Renting is extremely popular in California. Therefore, to try to keep the industry affordable, various regulations have been implemented.
In 2019, California passed numerous laws (AB 1482) that were established to ensure there is affordable rental housing in the state. The purpose of this legislation is to try to solve the state's housing crisis and stabilize the population.
Let's take a look at the various California rent control laws that property owners need to be aware of:
Rent Control Laws
Rent control refers to legislation that caps rental rates and annual rent increases in cities and states. Municipalities can have different rent control regulations; however, they generally limit annual rent increases and protect tenants from eviction without reason.
Furthermore, rent control is more common in urban areas since residents' access to market-rate housing is restricted by competition for available rental units.
While many states officially prohibit rent control, several U.S. cities, such as Washington, D.C. and New York City, have rent control laws.
In 2019, California and Oregon passed the first statewide rent control laws.
It's crucial to keep in mind that there are no limits on the initial rent a landlord can charge for a vacant rental unit.
California Rent Increase Laws
The state of California does have rent control that prevents excessive rent hikes. Furthermore, several California communities have their own rent control regulations.
In addition to the state's legislation, the majority of California's major cities have adopted rent control measures that provide tenants with additional rights.
The state's rent control laws can contradict the city's rent stabilization ordinance.
If a city's local rent control laws are contradictory to the state law, the city law will take precedence if it was passed before September 1, 2019, and/or if it provides more protection for tenants.
California Rent Control
A statewide law called AB 1482 governs rent hikes and gets rid of a landlord's ability to evict renters without good reason.
Rent Increases
Under AB 1482, the maximum annual rent increase is limited to 10% and consists of a local cost-of-living adjustment of no more than 5%.
The starting rent is determined from March 2019 under the law, which is retroactive.
There is no upper rent cap or limit on how much a landlord can raise the rent from one occupant to the next. We'll discuss this in further detail below.
Eviction Protections
When it comes to tenants who have lived in a rental property for more than one year, landlords can only evict lessees if they have a legal reason to do so:
At Fault
This includes failure to pay rent, breaching the lease contract, or engaging in criminal activity on the property.
When it comes to lease violations, the landlord must give the tenant the opportunity to rectify the issue.
No-Fault
This includes converting the apartment into a condo, the owner moving into the rental unit, or demolishing or renovating the property.
In these instances, the landlord needs to offer the tenant a "relocation fee" equal to one month's rent.
Keep in mind that the rent control law does not enforce these rules.
When Not To Increase Rent
In California, landlords are prohibited from increasing rent in the middle of a fixed-term lease for certain types of discrimination (such as age or race) or certain types of retaliation (such as in response to the renter complaining about bugs).
The following grounds of discrimination are prohibited by the Federal Fair Housing Act:
- Race
- Age
- Religion
- Gender
- Disability
- Sexual orientation
- Familial status
- Nationality or origin
The Unruh Civil Rights Act of California also prevents discrimination because of:
- Source of income
- Medical condition
- Immigration status
- Primary language
- Veteran or military status
- Physical appearance
According to California law, landlords cannot raise the rent in reprisal. If an action takes place within 180 days of a tenant's action, it is seen as retaliatory.
If a tenant complains about one of the following factors, and the landlord raises the rent, it is seen as retaliation:
- Organizing or joining a tenant's union or group.
- Filing a complaint regarding the property's safety or health with the respective agency.
- Exercising their rights under the law.
- Complaining about the rental property's habitability.
Rent Increase Amount
According to AB-1482, the Tenant Protection Act of 2019, landlords in California are only permitted to increase rent by 5% plus 10% or the annual inflation rate, whichever is lower.
The rate of inflation is also referred to as the Consumer Price Index (CPI).
Several areas are implementing the 10% rent increase limit as it is significantly less than keeping up with the Consumer Price Index given the substantial inflation experienced in the last year.
However, keep in mind that this only applies to properties where rent control is in effect and that there are exceptions to the norm.
State law calculates the rent increase using the regional CPI if you own property in the following counties:
- Orange and Los Angeles County
- San Diego
- San Bernardino and Riverside
- San Francisco, Alameda, Mari, Contra Costa, and San Mateo
The maximum rent increase is determined using the California CPI, as reported by the Department of Industrial Relations if you do not reside in one of these counties.
Landlords in California are free to increase the rent by any amount while signing a new lease agreement if no existing occupants are present because the state's rent control regulations only apply to rent increases for existing tenants.
Moreover, local governments are now prohibited by state law from imposing "vacancy control," which sets a ceiling on the maximum rent increases permitted for new lessees.
Rent Increase Frequency
Landlords in California are only permitted by state law to raise rent twice every 12 months if they give adequate notice and do not do so throughout the lease term.
If the rent is raised twice in a calendar year, the total increase cannot go over the yearly cap.
In certain cities with local rent control laws, such as East Palo Alto and Oakland, there are different increments for raising rent.
These cities only allow one rate increase yearly unless the rental unit is exempt from rent control.
Proper Notice
Normally, rent increases require a 30-day notice from the landlord. The landlord is required to provide 90 days' notice if they plan to increase the rent by more than 10%.
In California, landlords are prohibited from raising rent throughout a lease term unless the lease agreement expressly permits it.
Exemptions
Keep in mind that certain properties are exempt from California rent control law. These types of properties include:
- Condos and single family-homes not owned by a real estate investment trust (REIT), corporation, or corporation-owned LLC
- Mobile homes
- Commercial properties
- Hotels
- Duplexes whether the landlord lives in one of the rental units
- College dorms and schools
- Rental property managed by a non-profit organization
- Buildings constructed in the past 15 years
- Rental properties that are subject to pre-existing rent control ordinance
If there are no other local laws that the landlord must abide by, they are free to increase the rent as much as they want on properties that are exempt from rent control.
However, they must inform their tenants of the exemption under AB 1482 by giving them notice.
Local Rent Control Laws
Various cities and counties impose additional rent controls in addition to the state limits. These cities are:
- Beverly Hills: There's an annual limit of 8% on rent hikes.
- Los Angeles: Rent increases are limited to 8% per annum. However, the limit is 10% if a new roommate moves in.
- Berkeley: Local laws place a limit on rent prices, parking fees, garbage fees, eviction protocols, and security deposit laws.
- Hayward: Annual rent increases are limited to 5%.
- East Palo Alto: Rent hikes are limited to 10%, including parking and utility fees as well as any other services.
- Palm Springs: Rent increases are limited to 75% of the CPI.
- Oakland: Rent increases are limited to 10%.
- Los Gatos: Rent can increase by over 5% of the existing monthly rent.
- West Hollywood: The West Hollywood rent stabilization division determines the maximum allowable rent increase.
- San Jose: There's a 5% cap on annual rent increases.
- San Francisco: The annual rent increase rate is determined by the San Francisco Rent Board.
- Santa Monica: Rent hikes are limited to 75% of the CPI of Los Angeles for the past year.
Bottom Line
There are numerous laws in California that limit the amount of rent that landlords are permitted to charge.
If you own an investment property in California, it's a good idea to familiarize yourself with the state and local regulations on rent hikes to avoid any legal issues.
You should also keep up to date with the latest California Landlord-Tenant laws, eviction laws, and security deposit laws to ensure you are complying. DoorLoop has everything you need to ensure you manage your properties and tenants effectively and within the constraints of the law. Therefore, if you need a template to draw up a comprehensive California lease agreement, feel free to check out our free forms.
