Are you "banking" on a rent increase? Or are you taken by surprise?

Tenants in Oakland breathed a sigh of relief when the City Council recently voted to change the manner in which the CPI rent adjustment was calculated and the Council capped rent increases at no more than 3% versus 6.7% under the prior calculation. The Council also changed the date at which the new increase became effective from July 1 to August 1, 2022.

I reside in Oakland and on June 30, 2022, I received a rent increase notice from my landlord's agent notifying me that my rent would be increased by 3% on August 1. The last sentence of the notice read as follows:

“It is the express intention of the property owner that the balance of any allowed rent increase under the Ordinance are banked under provisions of the RAO (Rent Adjustment Program) and can be added to any future increases and transferred to any future property owners."

Fortunately, given the continuation of the Oakland Eviction Moratorium, only the the annual CPI increase can be imposed on any Oakland tenant covered by the Moratorium and late fees are also prohibited. In addition, a rent increase can only be imposed with proper written notice once every 12-months.

Landlords may argue that rent increases that are not imposed allow tenants to “bank” the increase in a savings account until the increase is actually imposed. But it is more likely a strategy for a landlord to accumulate banked increases and raise the rent by the highest allowable (and unaffordable) amount, an amount that is designed to stimulate the tenant to move. (The transference of banked rent increases may also make the building more attractive to new owners for the same reason.) Once the unit is vacated, the landlord can re-lease the unit at market rate. This is particularly true if the tenant is low income, retired and/or disabled and “enjoying” a fixed income and a low market rent due to rent control. 

In San Francisco, for example, there is no limit to applying any banked increases dating back to as far as April 1982. In an article published on 9/16/2019 and titled, “Cities Grapple with ‘Banked’ Rent Hikes,” Noah Arroyo wrote, “San Francisco can be seen as the Wild West of rent banking. . .Landlords may grow their banks to any size, and may tap into any portion of that bank in a single year, as long as they provide. . .notice. . .That means a landlord who never raised the rent in 37 years could impose a non-negotiable [rent] hike of 95% in 2020.”

Fortunately, in Oakland, there is a cap of 3x the current CPI but not more than 10% for banked increases, which is still a pricey increase. Landlords are limited to banking rent increases for no more than the most recent 10 years. But, there are certain exceptions that allow landlords to increase rent by more than 10% and this includes (but is not limited to) a petition and hearing related to a "Fair Market Return."  

The City of Alameda appears to have the most well thought out ordinance regarding banked rent increases restricting any banked increases to no more than 8% being imposed at one time and allowing only 3% of the banked increases plus the current AGA to be imposed on any tenant in any year. Moreover, Alameda has a Rent Registry, requiring landlords to inform the rent board about any and all banked increases. (AGA = Annual Gross Adjustment). 

Oakland is playing catchup to Alameda, Berkeley, Richmond, and San Francisco having just enacted a Rent Registry which would require landlord's to register the latest rent increase. But, to protect an elder or disabled population or low income families, the registry (like others) does not include age or income range, likely due to privacy issues.

So what's a tenant to do? Oakland has a Banked Rent Increase calculator available for download with instructions which tenants can use to determine how many, if any, rent increases have been banked. If possible, tenants can start a special savings account to accommodate for these future increases although tenants are currently squeezed by post-pandemic hikes in gas, utility, and food costs, and the cost of household supplies.

A table below explores some of the municipal banked rent increase requirements.Links to research studies by the Terner Center for Housing and Innovation, U.C. Berkeley, are also noted below.

https://ternercenter.berkeley.edu/blog/california-rent-cap-debate/

https://ternercenter.berkeley.edu/wp-content/uploads/pdfs/Rent_Control_Paper_053018.pdf

BANKING RENT	BANKED RENT INCREASES LIMITED BY “X’ YEARS?	IS BANKED RENT INCREASE CAPPED?
Oakland	10 Years; banked increases over 10 years expire. Banked rent increases can be transferred to a New Owner.	Yes. The total of CPI Adjustments imposed in any one Rent increase, including the current CPI Rent Adjustment, may not exceed three times the allowable CPI Rent Adjustment on the effective date of the Rent Increase notice (Reg. 10.45) and no more than 10% in any one year (O.M.C.8.22.070A(2)) with certain exceptions such as if the Owner seeks a Fair Market Return. (O.M.C. 8.22.070A(3)). "No series of rent increases in any five-year period can exceed 30% for any rent increases [with certain exceptions]" (O.M.C. 8.22.070A(3).)
Berkeley	No. “If a landlord chooses not to take an AGA rent increase in a given year, they do not lose it. Landlords can “bank” AGAs and then raise the rent to the rent ceiling at any time if they provide the tenant with proper notice.” See: https://rentboard.berkeleyca.gov/rights-responsibilities/rent-levels/annual-general-adjustment See B.M.C. Chapter 11 (1102)	Yes, it is capped by the rent ceiling which is established by the rent board annually and published for each rental address and rental unit. See: https://rentregistry.cityofberkeley.info/#/homepage
Richmond	No.	Yes, as guided by Rent Board Regulation 602," To the extent a Landlord has not increased Rent up to the Maximum Lawful Rent level, the Landlord shall have the ability to apply deferred AGA rent increases; however, if the proposed rent increase for the Tenant household exceeds the current year AGA plus five percent (5.0%) of the rental amount charged to the Tenant household at any time during the 12 months prior to the effective date of the proposed increase, either in and of itself or when combined with any other rent increases for the 12 months prior to the effective date of the increase, the proposed rent increase shall be void." NOTE: The rent board uses compounded addition for banked rent increases.
City of Alameda	No. Landlords may choose to bank unused portions of the AGA to impose in later years; however, there are numerous restrictions such as a banked increase may not be transferred to a new Owner, a landlord can’t bank more than 8% in rent increases, and a banked increase is capped at 3% plus current AGA. NOTE: Compounded addition is used.	For more information, see Form RP-203. https://www.alamedarentprogram.org/Forms/Landlord-Forms
San Francisco	No. A banked rent increase is an increase that has not been imposed on the Tenant for 24-months unless the banked rent increase is a partial increase which can be banked for 12-months. There is no limit to the number of years of banked increases that may be imposed but rent increases prior to April 1982 can’t be imposed. Banked increases can be transferred to the new Owner for current (not new) tenants. NOTE: Compounded addition is not used and the landlord cannot round up the rent increase amount. See https://sfrb.org/topic-no-053-banked-rent-increases See: https://sfrb.org/fact-sheet-7-annual-allowable-rent-increases-and-banked-rent-increases	No. See column 1.