Leading San Francisco Landlord Accused Of Gaming Rent Control Loophole
SAN FRANCISCO (KPIX 5) -- Tenants on rent control in San Francisco are fighting to stay, but they say large investors are pricing them out of their affordable apartments.
That's because new landlords in the city are allowed to pass on a whole laundry list of expenses to rent-controlled tenants. The biggest rent increase is for the actual cost of buying the building.
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The Board of Supervisors voted to change the law so rent-control tenants are no longer paying off their landlord's debt. But KPIX 5 found the city is still approving those sweetheart deals.
KPIX first met Rosie Garcia at a rent board hearing. She was one of several tenants there objecting to a petition filed by her new landlord, Veritas Investments, to increase her rent by 7 percent.
Tenants may object to rent increases if their landlord has failed to perform requested repairs on their units that are required by law.
Most of this rent increase is to pay for the new mortgage and increased property taxes on Rosie's Mission District apartment building. A 2018 city ordinance forbid that kind of rent increase.
But landlords like Veritas that filed in the four months before the law went into effect last year are exempt, if they can prove they "reasonably relied on their ability to pass through those costs at the time of the purchase."
The rent board so far has ruled on 23 petitions for mortgage and property tax rent increases filed during that four month window of opportunity. 21 were granted, including 12 for Veritas.
"That kind of business model is fundamentally incompatible with a city that is trying to address an affordability crisis," said Brad Hirn with the Housing Rights Committee of San Francisco.
He says the decisions will raise the rent for more than one hundred rent controlled tenants in the city by 7 percent percent.
"The impact is increasing rents way beyond what a rent controlled tenant expects. Double digit rent increases on rent controlled tenants," explained Hirn.
Garcia has lived in her apartment for more than 40 years and can still afford it on a fixed income, thanks to rent control. But ever since Veritas took over she says her rent has steadily crept up. If this latest rent increase is approved, she says she won't be able to make it.
"If the rent keeps going up and up, what am I going to do?" asked Garcia.
Veritas is the biggest landlord in San Francisco with nearly 200 apartment buildings. KPIX has previously reported on what rent-controlled tenants describe as the company's "renovictions" -- constant construction projects that tenants believe are designed to annoy them into vacating their units.
They say making them pay for the landlord's expenses, especially for the mortgage, is just rubbing salt on the wound.
"The stories I have heard from many Veritas tenants are horrific," said San Francisco Supervisor Hillary Ronen. It was Ronen who helped craft the ban on mortgage rent increases. She says even though Veritas can be exempted, it should stop petitioning for that.
"Debt servicing pass throughs are not appropriate. So just because it doesn't apply retroactively doesn't mean that a company who cares about their brand and their image, being a major actor in the city, shouldn't voluntarily comply with that policy," said Ronen.
KPIX 5 wanted to ask Veritas's spokesperson Ron Heckman about that. He showed up at the rent board hearing soon after our crew arrived and promised us that he would sit down for an interview at the appropriate time. But he never came through on the offer.
Instead, he referred KPIX to Charley Goss with the San Francisco Apartment Association.
"You have owners who have relied on this law in order to be able to pay their mortgage, and we shouldn't change the law on them," said Goss.
But in the case of Garcia's apartment building, Veritas told the judge the loan for the property had already been paid off as of March 2019.
"Before this rent increase is even approved, they have paid off the loan that is the subject of the hearing. So that to me proves that they do not need it," said tenants rights activist Brad Hirn.
As for Garcia, she got a hardship exemption from the rent board for this rent increase. But she's already bracing for the next one.
"I am not going to lie; I do feel worried. But we have to fight. Maybe I can help other people," said Garcia.
Veritas sent KPIX the following written statement: "Veritas has one of the best, if not the best, track records for responding to resident concerns/complaints, has the lowest (less that 1%) eviction rate of any of our peers and categorically does NOT make efforts to force out residents but welcomes them to stay as long as they like."
The San Francisco Rent Board grants financial hardship exemptions for low-income residents. Application information can be found at the Rent Board website.
