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1973 (if not rented on that date) or an appropriate rent determined by the Rent Administrator (if not rented during previous year or if rent charged during that period cannot be determined). This definition shall be adhered to during the entire act as provided in subsection 204(d).

Subsection 201(a) defines "capital improvement” as a permanent improvement or renovation other than ordinary repair, replacement or maintenance continuing for twelve months or longer. It was the intent of the Council that normal replacements and proper maintenance should clearly be delineated as that ongoing effort of landlords to keep dwellings in compliance with the housing code.

Subsection 201(e) defines the term “housing accommodation" as a structure or building within the District of Columbia containing one or more rental units with 60 percent or more of its rental units within used for residential nontransient occupancy.

Subsection 201(1) defines the term "housing regulations" as the Housing Regulations established by the Commissioner Order dated August 11. 1955 as amended.

Subsection 201(9) defines "initial leasing period” as that period in which the first tenant of a new accommodation, or one substantially rehabilitated, occupies and rents it.

Subsection 201(h) defines "landlord” using the standard definition while adding thereto all possible nuances of the definition which could cover any entity receiving or entitled to receive rents or benefits for the use or occupancy of rental units. The Council felt that this definition should be all inclusive in order that there be no loopholes for any bonafide housing business operator to circumvent the provisions of the act.

Subsection 201(i) gives the standard definitions of "person".

Subsection 2010;) defines "related facility” as any furnishing or equipment available to tenants, the use of which is included in the rents.

Subsection 201(k) defines "related services" as those in the rental agreement, required by law or provided by landlord, and paid for in the rent.

Subsection 201(?) defines “rent" in its broadest meaning to include any consideration of value in exchange for the use or occupancy of a rental unit.

Subsection 201(m) defines "rental unit” as any type of apartment, room, single family house or duplex which is rented or offered for rent for residential occupancy. It also specifically excludes those structures used primarily for transient occupancy,

Subsection 201(n) defines “market value” as the purchase price paid by the landlord or that value determined by the Mayor for assessment purposes, whichever is greater.

subsection 201(0) defines "assessed market value" as the estimated market value of a housing accommodation as determined by the Mayor for property assessment purposes. Subsection 201 (p) defines "substantial rehabilitation" as any

improvement or renovation begun after February 1, 1973, the cost of which improvement is 50 percent or more of the market value of the accommodation.

Subsection 201(9) defines "tenant” as including a tenant, subtenant, lessee, sublessee, or other person entitled to the possession, occupancy

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beter or the benefits of any rental wit. The intent of the Council was to in

sure that every individual who rented property for residential use This would be protected by the provisions of the act.

Subxection 201(c) defines "maximum possible rental income as the

sum of rents for all rental units (occupied or not) as of the date of per filing the registration statement. The Council wanted to specifically

include all possible income from rental in the rate of return formula in order to more realistically assess the income and income potential.

Subxection 201($) defines "vacancy loss” as the amount of rent not collected due to vacant units. The Council wanted to insure that units not offered for rent or occupied by the landlord or his employees be excluded so as not to improperly inflate losses in the rate of return fomula.

Subsection 201(1) defines "uncollected rent” as the amount of rent or other charges due but not collected. Deducted from this amount is any such amounts due for which the landloard has failed to attempt to recover through appropriate legal channels after having ample opportunity to do so. The Council wanted to insure that uncollected rents as al proper operating loss item in the rate of return formula

would not be improperly inflated by amounts for which no reasonable | attempt to recover such had been made.

Nuhxertion 2011v) defines "operating expenses" as the normal expenses for the upkeep of the rental accommodation for any consecutive 1 month perioni in the 15 months immediately preceding the filing of the registration statement.

Subsection 2014-) defines "management fee" as the amount paid to a managing agent and any pro rata salaries paid to off-site administrative personnel. Subsection 2016.") defines "property taxes” as the amount paid to the District of Columbia Treasurer for real property tax on the houising accommodation. This is a legitimate expense item in the computatior of the rate of return.

