Everything You Need to Know About California’s Rent Control Laws

California Rent Control Laws changed with the Tenant Protection Act of 2019 (the bill also known as AB-1482). Read on for an overview of changes to local rental control law in the State of California.

Enacted on January 1, 2020, California’s statewide rent control law made it illegal for residential landlords to raise rent more than 5%, plus the local rate of inflation in a year. Called the “Tenant Protection Act of 2019,” or AB 1482, the law is designed to prevent the most “egregious” rent increases in the state, especially as many renters have had extreme difficulty paying for housing in the midst of the COVID-19 pandemic.

California Governor Gavin Newsom remarked that with the implementation of the Act (AB 1482), the state will enjoy the “nation’s strongest statewide renter protections.” The statewide law is retroactive to March 15, 2019, and expires on January 1, 2030.

Note that the rental caps limit how much a landlord can increase a tenant’s rent, not the amount of the initial rental price. That amount is determined as it always has been: the homeowner and the tenant come to an agreement that is ratified through a signed lease. To help homeowners determine the optimum price embodied in that agreement, Belong offers a Pricing Optimization Model which takes into account a variety of factors, including market conditions and location.

Exemptions for the Statewide Rent Control Law

The Tenant Protection Act applies broadly to all housing, however there are some exemptions, including which can be found here. The statute does not apply to California condos, and single-family homes, unless they’re owned by a corporation or real estate investment trust. Local rent control ordinances currently in effect will still apply.

Duplexes, where the owner lives in one of the units, are also exempt. In addition, the law provides for these exemptions:

• Housing accommodations in which the tenant shares bathroom or kitchen facilities with the owner;
• Single-family owner-occupied residences, including a residence in which the owner-occupant rents or leases no more than two units or bedrooms, including an accessory dwelling unit or a junior accessory dwelling unit;
• Units already subject to a local ordinance that is more protective than state law, and that requires “just cause” to terminate a tenancy (for example, the eviction protections of the San Francisco Rent Ordinance) – see below for a further description of “just cause;”  and
• Residential real property that’s separately alienable from the title to any other dwelling unit – meaning, it can be sold separately from any other dwelling, as is typically the case with single-family residences and condominiums – as long as both A and B apply:
  

(A) The owner is not any of the following:

(i)  A real estate investment trust, as defined in Section 856 of the federal tax code;

(ii)  A corporation; or

(iii)  An LLC (limited liability company) where at least one member is a corporation

AND

(B) The tenants have been given written notice that the residential property is exempt from this section.

Homeowners should note that the state law exempting buildings constructed in the last 15 years is a rolling date. Thus, units built in 2006 will be covered by the exemption in 2021, but not thereafter. Similarly, units built in 2007 will be covered up through 2022,  but not thereafter. And so on.

Updates to evictions and lease terminations: the “just cause” requirement

AB-1482 has a protection for tenants that prevents landlords from attempting to circumvent the law by evicting current tenants to set new, higher rents for future tenants. The law requires landlords to show “just cause,” such as failure to pay rent, when terminating a lease. Other examples of just cause include violating the terms of a lease agreement, assigning or subletting the premises, refusing to provide reasonable access, refusing to vacate, and committing a crime on the property.

The just cause protection applies to renters who have resided in the unit for 12 months or more. If another renter is added to the lease before an existing renter has continuously resided in the unit for 24 months, the just cause provisions only apply if everyone on the lease has continuously resided in the unit for 12 months or more, or if one of the renters has continuously resided in the unit for 24 months or more.

For those residents who’ve lived in a unit for at least a year, landlords must provide the tenant with an opportunity to cure the violation.

The law exempts certain housing types from the tenant protections (like the rent control provision), requiring a just cause showing prior to terminating a residential tenancy.

Furthermore, AB 1482 sets out some “no fault” just causes, which means that a homeowner can end a lease if the unit is removed from the rental market or is being provided to an immediate relative. Additional “no fault” just causes include: if the homeowner is substantially remodeling the unit; if it needs to be vacated to remedy habitability issues; or if the homeowner is responding to an administrative or court order. 

