Vega Adjustment

Vega Adjustment addresses situations where the base year NOI was unusually low, typically because the rent charged for 1 or more units was unreasonably low. Vega refers to a court case which required such adjustments when using the MNOI methodology for fair rate of return. The RHC adopted a Vega Adjustment methodology which allows the landlord, as part of a petition for a fair rate of return, to identify units that were rented for less than the HUD Fair Market Rents (FMR) for Santa Clara County. The Vega Adjustment assumes that the rent charged for such units would be the higher HUD FMR rent, rather than the lower rent actually charged, thereby raising the gross income for the base year, which then affects the MNOI for the base year and allows an additional increase in rent for the year for which the landlord is petitioning. The increase in rent allowed would then be spread across all the units in the apartment complex that were subject to the Vega petition.

« Back to Glossary Index