In 2019, California implemented AB 1482, which affects how much landlords can increase rents. The law allows for an annual rent increase of 5% plus the Consumer Price Index (CPI).
With a population exceeding 40 million people, California accommodates a significant number of renters, constituting half of its total population. Unfortunately, the state has experienced a consistent increase in rent prices over the past two decades, transforming it into one of the most expensive places to reside in the United States. This concerning trend has contributed to a housing crisis, as the supply of housing fails to meet the high demand, compounded by a decline in middle-class job opportunities.
Consequently, the State of California has responded by enacting a series of rent control laws, notably AB-1482, aimed at preserving affordable housing options for low-income and moderate-income households. Notably, California’s implementation of rent control measures and tenant protection laws during the COVID-19 pandemic has played a pivotal role in curbing exorbitant rental price hikes and minimizing mass evictions, setting it apart from many other states.
Rent Control Exemptions
Not all properties are subject to rent control in California. It’s important to know which types of properties are exempt from these regulations. Single-family homes and condominiums, for example, are not subject to rent control. This means that landlords can generally raise the rent on these properties as much as they want. Additionally, if you own a duplex and live in one of the units, the other unit is also exempt from rent control. New constructions within the last 15 years are also exempt.
Rent Control Regulations
For properties that are subject to rent control, the regulations set a maximum allowable rent increase. Under AB 1482, landlords can raise the rent by 5% plus the Consumer Price Index (CPI). The CPI reflects inflation and is calculated based on various factors such as utilities, food, and gas prices. The CPI for each area is released monthly, and landlords are required to use the CPI for the month of April to determine the allowable rent increase.
Note: Several cities in California have their own rent control laws, which may be more stringent than the state law. Notable cities include Los Angeles, Santa Monica, Beverly Hills, and Inglewood. If you own property in these areas, you’ll need to adhere to their specific regulations.
We use the CPI provided by the U.S. Bureau of Labor Statistics, specifically for the Los Angeles area. You can find the CPI information for the Los Angeles area here: https://www.bls.gov/regions/west/news-release/consumerpriceindex_losangeles.htm
Please note that not all regions release the April CPI. Therefore, we recommend consulting with your local apartment association to determine the appropriate CPI and which month they suggest using.
What other resources could I use to determine how much landlords can legally raise the rent in California?
- Apartment Association of Greater Los Angeles
- Apartment Association of Orange County
- California Southern Cities Apartment Association
- NorCal Rental Property Association
- East Bay Rental Housing Association
- San Diego County Apartment Association
- California Apartment Association
Advice For Tenants
For tenants, becoming a homeowner or investing in property can be a long-term strategy to cap their biggest expense. Owning a property with a fixed mortgage rate provides stability and protection against rising rents. While it may not be easy for everyone, exploring the possibility of homeownership or real estate investment can provide financial security in the long run.
Advice For Landlords
Landlords often wonder whether to raise rents immediately or gradually. While some choose to increase rents in two stages within a year, we advise against multiple notices. Instead, consider a single annual adjustment to maintain good tenant relationships and simplify management.
If you’re contemplating selling your property, leaving some units vacant can be advantageous. A vacant unit often attracts more offers and can sell for a higher price. Prospective buyers face high costs and prefer properties that align with market rates, making a strategic vacancy beneficial.
Conclusion
Rent control in California is a complex topic that both tenants and landlords should understand to navigate the rental market effectively. While statewide rent control regulations provide some stability, it’s crucial to know the exemptions and limitations that apply to different types of properties. Tenants can protect themselves by staying informed about their rights, while landlords should ensure they comply with the regulations and consider the impact on property value.
