A Seattle City Council committee voted against new legislation Friday to establish a rent control policy for the city. The legislation would only go into effect if Washington State repeals laws prohibiting cities from regulating rent.
The legislation, sponsored by Councilmember Kshama Sawant, was voted down 2-3 by the Sustainability and Renters Rights Committee. Under Council rules, the legislation will still move forward to a full vote of the City Council, but it will do so with a “do not pass” recommendation from the committee.
Washington State’s ban on rent control
Washington State has prohibited cities, like Seattle, from implementing rent control policies since 1981.
Per RCW 32.21.830, “no city or town of any class may enact, maintain, or enforce ordinances or other provisions which regulate the amount of rent to be charged.” Until that law is changed, Seattle cannot implement any controls on rent, including this legislation.
How the proposed rent control legislation would work
Note: The following explanation is an adaption of a Seattle City Council Central Staff Memo. Read the full memo.
This legislation would add a new chapter to the Seattle Municipal Code to establish a maximum annual limit on rent increases based on the annual rate of inflation. This section will describe the following major provisions in CB 120606:
1. Effectiveness of the Legislation (Sections 5 and 6)
Washington State currently prohibits any city from regulating the amount of rent to be charged. If the legislation passes, and the state prohibition is repealed, and no other rent control regulations that would apply in Seattle are enacted, landlords would be immediately prohibited from raising rents or deposits in Seattle for 18 months. After 18 months, the rent control program defined in Sections 1, 2 and 3 of this bill would go into effect.
If the prohibition against regulation of rent is repealed and the state does enact rent control laws that would preempt application of the operative sections of this legislation, then Sections 1, 2, and 3 would not go into effect.
There is some potential that if and when the State repeals the prohibition on regulation of rents that it may enact other regulations that create differences between State regulations and what the City has adopted in CB 120606. Those differences may not rise to the level of preemption, which as described above, would preclude this legislation from going into effect, but they could make the policy or implementation confusing or inconsistent. The 18 months between when a rent freeze would begin and when the rest of the legislation would go into effect is intended to give a future Council the time to amend the legislation to correct for any inconsistencies or make other policy changes.
2. Applicability to types of housing units (Section 7.28.040)
Rent control limitations would apply to all rental housing units in the City, except for the following:
- Short-term rentals;
- Transient lodging (hotels, motels, etc.);
- Emergency/temporary shelter and transitional housing;
- Government- or housing authority-owned units; and
- Any other rental housing units exempted from City regulations.
The limit on rent increases applies to a rental housing unit rather than a tenancy, so all rent increases must be consistent with the limitations in the legislation, regardless of whether the tenancy changes. This kind of coverage is called vacancy control, discussed later in this memo.
3. Calculation of the Limitation on Rent Increases (Sections 7.28.050 – .070)
Section 7.28.050 of the bill would prohibit a landlord from increasing rent over the amount of the “maximum annual rent increase” in a 12-month period, either through a one-time rent increase or cumulatively throughout a year. The maximum annual rent increase is equivalent to the rate of inflation multiplied by the average monthly rent charged in the preceding 12 months.
To account for utilities, Section 7.28.070 would require that if a landlord pays the utility bills for the unit, the cost of the utilities would be included in the rent for purposes of calculating average monthly rent. If the tenant pays the utilities, they would be excluded from rent. These utility costs cannot include late fees for the purposes of this calculation.
If the City would like to change the standard calculation of the maximum annual rent increase in the future, the legislation would require that the Council hold at least two public hearings on legislation proposing such a change and outline its reasons for making the change.
4. Applicability to rental housing units newly offered and one-to-one replacement (Section 7.28.080)
This section would regulate the initial rent charged when a rental housing unit is newly offered on a site that was used as rental housing at any time during the ten years prior to when the new unit will be offered for rental. For units that meet that condition, CB 120606 regulates the following scenarios:
- For units matching square footage of the previous rental housing units, the maximum initial rent would be set at the most recent rent charged in the previous rental unit plus the cumulative maximum annual rent increase amount for the years between when it was last offered for rental and when it will be newly offered for rental. It is the landlord’s responsibility to determine the rent most recently charged in the previous rental housing units as accurately as possible using existing data sources.
- If the square footage of a new unit is different than that a previous unit, the landlord must use the same calculation to account for past rent, then prorate rent based on the ratio of rent to square footage.
