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California Rent Increase Limits
There is a lot of confusion out there about whether or not California landlords are allowed to raise rents and, if so, by how much. This is mostly because laws have gone through a series of updates as the Pandemic unfolded and those laws would vary depending on whether you were referring to the state, a particular county, or a city.
Recently you may have been hearing news stories about changes to rent protections throughout California, starting in August of 2022. So, what’s prompting this news and what effects that will this have on property owners and renters? Well, as a professional property and asset management company, we receive many questions on this topic from our clients and our tenants and so, in this article, we would like to bring some clarity to the issue.
BACKGROUND OF STATE AND LOCAL RENT PROTECTIONS
First of all, let’s dive into a bit of background history to gain a better understanding of where this all started. Back in 2019, California Governor Gavin Newsom signed a bill called the Tenant Protection Act (also known as AB 1482) which mandated a statewide rent stabilization that would be in place until at least January 1, 2030. The mandate limited rent increases to the combination of 5% plus the Consumer Price Index (CPI) for your specific region (California has 26 statistical areas to consider). These increases cannot be more than 10% of the lowest rent charged at the property. It should be noted that some properties are exempt from these laws, which we will cover later in this article.
Also, if a city or county has stricter rent control laws in place, those laws take precedent; landlords must follow the laws that best protect the tenant. A notable example of a stricter local ordinance that a landlord must follow is the City of Los Angeles, where Coastline Equity manages a large apartment complex. In March 2020, Mayor Eric Garcetti issued an emergency order in response to the COVID-19 pandemic that halted rent increases in such apartments until a year after the emergency order expires. Now in 2022, that emergency order is still in effect; therefore, rent increases cannot in the City of Los Angeles cannot begin any earlier than May 2023.
WHAT IS CHANGING
So why are we hearing about changes taking place in August? With recent rises in inflation have been concerning for everyone. In August 2022 the Consumer Price Index rose high enough to the point where the entire state of California now meets the 10% cap that was placed on rent increases. So, tenants can expect that all allowable rent increases in the state will be 10%, unless their particular county or city has a specified lower rent cap. An example of this would, again, be the City of Los Angeles, which has a stricter cap on rent increases than the state, at 8%.
Even still, the rental increases can also vary depending on the situation. Despite the 8% cap we just mentioned above, according to the City of Los Angeles’ Rent Stabilization Ordinance, “...a rental unit which has an additional tenant joining the occupants of the rental unit thereby resulting in an increase in the number of tenants existing at the inception of the tenancy...The landlord may increase the maximum rent or maximum adjusted rent by an amount not to exceed 10% for each additional tenant that joins...(2)”
Check your specific region to find out if there are any unique caps on rent increases in your area.
EXEMPTIONS TO RENT CAPS
Yet another set of variables that affect the allowable amount of rent increases are exemptions that exist for these rent stabilization laws, wherein landlords can raise rents beyond those limits in some cases.
Single-family homes, duplexes in which the owner occupies one of the units, or buildings that received their Certificate of Occupancy within the last 15 years are some examples of instances when a landlord does not need to adhere to a cap on rental increases; rather, they can adjust rents to market prices. It’s also important to note that any caps on rent increases only pertain to existing tenants. If, however, your tenant moves out and you are marketing a vacant unit, you can rent that unit at whatever price the market will bear.
A NOTE ABOUT EVICTIONS
Of course, any time you discuss rent laws, you also need to be aware of the eviction laws that exist in order to allow landlords to enforcement of those laws. Previously we had seen many eviction protections put into place during the COVID-19 Pandemic. Now, in 2022, many (but not all) of those safeguards have been removed, meaning landlords have a greater ability to evict for things like non-payment of rent. Again, the exact details will depend on your specific local area and you may need to take additional steps before sending an eviction notice.
Bear in mind that, in general, California laws typically seek to provide the highest protection to the tenant. To use the City of Los Angeles in yet another example, qualifying renters have a year after the expiration of the mayor’s COVID-19 emergency order (which is still in place as of September 2022) to pay back rent that accrued during the pandemic before being evicted. Elsewhere in L.A. County, tenants can be evicted for unpaid rent now unless they or their landlord have a pending application for the state’s rental assistance program. California law still allows for the eviction of problem tenants who become serious nuisances to others or who inflict major damage to the property or use it to do anything illegal.
RESOURCES
Lastly, we think it will be helpful if we share with you some of the resources that will help you find out what the rent laws are for your specific geographical area. Here at Coastline Equity, we manage properties throughout Southern California and predominantly within Los Angeles County, Riverside County, and Orange County, so we know how challenging it can be to keep up with the nuanced differences between different areas. The resources below will provide a good starting point to understand the laws within the state but you may also want to search through the official websites for your specific city.
- City-by-city rent control rules in California (www.nolo.com)
- A chart of California cities/counties that have rent control laws more specific than the state of California.
- California Consumer Price Index Table Percentage Changes – For All Areas (2021-2022) (www.dir.ca.gov) - Shows percentage changes in CPI data from 2021 to 2022 for each geographical area for "All Urban Consumers" and "Urban Wage Earners and Clerical Workers."
- Evictions
- California Courts Self Help Guide (selfhelp.courts.ca.gov) - This provides a summary and a set of step-by-step instructions for the eviction process in the state of California
CONCLUSION
Understanding this ever-changing landscape can be daunting at first but it’s helpful to keep in mind that these are very turbulent times and it will always be a challenge to accommodate the interests of both landlords and tenants equally. With a bit of patience and research into the specific region in which you own your property, at the very least you will be able to understand your rights and navigate the law successfully.
Coastline Equity has been helping landlords manage their residential, retail, industrial, and office properties for over 40 years, so please feel free to reach out to us through our website at www.coastlineequity.net or via email at info@coastlineequity.net to see how we can help manage and advise on your real estate investment, too!
REFERENCES:
- Statewide Rent Control: California’s Tenant Protection Act of 2019. Nils Rosenquest, Attorney. Nolo.com. https://www.nolo.com/legal-encyclopedia/statewide-rent-control-has-arrived-california-s-tenant-protection-act-of-2019.html
- Amended by Ord. No. 181,744, Eff. 7/15/11. City of Los Angeles Rent Stabilization Ordinance. https://codelibrary.amlegal.com/codes/los_angeles/latest/lamc/0-0-0-195377
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