Amid a high demand for affordable housing, San Francisco is moving to restrict the costs landlords can pass on to tenants, known as passthroughs.
Legislation introduced by Supervisor Sandra Fewer and approved unanimously by the Board of Supervisors Tuesday will prevent landlords from passing on to tenants the cost of debt service and property tax increases incurred when buying the property.
Fewer said that the proposal closes a “loophole” that is being exploited by real estate speculators, and noted that Oakland and San Jose have passed similar laws.
Supporters of the legislation said that large real estate investments firms are increasingly using the law allowing the passthroughs to increase tenants rents by 7 percent in addition to the allowed annual rent increase.
“There is a flaw in our rent ordinance that allows landlords to pass through debt service and property tax increases that they have incurred from simply purchasing a rent controlled building— not for maintaining or improving the building, just acquiring it,” Fewer said in a statement. “Tenants should not be burdened with a rent increase just because they have a new landlord.”
Other passthroughs, such as for the cost of garbage and water, will still be allowed. The legislation does not impact landlords’ rights to pass through costs like those for capital improvements.
“This measure will stop outside property speculators from buying up buildings with high-priced loans and then passing through their financing costs onto existing rent controlled tenants. The goal of pushing these costs onto tenants is to price them out of their units so they can be re-rented out at market rates,” Supervisor Jeff Sheehy said in a statement.