Capital Improvements

A housing provider can petition to raise rents by an amount enough to amortize the cost of capital improvements. If the Rent Administrator approves the petition, the increase is temporary and is stoppeonce the housing provider recovers all costs of the capital improvements. That’s why this increase in rent is called a surcharge.

A housing provider files a petition, serves copies to the tenants, and presents the case for the improvement at an RACD hearing. Tenants may support or oppose it.

RACD makes a ruling on the petition, based on:

• Whether the improvement will protect or enhance the health, safety and security of the tenants or the habitability of the housing accommodation;
• Whether the improvement will be depreciable under the Internal Revenue Code;
• Whether required governmental permits and approvals have been secured; and
• Whether the design and cost of the work are sufficiently documented.

In addition to the work’s cost, the housing provider can include financing costs, including interest and service charges. The provider must amortize (spread the costs of) a building-wide improvement project for 96 months and an improvement to one or more but not all rental units for 64 months. The surcharge may be no more than 21 percent of the prior rent charged for a building-wide capital improvement and no more than 15 percent for an improvement to one or more but not all rental units. If RACD approves the surcharge, the housing provider performs the work and may then raise rents.

The Act allows a housing provider to continue the surcharge until the housing provider has recovered all costs, including interest and service charges, of the capital improvement. Certain low-income elderly and disabled tenants can be exempted from a capital improvement surcharge.

Find out more by visiting Capital Improvement Petition Process.