Rules Committee advances ordinance to bar debt-service, certain property-tax pass-throughs after ownership change

San Francisco’s Rules Committee voted May 18 to send an ordinance to the full Board that would prevent landlords who purchase rent‑controlled buildings after April 3, 2018, from passing on debt‑service and acquisition‑related property‑tax increases to existing tenants.

Sponsor Supervisor Feuer introduced the measure after tenants reported an uptick in operating‑and‑maintenance petitions, saying the rule change would close a loophole she called “a subsidy for speculative behavior.” "Tenants should not be burdened with their rent increase just because they have a new landlord," Feuer said, describing the change as limited to pass‑throughs tied to acquisition, not ordinary maintenance or capital improvements.

The Rent Board provided the committee with background on how operating‑and‑maintenance (O&M) petitions are calculated and recent caseload data. "In the last 12 months the Rent Board received over 100 O&M petitions; the majority filed by new owners," senior administrative law judge Sandy Gartzman told supervisors, and staff highlighted that in a recent 12‑month span the board issued 67 O&M decisions affecting 646 units. Rent Board staff also said 15 percent of recent petitions were filed by owners of 1–5‑unit buildings and that the hardship process exists for tenants who cannot afford increases.

Public comment ran well over an hour and divided sharply. Dozens of tenants and tenant advocates urged the committee to approve the ordinance without changes, giving examples they said showed corporate buyers using pass‑throughs to raise rents and push out long‑term residents. "Since Veritas took over our apartment, our rent went up $500 in four months," one tenant said, urging immediate action.

Speakers opposing the change argued that small, long‑time property owners already face tight rent‑control limits and rising operating costs — from garbage and water to insurance and labor — and warned the ordinance could make it harder for modest landlords to hold buildings. Representatives of the San Francisco Apartment Association and several small‑owner speakers asked for protections or grandfathering for small owners; speakers also debated whether removing both debt service and property tax pass‑throughs could have unintended market effects.

Supervisors pressed Rent Board staff on specifics: how O&M increases are aggregated across categories, how the board defines the annual allowable increase tied to CPI, and what portion of recent petitions were filed by new owners. Staff told the committee that the O&M calculation examines two consecutive 12‑month periods, aggregates operating and maintenance costs (including items such as garbage, insurance and management), and divides the difference by 12 to compute a per‑unit monthly increase; if that increase exceeds a tenant’s annual allowable, an O&M petition may be granted. Staff said the board provides memos and multi‑language outreach to tenants about hardship relief and the application process.

Supervisor Yee moved to pass the ordinance out of committee with a positive recommendation to the full Board; the chair put the motion forward as a committee report and it was carried by voice without objection. The full Board will consider the ordinance at a future meeting.

What’s next: the ordinance will appear on the Board of Supervisors calendar for deliberation; committee members and stakeholders said they expect additional amendments and continued negotiations, particularly about grandfathering and small‑owner impacts.