Where local rent control laws are already in place

The following California communities have local rent control laws on the books, meaning the statewide rent control rules won’t apply – other than for mobile homes:

• Alameda
• Baldwin Park
• Berkeley
• Beverly Hills
• City of Commerce
• Culver City
• East Palo Alto
• Gardena
• Glendale
• Hayward
• Inglewood
• Los Angeles
• Los Gatos
• Mountain View
• Oakland
• Palm Springs
• Redwood City
• Richmond
• Sacramento
• San Francisco
• San Jose
• Santa Ana
• Santa Barbara
• Santa Monica
• Thousand Oaks
• Vallejo
• West Hollywood

In addition, several other communities have measures short of rent control, and we advise you to look at the provisions that apply:

• Campbell (starting Ch 6.09 mediation only)
• Fremont (mediation only)
• Gardena (mediation only)
• Glendale (just cause eviction, only)
• San Diego (98.0730 just cause eviction, only)
• San Leandro (non-binding review & mediation only)
• Thousand Oaks (only pre-1988 tenancies)

Plus, the unincorporated neighborhoods of Los Angeles County have local rent control laws.

Rent Control Ordinances in Large California Cities

Los Angeles

In LA, the local rent control law only applies to buildings constructed prior to 1978. However, with the statewide rental control law, many thousands of newer units built between 1978 and 2005 will be required to comply with AB 1482.

The municipal code says that only one rent increase is allowed every 12 months based upon the regional CPI (Consumer Price Index). Effective July 1, 2020, the annual allowable increase is 3.0%. To be clear, in the City of Los Angeles, if a tenant resides in a building that was built before 1978, rent increases are to be capped under the provisions of the city’s rent control ordinance, and rent in that building can’t exceed a 5% increase (plus inflation). The rate by which landlords can up the rent is calculated as a percentage of the annual Consumer Price Index (CPI).

In LA County, the Los Angeles County Rent Stabilization Ordinance (RSO) sets the maximum annual rent increase based on the changes in the CPI and provides tenant protections from evictions without just cause. 

Like the city ordinance, just a single rent increase is permitted annually, based on the change in the regional CPI up to a total of 8% including pass-throughs and fees (these are allowable surcharges that can be passed through to the tenants).

San Diego

San Diego’s rent increase limit – see below - went into effect on January 1, 2020. And in May of this year, the San Diego County Board of Supervisors adopted a countywide temporary rent cap which make evictions more difficult for landlords during the pandemic. Under this ordinance, rent won’t be completely forgiven for renters who are behind on payments, and landlords will be paid 80% of what is owed from the state. So, in exchange for forgiving 20% of what’s owed and not pursuing eviction, landlords in San Diego will recoup the balance of 80% through the state’s rent relief program.

Rent is capped at a 9.1% increase. The cap – which sticks out as a big number – is based on the inflation rate according to the CPI for the San Diego region, for April 2020 to April 2021. Thus, for rent increases effective between August 1, 2021 and July 31, 2022, the maximum rent increase in San Diego County is a 5% base + 4.1% CPI change to a total of 9.1%.

San Diego’s law will sunset on January 1, 2030.

San Francisco

Annual rent increases in the City of San Francisco are limited to 60% of the regional CPI. 

Alameda

Landlords are limited to the base rent charged as of September 1, 2019, plus the annual increase allowed.

For tenancies that started after that date, the base rent goes back to the initial rent amount. The AGA is calculated using 70% of the regional CPI with a 1% floor and 5% ceiling. Each May, the local government the AGA effective September 1. The AGA for September 1, 2020 is 1.0%.

Beverly Hills

Landlords here may hike rent once every 12 months; however, this is limited to 3% of the then-current rent or the regional CPI—whichever is higher.

Where to get further information

These ordinances can get tricky, so pay attention. Remember that in cities that don’t already have a local rent control law, the statewide rent control prevails, and it will limit rent increases to 5% plus local inflation. And rent increases can never exceed a total of 10%.

If you have any doubts, we advise you to ask a real estate lawyer, or your accountant – assuming they are sophisticated consumers of local regulations. It costs a lot more to get out of trouble than to prevent yourself from getting into it!