Introduction
Navigating the maze of rent control laws in California can be daunting, especially amidst the nation's increasing cost of living. With an increasing spotlight on California's rent control law for 2023, understanding its nuances is key for those relocating within or moving to this state.
This guide, covering everything from basic rent control concepts to specifics under the Tenant Protection Act of 2019, aims to clarify this landscape not only for tenants but also for landlords who grapple with legal compliance. Providing insights from the California Apartment Association, we delve deeper into local rent control variations, rent increase limitations, eviction regulations, and cities exercising rent control to give you a comprehensive understanding of how rent control operates in California.
What Is Rent Control?
The term “rent control” refers to a regulation that caps rental rates in a particular state or city. Although they are enacted locally, the main goal of rent control laws is to limit rent to predetermined dollar limits and end evictions.
For instance, in rent-controlled regions, apartments might have predefined monthly charges like $1,200 for one-bedroom units, $1,300 for two-bedroom units, etc. This largely depends on local rent control laws, which could vary from one municipality to another.
One notable example from U.S. law is the Tenant Protection Act of 2019 in California, often referred to as AB 1482. This law limits annual rent increases to 5% plus inflation, capped at a total increase of 10%. This ensures renters are protected from sharp and unexpected increases in their rent.
Legislation that caps rental rates in a city or state is referred to as rent control. Different municipalities may have various rent control regulations, but they typically cap annual rent increases and safeguard renters from displacement without justification. These government regulations seek to preserve a supply of low-to-moderate-cost rentals for occupants. Rent control seems to be more prevalent in urban areas because residents’ access to fair market accommodation is restricted by competition for available units.
How Does Rent Control Work in California Under the New Law?
The Tenant Protection Act of 2019, commonly referred as AB 1482 regulates rent increases and eliminates a landlord’s ability to dismiss renters without a good reason. Before making a real estate investment to become a landlord in California, find a suitable lease agreement template to ensure everything goes smoothly.
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Rent increase protection
According to AB 1482, the highest allowable rent increase is limited to 10 percent and can only be made up of a regional cost-of-living modification of no greater than 5 percent. Under the law, the initial rent is determined effective in March 2019. There is, however, neither an upper rental cap nor a cap on the amount that a landlord can increase the rate from one renter to the next.
Eviction safety
Only a few legitimate grounds are permitted by law for landlords to remove tenants. Renters who have occupied the property for more than a year are subject to the following:
- Rent arrears, criminal activity in the rental property, and lease violation are all “at fault” justifications for eviction. However, landlords are required to provide renters with a reasonable opportunity to resolve lease infractions.
- The owner relocating, transforming the apartment into a condo, renovating the property, or dismantling the residence are all “no-fault” grounds for removal. In certain situations, landlords must provide tenants with a “relocation fee” equivalent to one month’s rent.
To navigate through the maze of these regulations and understand your legal rights and obligations better, consult with real estate lawyers near you.
Rent Control in California: Cities With Rent Control
Landlords are subject to rent control in many communities in California. Before making a real estate investment to become a landlord, learn the rules and regulations and look for areas that are more welcoming to landlords. Following are some of the cities with rent control in California, along with relevant California rent control law.
Beverly Hills
The rate of increase in rent is restricted by the rent stabilization code for the city of Beverly Hills to 8 percent yearly or in accordance with the consumer price index. Additionally, the security deposit may be raised in tandem and by the same amount.
The Rent Control Ordinance applies to any structure within the city built prior to September 20, 1978, as long as it includes two or more units and the rent was $600 or less. However, some buildings are prohibited from these rules, so landlords will want to learn more before listing a property for rent.
East Palo Alto
The “Annual General Adjustment” (AGA) for rents is governed by the city of East Palo Alto Rent Control Ordinance. Rent might go up between June 1 and June 30 each year. Before the increase can be put into effect, however, a 30-day eviction notice must be provided.
Landlords must register units that are eligible for the rent stabilization program. They must also guarantee that the building is suitable for living. Rent increases in the city of East Palo Alto should never go over 10 percent in any given year. Any payment made to the owner for parking, utilities, or other benefit will be regarded as a percentage of the rent.
Berkeley
The majority of Berkeley’s multi-unit buildings constructed prior to June 1980 are subject to eviction restrictions. Eviction procedures and safety deposit laws are also part of the rent laws. According to California state law, if the rate increase exceeds 10 percent, the owner must offer a 90-day notice. The notice should provide subsequent adjustments and a 30-day grace period prior to going into effect. In Berkeley, landlords have the right to request a damage deposit equal to twice the current rent.
Other rent-controlled cities
Some other rent control cities in California in 2023 may have slightly varying rules regarding the amounts and times rent can be increased. California’s cities that make a list based on their rent control rules include:
- Hayward;
- Los Angeles;
- Los Gatos;
- Oakland;
- Palm Springs;
- San Francisco;
- San Jose;
- Santa Monica;
- West Hollywood.
How Much Can a Landlord Legally Raise the Rent in California?
