They're wrong. The new rent control law (effective Jan 1, 2020) specifically excludes temporary discounts from the base rate calculation. See section 1947.12:
This is a state law and it still allows for stricter city level rent control. If the unit is bound under the stricter SF city rent control, the city rent control law may treat discounts differently?
That doesn't really govern SF rent control. This clause does not override San Francisco's limit, which applies to all pre-1979 buildings and which limits annual increases to CPI inflation. Under SF's program "A rent reduction is permanent and cannot be restored if a new agreement is created between the parties at a lower rent due to market conditions."
Note that SF-style rent control was outlawed statewide in 1995 by Costa-Hawkins. Only cities with existing program at that time can continue them.
Well you kind of have to read the whole thing, but specifically section a1: “That rent which is charged a tenant upon initial occupancy plus any rent increase allowable and imposed under this chapter”
Non-controlled buildings that have other limiting provisions e.g. max 10% annual increase also don't want that nominal rent to go down, so that they can still charge $4500 in year two even if the effective rate in year one was like $3250 due to discounts and gift cards.
