Pasadena Rental Housing Board to Mull Draft of New Regulations for Rent Increases

The Pasadena Rental Housing Board will consider the first draft of proposed new regulations that would clarify and define the standards for rent increases by landlords.

The new guidelines, detailed in Chapter 7 of the Pasadena Rental Housing Board Regulations, would be considered when determining whether a landlord is entitled to a rent increase to ensure a fair return on their investments while maintaining rent control and eviction protections for tenants.

Under Measure H, landlords can request upward adjustments to rent beyond the Annual General Adjustment if they demonstrate that such increases are necessary for a fair return on their investment. This is based on the “fair return standard,” which allows landlords to achieve a net operating income equal to the Base Year net operating income adjusted by 50% of the Consumer Price Index since 2021.

Measure H, passed by Pasadena voters on November 8, 2022, amended the City Charter to impose rent control and just cause eviction protections. The measure took effect on December 22, 2022, following certification by the City Council and filing with the California Secretary of State.

The proposed regulations further clarify the fair return standard and net operating income calculations. They outline how to determine operating expenses and the allocation of upward rent adjustments among units. Key provisions include:

• Applicability: Only landlords of fully covered units in substantial compliance with Measure H and Pasadena Rental Housing Board regulations can file for upward rent adjustments.
• Definitions: Clarifications on terms such as Adjusted Net Operating Income, Base Year, and Petition Year.
• Vega Adjustment Standard: A new standard for adjusting Base Year net operating income if it falls below HUD Fair Market Rents. This includes three options for defining HUD Rents.
• Tenant Hardship: Provisions for tenants who might face undue hardship due to rent increases, including low-income households, families with children, seniors, persons with disabilities, and those who are terminally ill.
• Capital Replacements: Definition and exclusions for capital replacements that can be included in operating expenses.

The Pasadena Rental Housing Board has also proposed that upward adjustments be allocated equally among rental units unless fairness dictates otherwise. The regulations allow tenants to challenge upward adjustments by proving undue hardship, and landlords must retain Base Year records or request them when purchasing properties.

The Pasadena Rental Housing Board will consider feedback on the proposed regulations before finalizing them. For further details, residents and stakeholders are encouraged to review the regulations and participate in upcoming public discussions.