Suberction 2016) defines "other income which can be derived from the housing accommodation” generally as all other types of income other than the gross rental charge which a landlord earns by virtue of his ownership of the accommodation. These income items are legitimiate income items in the computation of the rate of return.

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SECTION 202--REGISTRATION AND COVERAGE

Subsection 202(a)-Sections 203-212 of this act applies to all rental vuits except the following:

1. rental units in health care, personal care homes and hospitals; (to eliminate medical care institutions)

2. federally owned units or units in which the mortgage or rents are subsidized: (federal regulations prohibit controls on such properties)

3. a unit for which the initial certificate of occupancy was issued after February 2, 1973 (to stimulate new construction because the Committee originally intended to exempt all new construction)

4. any dormitory of an institution of higher education and private boarding schools where rooms are provided for students; {to specifically eliminate institutional residences)

5. any

rental unit in an owner or renter occupied residence containing not more than two rental units; (to eliminate small units which are generally not primarily operated as a housing business)

6. units in housing accommodations which have been vacant and unoccupied for two years preceding the enactment date if such accommodation is in compliance with the housing regulations; (to encourage the utilization of boarded up housing in

increasing the rental housing stock). Additionally, the Council intended that administrative workload of the Rental Accommodations Office would be significantly reduced by these aforementioned exclusions,

Subsection 202(1) requires registration of unregistered accommodations within 90 days after the effective date of the act.

A registration statement is required to be filed for every housing accommodation within the District of Columbia irrespective of the applicability of any other provision of the Act to the housing accommodation.

Paragraph one (1) requires a complete description of property along with the housing business license and occupancy permit numbers and dates.

Paragraph two (2) requires a description of the utilities including air conditioning and heating fuel.

Paragraph three (3) requires rental information (local occupancy fee charged, amount of security deposit, related service included and related facilities and charges) that obtained on the base rent date.

Paragraph four (4) requires the information required in paragraph 3 that obtains on the registration date.

Paragraph fire (5) requires information on rental units that have been substantially rehabilitated (market value prior to rehabilitation, method of market value computation, description of rehabilitation and an itemized list of expenditures).

Paragraph six (6) requires the same information as stated in paragraph (5) on rental units for which substantial rehabilitation is planned. Additionally, it requires a description of the proposed rehabilitation.

Paragraph seren (7) requires information on the market value prior to capital improvement, a list of capital improvements and an itemized list of expenditures for all capital improvements allowed under section 205 of this act.

Paragraph eight (8) requires a list of outstanding violations of the housing regulations applicable to the registered accommodation.

Paragraph nine (9) requires inclusion of the name and address of the owner and, wlien applicable, the resident agent.

Paragraph ten (10) requires the information necessary for the Rent Administrator to easily and accurately compute the rate of return according to subsection 204(a).

Paragraph eleron (11) requires the rate of return for that housing accommodation as computed by the landlord according to the formula in subsection 204(a).

Subsection 202(c) requires landlords to certify that there have been no changes in the information required on the previous registration statements or, when applicable, to correct such statements quarterly by sworn addendum. Upon the occurrence of any change which would

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affect the rent, the landlord would have to submit a new statement prior to filing for an increase.

Nubarction 2012 (d) provides for public inspection of registration forms and requires landlords to post a copy in public place on the premises of the housing accommodation to which the registration statement applies, have such available at the Rental Accommodations Ofice and mail duplicate copies to each tenant.

Tile Council felt that it was imperative that the data on registration forms be readily accessible to tenants on the premise and at the office in order to facilitate their decisions relating to filing petitions and to provide this pertinent data to all parties concerned.

Subsection 202(e) requires the Administrator to assign each registration form a registration number.

The Council added this provision in order to aid in the management of registration information.

Subsection 202( ) requires that the registration number be placed on each housing business license and each certificate of occupancy issued after the effective date of the act.

