Topic No. 305: Interest on Capital Improvement Costs

When calculating a capital improvement passthrough, landlords are entitled to add a reasonable rate of interest to capital improvement costs. Interest is computed by one of two methods. If the money to do the work was borrowed with a fixed rate loan, the actual interest cost up to 10% will be used. If the interest rate on a loan is variable, or if no funds were borrowed to pay for the work, then an imputed interest rate as determined by the Rent Board each year will be used. Please note that credit card charges are subject to the imputed interest rate, since they have variable rates of interest. Also, no interest is allowed for uncompensated labor costs.

When the imputed interest rate is applicable, landlords must use the imputed interest rate in effect on the date the petition is filed. The imputed rate is determined annually and changes on March 1st of each year. The current interest rate is included on the Capital Improvement Petition form. To receive a copy of the petition form, you can fax it to yourself through our Fax Back system by calling (415)252-4660 or visit our website at The petition form is also available at our office.


June 2006