Does California have rent control? California rent control 2022 is especially important as the entire nation sees price increases at the gas pump, at the grocery store, and beyond. If you are moving within or to the state, it can be helpful to learn what rent control is in California. The California Apartment Association keeps landlords up to date on the current laws and regulations to help them ensure legal compliance. The following will help you to better understand the rent control laws California has for CA rent control.

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. As an illustration, rent-controlled apartments in a specific area might be permitted to charge $1,200 monthly for one-bedroom units, $1,300 monthly for two-bedroom units, and so forth.

Legislation that caps rental rates in a city or state is referred to as rent control. Different municipalities may have different 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.

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.

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 2022.

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 would exceed 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 2022 may have slightly varying rules regarding the amounts and times rent can be increased. California’s cities that make the 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 often must think about increasing the rent of their properties in order 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:

  1. Mobile homes
  2. Hotels, commercial properties, school, and college dormitories
  3. Any duplex where the owner occupies one apartment 
  4. Structures constructed within the last 15 years (including accessory dwelling units)
  5. Rental properties offered by non-profit organizations
  6. 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 include the following:

  • Rent control sets a limit on the annual increase in rent that may be imposed on a particular property.
  • Rent control is a policy that some communities use to restrict the grounds for eviction.
  • Open market rates are still available for landlords to benefit from.
  • Rent control promotes a greater occupancy rate.

Cons of rent control include the following:

  • The effectiveness of the free market system is eliminated by rent control.
  • The amount of allowed rent increases may be severely constrained.
  • Tenants’ freedom of movement is restricted in order to prevent a substantial rent increase.
  • Rent-controlled homes may be in poor condition.
  • Rent control may result in less tax money being collected.
  • Investors in real estate may find it difficult to profit as a landlord.
  • The scheme of rent control has greater operational expenses.
  • Fees continue to be charged.

Based on the above lists, there are now only a few places where rent control is legal. Whether your property is controlled or not, a California lease agreement template may be useful when you find your next prospective tenant.

Closing Thoughts

Renters make 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. Low- and middle-income Californians are leaving certain regions or the state altogether as a result of surging rents and a decline in middle-class employment. To stabilize its population and address its housing problems, the state is resorting to new California rent control legislation.

The justification for rent control is simple. Restricting the amount of rent growth will preserve accessible housing and lessen the incidence of evictions. Those who are in housing that is priced less than the average rate significantly benefit from rent control.