- If the square footage of all the new rental housing available exceeds the square footage of the previous rental housing units, the landlord must match the value and desirability of previous units to the new units when determining which units would be considered as replacement units and thus subject to limitations on rent increases.
- For any units the landlord considers as excess square footage, the landlord would be able to set initial rents without limitation.
There would be no limit on initial rents for any newly offered rental housing units built on a site where there were no units offered for rent in the past ten years. After the initial rent is set, any future rent increases would be subject to the limitation on maximum annual rent increase.
Lastly, for any units newly offered after the effective date of Section 1 of this legislation, a landlord would need to submit a plan to comply with these regulations, which the SDCI Director would have to approve.
5. Establishment and function of a Rent Control Commission (Section 7.28.110)
This section would establish a citywide Rent Control Commission to meet on a quarterly basis and:
- Make recommendations to the City about rent control policies and regulations, including any changes to the calculation of the maximum annual rent increase;
- Ensure fair and consistent application of regulations; and
- Adopt administrative rules to govern the process to petition for exemptions from rent increases.
Each district Councilmember would appoint five renters who live, and one landlord who owns or manages rental property, in the Councilmember’s district, to be confirmed by City Council. The resulting 42-member Commission would be comprised of 35 renters and seven landlords.
While the current legislation outlines an appointment process and sets two-year terms, the legislation also make mention of an intent to amend the City Charter to allow residents to elect Commission members.
The members of the Commission would be divided into seven District Rent Control Boards (“Boards”), consisting of the members of the Commission in each district. The role of the Boards is to hold hearings on petitions for emergency rent control exemptions and decide whether the petitions meet the criteria for granting such an exemption.
The legislation includes details regarding the expectations and administrative responsibilities that SDCI would have in staffing the Commission and Boards.
6. Process for petitioning for an emergency rent control exemption (Section 7.28.120)
This section would allow a landlord to petition the Board to raise rents higher than the maximum annual rent increase limit. A landlord would be eligible to submit a petition if the landlord has incurred or will incur costs of repairing major damage to the property because of unforeseeable events, including but not limited to earthquakes, flood, water or fire and the costs prevent the landlord from completing repairs or paying for repairs already completed without financial hardship. Petitions would be assigned to the Board with the rental housing units in its district. The Board would hold hearings and decide whether a petition should be approved, conditionally approved (approved for a rent increase over the maximum limit but not the amount the landlord petitioned for), or denied.
The legislation includes details regarding the expectations and administrative responsibilities that SDCI would have in this process, which include staffing, notice, petition processing, and assignment of petitions to Boards.
CB 120606 lays out the following for the Board to consider in deciding on the petition:
- Financial hardship to the landlord from costs incurred due to an unforeseeable event. The Board cannot consider any costs resulting from foreseeable major repairs or arising from routine wear and tear;
- Financial hardship to the tenant(s) if the exemption petition is approved; and
- Whether the exemption can be reasonably expected to result in one or more tenants in the unit being unable to remain housed within Seattle. If the tenant(s) could not remain housed upon approving the petition, the legislation makes clear that the exemption should not be granted.
A landlord or affected tenant injured by the Board’s decision would be able to appeal it to the Hearing Examiner within 14 calendar days of the decision’s issuance.
7. Administration and enforcement of the legislation (Sections 7.28.090 .100; .130 – 200)
This legislation would require that a landlord express any notice of rent increase both as a dollar amount and as a percentage of current rent. In addition, when landlords are registering, renewing, reinstating, or updating their RRIO registrations, they would be required to include the current rental amount and how amount has changed over the previous ten years. CB 120606 would similarly amend RRIO.
SDCI would enforce the provisions of the legislation. In addition to protecting tenants from prohibited retaliation by their landlords for exercising their rights under this legislation, SDCI would have the authority to use warnings, citations, and notices of violation to enforce the legislation. Citations are $500 for the first violation and $1,000 for each subsequent violation in a five-year period. The City Attorney’s Office can also pursue criminal penalties. The administration and enforcement provisions are modeled after the enforcement provision in Section 7.24 of the Seattle Municipal Code, governing rental agreement regulation. The legislation includes a private right of action for a tenant to bring civil suit against a landlord in a court with jurisdiction.