The Council intended that this section would encourage landlords to register promptly and properly, since they will not be able to get a license until they get a registration number.

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SECTION 203--REGISTRATION FEE

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Section 20.3 establishes an annual registration fee of $2.00 per rental

unit to be paid at the same time and place that one applies for their tal housing business license or their renewal or files their registration

forin.

These fees are to be paid into the Treasury of the United States and credited to the General Fund of the District of Columbia. There was substantial testimony to the Council supporting the concept that the Rental Accommodations Office should be self-sustaining. The Council felt that the two dollar fee was not burdensome and would produce approximately $375,000 annually to support the staff necessary to administer the program.

SECTION 204-RENT CEILING

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Subsection 204(a) provides the formula for computing the rent ceiling (or maximum allowable rent for rental unit). Landlords will only be able to add to the current rent ceiling applicable to their units,

to 5 percent of the current rent ceiling. This amount may only be added if the rate of return of that particular housing accommodation is less than cight percent (as computed according to the formula). Then the landlord may only increase rents on a pro rata basis by an amount sufficient to generate a rate of retura no greater than 8 percent. The aforementioned rate of return formula includes the normal elements of income and operating expenses of the housing industry. The maximum possible rental income plus all other related income from the property are added together. From this sum is subtracted operating expenses, property taxes, management fees, depreciation expense, and the amortized cost of capital improvements (where allowed). The result of this computation produces a

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net income figure. This net income figure is divided by the assessed market value of the property to provide a percentage rate of return.

It is the conviction of the majority of the Council that the rent increase formula described above is the most equitable method to allow for increased costs of landlords without placing the entire burden of such costs on the shoulders of tenants. Specifically, it is the contention of the Council that the increased operating costs will be equitably shared by landlords and tenants. Hopefully, such a measure will encourage conservation of energy and better manage- s. ment of declining resources by both landlords and tenants.

The Committee chose to adapt the approach of Regulation 74-20 of automatic increases rather than a cost justification approach because it felt that the latter approach would result in a flood of petitions by landlords and tenants. Even if the cost justification approach were tied to a reasonable rate of return formula there could be no guarantee that the tenants would be protected from excessive rents or that the landlords were doing their best to maximize efficiency, cut wastes, eliminate mismanagement and the like.

The testimony at the hearings revealed a deep gulf between the opinions of landlords and those of the tenants. Generally, landlords argued that 10% increase would be needed as a minimum to allow an adequate reasonable rate of return on their investment which they contend should be around 10%, using the market value of the property as the denominator. Tenants argued that no increases should be allowed.

The act would allow 5 percent increase over a two year period to cover the cost of increasing taxes, maintenance, labor, trash removal services and other operating costs. The Council finds that such an increase is justifiable to protect the interests of both landlords and tenants.

The derived formula resulted from combining features of two different approaches, neither of which in and of itself was thought to be acceptable or sufficient. The first approach, known as the automaticincrease-approach, was the thrust of the prior regulation (74–20) which allowed all landlords to automatically increase their rents to a level 12.32 percent higher than that which they received on February 1, 1973. Although further increases required the scrutiny of the Commission, many tenants were forced to pay higher rents even though they may have been paying their own utility bills. The ceiling of 12.32 percent was arbitrary and in some cases much too high, in others too low. The second approach, or cost-justification-approach was the method envisioned in the Congressional enabling legislation. Landlords should have been able to raise their rents as their costs increased. Irrespective of a landlords profit levels, a strict passthrough-of-costs provision would have placed the burden of inflation on tenants alone.

The Committee recognized some very basic facts: (1) declining profits encourage investment disincentives; (2) negative cash flows can lead to reduction in housing stock; (3) across-the-board automatic percentage increases in rent levels are in and of themselves inflationary; (4) any percentage increase figure would rely on guesswork (of such exogenous factors as oil import tariffs, consumer conservation

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