California is one of only two states in the US with statewide laws that limit rental amounts. While some major cities have had local rent control since the late 1970s, the California Tenant Protection Act of 2019 expanded rent caps across the state.
With nearly half of all California residents living in rented homes, landlords in California need to stay up to date on the newest landlord-tenant laws. If you’re a landlord, understand that California rent control laws are complex. Here’s what you need to know.
What is rent control in California?
Rent control is a type of legislation that limits rental rates in a city or state. However, when talking about “rent control,” most people are actually referring to rent stabilization.
Rent control caps rent at a specific price, and several cities in California have these laws in place. For example, Santa Monica has rent control regulations that govern a Maximum Lawful Rent that landlords can charge.
On the other hand, rent stabilization caps rent increases based on a set percentage.
California Assembly Bill 1482, known as the California Tenant Protection Act of 2019, is rent stabilization — not rent control — because it limits rent increases based on a percentage. Landlords cannot increase rent by more than the sum of 5% plus the local inflation rate (or 10%, whichever is lower).
However, “rent control” is widely used to describe the provisions of AB 1482, and that’s the term this article will use.
What cities are under rent control in California?
Statewide rent control in California went into effect on January 1, 2020. The law prevents landlords from implementing “egregious” rent increases. It’s designed to help renters shoulder the high cost of living — as of March 2022, California rent costs are 52% higher than the national average.
While the laws expand across the state, they may not apply to you. The provisions have several exclusions. For example, rent cap limits don’t apply to:
- Units less than 15 years old
- Units with existing deeds or restrictions for affordable housing
- Two unit properties if one unit was owner-occupied for the entire length of the tenancy
- Certain single-family homes and condominiums
- Some units already under local rent control ordinances
What California rent control means for landlords
The California Tenant Protection Act of 2019 is a significant factor in rental properties. It’s one of the strongest safeguards against rent hikes in the US. But first, you must determine if the law applies to you.
The Act applies statewide, but it has exemptions. For example, you may not feel the effects if you own a newer rental property, reside in one part of your two-unit property, or rent to a tenant in Los Angeles or another city that already has rent control policies in place.
Otherwise, it likely applies to you and you must abide by the law’s provisions.
Other impacts of AB 1482
There’s another point of the Act that will directly impact landlords — it includes additional tenant protections that limit when you can evict someone from your property.
Prior to AB 1482, many California cities didn’t require a stated reason to evict a tenant. But the Act has provisions that require “just cause.” Examples of just cause include the tenant violating a significant term of the lease, such as not paying rent or engaging in illegal activities. You can also do an eviction if you want to substantially remodel the property.
But just like some properties are exempt from the rent cap limitations, some are exempt from the “just cause” regulations, too. For example, the provisions only apply if tenants have lived there for at least one to two years. Check with your local jurisdiction to determine if it applies to your situation.
When can a landlord raise the rent?
If you’re concerned about decreased profitability of rent increase limits, you’re not alone. Besides the cap on rent increases, many landlords in California worry about the impact of reduced tenant turnover due to the “just cause” eviction requirements. It can further limit the ability to raise rent and impact your viability as a landlord.
Increasing rent prices is necessary to keep up with annual inflation rates in the US. Generally, it varies from 1% to 4% each year, but it jumped to 7% in 2021. So, when can landlords raise the rent in California?
If your rental is covered under AB 1482, you can increase rent:
- Up to two times each year, but the annual rent increase must fall within the limits whether you impose one increase or two.
- Before a new tenant moves in after the old one moves out.
If the Act doesn’t apply to your rental property, check the local rent control laws to see if there are caps or limits in place that dictate when you can (and can’t) raise the rent.
How much can a landlord increase the rent in California?
The provisions of AB 1482 are quite clear on how much you can increase rent on California rental property. Keep in mind it doesn’t apply to every rental — newer structures and most condos and single-family homes are exempt.
But for properties that fall under the Act, the laws limit annual rent increases to no more than 5% + local CPI, with a maximum increase of 10%. Local CPI is the inflation rate based on the April calculations in your area by the US Bureau of Labor Statistics (BLS).
For example, suppose you rent a unit for $2,500 per month in Long Beach. The minimum amount you can raise rent is 5%, or $125 per month. If you want to increase it by the maximum legal amount, you need to know the CPI for Long Beach. Here’s how to find it:
- Visit the BLS website
- Select the nearest metropolitan area (Los Angeles-Long Beach-Glendale, CA)
- Find the CPI-U, All items, 12-month % change number for April
Based on the 3.6% CPI number for April 2021, you can raise the rent by 8.6%. That’s a $215 increase per month.
Can you get around rent control?
Unless your property is exempt from AB 1482, you don’t have many options to get around rent control in California. The Act does not allow tenants to waive their rights.
But there may be a loophole. The Act applies to existing tenants only — the laws don’t stop you from raising rent after a tenant moves out. But you can't evict tenants repeatedly in favor of new tenants who will pay higher rents. Remember, AB 1482 has tenant eviction protections restricting your ability to terminate a tenancy.
How landlords can protect their property
AB 1482 doesn’t regulate rent increases in many single-family homes, condos and other properties not covered under the legislation. But before you raise the rent or consider tenancy eviction, find out whether your property is covered under AB 1482. If not, look into local rent control laws in your area.
In the end, the best advice will likely depend on the specifics of your rental scenario. Another option to protect yourself as a landlord is to get landlord insurance tailored for California.
Landlord insurance protects you financially if your property is damaged by fire, lightning, wind, vandalism or the actions of irresponsible tenants. It can also include loss of use coverage that reimburses lost rent if your building is being repaired or is uninhabitable.