Learn More About Allowable Rent Increases

Date Posted: August 31st, 2018 @ 3:44 PM
Last Updated: January 28th, 2021 @ 8:16 PM

Consumer Price Index (CPI) Increases

The Oakland Rent Adjustment Ordinance allows an annual rent increase based on the regional Consumer Price Index (CPI). These annual rent increases are known as CPI increases or annual general rent increases.

The annual CPI rate for rent increases effective July 1, 2020 through June 30, 2021, is 2.7%. The rate is not applied to rent increases that take effect earlier than July 1, 2020.

  • July 1, 2020: 2.7%
  • July 1, 2019: 3.5%
  • July 1, 2018: 3.4%
  • July 1, 2017: 2.3%
  • July 1, 2016: 2.0%
  • July 1, 2015: 1.7%
  • July 1, 2014: 1.9%
  • July 1, 2013: 2.1%
  • July 1, 2012: 3.0%
  • July 1, 2011: 2.0%
  • July 1, 2010: 2.7%
  • July 1, 2009: 0.7%
  • July 1, 2008: 3.2%
  • July 1, 2007: 3.3%
  • May 1, 2006: 3.3%
  • May 1, 2005: 1.9%
  • May 1, 2004: 0.7%
  • May 1, 2003: 3.6%
  • July 1, 2002: 0.6%
  • March 1, 1995 – June 30, 2002: 3% per year

The “CPI rate” takes effect on each July 1 and remains in effect through June 30 of the following year. A property owner can raise rent above the CPI rate, based on certain justifications.

  • Banking
  • Increased housing service costs
  • Capital improvements
  • Uninsured repair costs
  • Fair return

Banking

Banking refers to deferred allowed annual rent increases. Annual rent increases that were not applied either fully or completely, can be applied in future years. Property owners may defer applying annual rent increases up to 10 years. Rent increases that were not imposed within 10 years expire. If challenged, evidence of the rental history of the subject unit is required.

Increased housing service costs

Housing service costs are expenses for services provided by the property owner. The costs are related to the use of a rental unit. These costs are also known as “operating expenses”.

If a tenant challenges a rent increase, the landlord must present evidence to prove all claimed expenses. Staff will compare the most recent two years of operating expenses to determine if a rent increase is justified. The calculation in both years must provide a reasonable comparison of all expenses. You may not isolate any single expense.

Expenses considered include:

  1. Property taxes
  2. Business license/taxes, and insurance,
  3. Utilities (electricity, gas, water, garbage)
  4. Maintenance and repairs
  5. Managerial costs
  6. Other legitimate annually recurring expenses to operate the rental property, except debt service

Capital improvements

Capital improvements include improvements to the property. A landlord may apply a rent increase to reimburse themselves for property improvements that benefit the tenants. Reimbursement is limited to 70% of the cost of the improvement amortized over its useful life. Property owners must also show that these costs were paid. Examples include: copies of receipts, invoices, bid contracts or other documentation.

Uninsured repair costs

Uninsured repair costs are losses that are not reimbursed to the property owner. These losses are related to damage from fire, earthquake, or other disasters. These costs must be associated with repairs to meet state or local laws. An increase for uninsured repairs is calculated the same way as an increase for capital improvements.

Fair return

A property owner may submit evidence to show that without the requested rent increase he or she is being denied a fair return on the investment. A property owner must show that the return on the investment is less than the return for an investment of similar risk.

The property owner is required to provide three things.

  1. Proof of the amount of investment
  2. Evidence of the return from other investments of similar risk
  3. An analysis of the rate of return from the rental property, including any appreciation in the value of the property.

Rent increases that exceed the CPI increase may be justified for one or more of the reasons listed. Owners may used more than one justification to increase the rent at the same time.

  • CPI, banking, and capital improvements can be passed through as a rent increase in a single petition.
  • Landlords cannot apply a rent increase based on a CPI increase with an increase based on increased housing service costs or fair return. Increased housing service costs or fair housing justifications replace the CPI increase.

Rent increases that exceed the CPI increase may be valid for one or more of the reasons. Owners may combine more than one justification to increase the rent at the same time.

  • Owners can combine CPI, banking, and capital improvements for a rent increase in one petition.
  • Landlords cannot combine CPI with increased housing service costs or fair return.
  • Increased housing service costs or fair housing justifications replace the CPI increase.