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Page 12 of 12 <br />5/5/2026 <br />ATTY/DOCS-ORDINANCE-REGULATIONS/05-05-26 FAIR RATE OF RETURN APPEAL GUIDELINES AND APPEAL FORM <br />REV: 05-05-26 LF <br />4. C = Verified Substantial Remodel Cost per unit: $50,000 <br /> <br />5. Y = 1 (substantial remodel took 1 year to complete) <br /> <br />6. I = Minimum Annual Allowable Increase under the TPA = 5% <br /> <br />7. T = Actual Annual Allowable Increase under TPA = 6.5% <br /> <br />8. S = Stabilization Period = 2 (fixed number) <br />Step 1: Determine the Right to Return Rent <br />B₁ = P₀ × (1 + T) ʸ <br />B₁ = $36,000 × (1 + 6.5%)1 <br />B₁ = $38,340 (annually) or $3,195 (monthly) <br />Step 2: Determine Baseline Stabilized Rent <br />B₃ = B₁ × (1 + I) ˢ <br />B₃ = $38,340 × (1 +5%)2 <br />B₃ = $42,270 (annually) or $3,523 (monthly) <br />Step 3: Calculate Substantial Remodel Cost Supported by Baseline Stabilized Rent <br />Supported Cost = (B₃ − B₁) ÷ Cap <br />Supported Cost = ($42,270 − $38,340) ÷ 5.5% <br />Supported Cost = $71,455 <br />Step 4: Feasibility Test <br />Supported Cost > C <br />$71,455 > $50,000 <br />In this example, the Supported Cost is higher than the Verified Substantial Remodel Cost so the <br />landlord would only be allowed to use the Right to Return Rent ($3,195) when offering the tenant the <br />right to return. <br /> <br />8.A. - Page 61 of 85 <br />319