punishing when I try to recover necessary capital improvement costs, or get the return on investment the law allows? Anyone who remembers the Columbia Heights, Shaw and numerous other neighborhoods of even 10 or more years ago, when there were scores of private properties that the District was responsible for because it had taken them for back taxes, but could not sell them at its tax sales, knows that DC Government stewardship is a neighborhood's worst nightmare (ditto for politically favored owners, such as Shiloh Baptist and Howard U., against whom the housing codes were never enforced). Those same neighborhoods are full of examples when an owner does finally decide to just sell and get out: the existing tenants "buy" the building with their TOPA rights- but with money loaned by a condo developer. The tenants then immediately take a cash payout, in exchange for selling the building to the condo developer and moving out. That developer proceeds to gut rehab the building as market rate condos. Those particular tenants have hit the lottery, the condo firm makes plenty of dough... and the city loses rental housing. Great policy, huh? A group like UIP is at least trying to upgrade the building and preserve it as rental housing. Will rents go up? They have to. Do tenants have a right and ability to scrutinize and even challenge the claimed necessity of the improvements and proposed rent increases? Absolutely. Do they need a lawyer to do that? No, they do not. Will the new improvements help ensure that the building is there for tenants of the next 50 years, and not just those there now? Yes. Should city policy encourage, not discourage, such investment-- but also try to minize its necessity by vigorous housing code enforcement? No question.

One last point. The District's rent control scheme is not means-tested. The highly educated people of ample means who are occupying a rent-controlled unit are often the ones who scream the loudest when valid, but sometimes substantial, rent increases are proposed-- and they wrap themselves in the flag of "protecting" lower-income tenants, even as their presence actually denies scarce affordable housing to those with demonstrated need.