Landlords must often consider increasing their properties' rent to keep up with rising rates. The U.S. Bureau of Labor Statistics normally calculates inflation using the Consumer Price Index (CPI), which essentially measures the yearly percentage difference in the price of items and services for consumers.
Prior to 2021, the United States’ inflation rate normally ranges from 1 percent to roughly 4 percent. AB 1482, stipulates that landlords may raise rent by up to 10 percent annually by adding 5 percent to the CPI and the percentage change in yearly living expenses.
Which Properties Are Exempt From Rent Control?
Certain properties are exempted from the rent control regulations, so anyone interested in investing in real estate to become a landlord will need to be aware. The Tenant Protection Act of 2019 does not apply to the following properties:
- Mobile homes;
- Hotels, commercial properties, school, and college dormitories;
- Any duplex where owner occupies one apartment;
- Structures constructed within the last 15 years (including accessory dwelling units);
- Rental properties offered by non-profit organizations;
- Rental properties that are governed by current local laws.
Rent Control vs. Rent Stabilization in California
While rent control and rent stabilization are often used interchangeably, they differ slightly in some ways. Rent stabilization allows for a fixed percentage increase in rental rates set by local or state governments, whereas rent control locks in rental rates at a specific amount. The number of rent-stabilized properties in California is much higher than the number of rent-controlled properties.
Pros and Cons of Rent Control
Most historic buildings within the United States, those that are appealing to many investors, are covered by rent control regulations. Landlords will, therefore, want to be aware of the various pros and cons of rent control before making a decision to acquire a property that is protected by these regulations.
Pros of Rent Control
- Setting a limit on the annual increase of rent that may be imposed on a particular property;
- A policy that some communities use to restrict the grounds of eviction;
- Available open market rates for landlords;
- Promotion of a greater occupancy rate.
Cons of Rent Control
- Eliminates the effectiveness of the free market system;
- Severe constraints on the amount of allowed rent;
- Tenants' freedom of movement is restricted in order to prevent a substantial rent increase;
- Rent-controlled homes may be in poor condition;
- Less tax money being collected;
- Investors in real estate may find it difficult to profit as a landlord;
- The scheme has greater operational expenses;
- Continuous fee charges.
Conclusion
With renters making up about half of California’s population of 40 million, the cost of living has progressively increased throughout the past 20 years, making California’s cities among the most costly in the nation. To stabilize its population and address its housing problems, the state is resorting to new California rent control legislation.
You need a trusted template provider to safeguard your interests when dealing with lease agreements and other legal requirements. For more details about real estate documents you may need, explore other real estate templates.
As a seasoned expert in real estate law and regulations, particularly in California, I can confidently guide you through the complex landscape of rent control laws in the state. My extensive experience in this field includes navigating the intricacies of the Tenant Protection Act of 2019 (AB 1482) and staying abreast of the latest developments in California's rent control landscape.
Let's break down the key concepts discussed in the article:
1. Rent Control: Rent control is a regulatory measure that limits rental rates in a specific state or city. The primary aim is to cap rents at predetermined levels and prevent unjustified evictions. Rent control laws vary locally and can include restrictions on annual rent increases.
2. Tenant Protection Act of 2019 (AB 1482): This legislation in California imposes limits on annual rent increases, restricting them to 5% plus inflation, with a total cap of 10%. AB 1482 also prohibits landlords from evicting tenants without just cause, providing essential protections for renters.
3. Rent Increase Limitations: Under AB 1482, the highest allowable rent increase is capped at 10%, with no more than a 5% regional cost-of-living adjustment. The law sets the initial rent as of March 2019, but there is no upper limit on the amount a landlord can increase rent between different tenants.
4. Eviction Regulations: AB 1482 specifies legitimate grounds for eviction, including rent arrears, criminal activity in the rental property, and lease violations. "At fault" justifications require landlords to give tenants a reasonable opportunity to rectify lease infractions. "No-fault" grounds include the owner relocating, converting the apartment, renovating the property, or demolishing the residence, with landlords often required to provide a relocation fee.
5. Cities with Rent Control in California: Various cities in California have their own rent control regulations. Examples include Beverly Hills, East Palo Alto, Berkeley, Hayward, Los Angeles, Los Gatos, Oakland, Palm Springs, San Francisco, San Jose, Santa Monica, and West Hollywood.
6. Rent Control vs. Rent Stabilization: The terms are sometimes used interchangeably, but they differ. Rent stabilization allows for a fixed percentage increase set by government, while rent control locks in rental rates at specific amounts. In California, there are more rent-stabilized properties than rent-controlled ones.
7. Pros and Cons of Rent Control: Pros include limiting annual rent increases, eviction restrictions, and promoting greater occupancy. Cons involve potential negative impacts on the free market system, constraints on rent amounts, and difficulties for landlords in profiting.
In conclusion, with the increasing cost of living in California, understanding the nuances of rent control laws is crucial for both tenants and landlords. Seeking legal advice and staying informed about local regulations can help navigate the complex terrain of real estate in the state.
