New Ordinance Amendments Regarding General Obligation Bond Passthroughs
The SF Tenants Union helped pass legislation to close a loophole landlords had been exploiting to unfairly raise rents. The way General Obligation Bond Passthroughs are calculated has subsequently changed. In addition, Tenant Financial Hardship Applications used to only apply to some of the Passthrough. Now, it applies to the whole Passthrough.
Legislation recently passed that amends the Rent Ordinance to provide that General Obligation Bond Passthroughs from landlords to tenants must be calculated based on the amount the property tax rate has increased due to the repayment of general obligation bonds since the tenant’s move-in date (or Tax Year 2005-06, whichever is later). The legislation also allows tenants to seek relief from payment of the entire Bond Measure Passthrough based on financial hardship. The amendments to the Rent Ordinance take effect on June 10, 2024, and apply to Bond Measure Passthroughs that first go into effect on or after July 1, 2024.
Background
The Rent Ordinance limits rent increases on residential tenants, but allows landlords to “pass through” to their tenants a portion of the change in the property taxes that is the result of the repayment of certain categories of general obligation bonds (“Eligible Bonds”). Specifically, landlords can pass through 100% of the change in property tax resulting from bonds issued by the City between 1996-98; 50% of the change resulting from bonds issued by the City after 2002; and 50% of the change resulting from bonds issued by the San Francisco Unified School District or the San Francisco Community College District after 2006. The Controller calculates a Citywide passthrough rate each year, based on the amount of the property tax rate in that year that is attributable to Eligible Bonds. The landlord is not required to file a petition with the Rent Board for approval of the Bond Measure Passthrough. However, the landlord must use the Rent Board’s Bond Measure Passthrough Worksheet in order to calculate the passthrough. To impose the passthrough, a copy of the completed Worksheet must be provided to the tenant in addition to a written notice of rent increase.
What does this legislation change?
The legislation changed how the Controller calculates the tenant passthrough rates. Rather than using a standard passthrough rate for all tenants based on the total cost of the Eligible Bonds under repayment, landlords must now identify a specific passthrough rate for each tenant, which depends on the tenant’s move-in date. Each tenant’s passthrough rate is based on a comparison of how much the portion of the property tax rate that pays for general obligation bonds of the three bond issuing entities (the “Bond Factor”) has increased between the current year, and the year that tenant moved into the unit (or Tax Year 2005-06, whichever is later). Unless the current year’s Bond Factor is greater than the Bond Factor in the year the tenancy commenced, no Bond Measure Passthrough is available. However, if the Bond Factor had increased since the year the tenancy commenced, the landlord may pass through to that tenant the portion of the increase that was attributable to Eligible Bonds. The Rent Board has updated the Bond Measure Passthrough Worksheets based on the Bond Factors calculated by the Controller’s office to help landlords and tenants calculate the tenant passthrough rates. These changes only apply to Bond Measure Passthroughs that first go into effect on or after July 1, 2024, and do not affect Bond Measure Passthroughs that went into effect prior to that date.
In addition, the legislation allows tenants to seek relief from payment of the entire General Obligation Bond Passthrough by filing a Tenant Financial Hardship Application.
If you have questions about your rent, speak a Tenants Union counselor.
