California’s Rent Control Explained

Updated July 17, 2023
7 min read
California's Rent Control Explained; pen, paper titled "Lease Agreement", house, money

Introduction

Navigating the maze of rent control laws in California can be daunting, especially amidst the nation's increasing cost of living. With an increasing spotlight on California's rent control law for 2023, understanding its nuances is key for those relocating within or moving to this state.

This guide, covering everything from basic rent control concepts to specifics under the Tenant Protection Act of 2019, aims to clarify this landscape not only for tenants but also for landlords who grapple with legal compliance. Providing insights from the California Apartment Association, we delve deeper into local rent control variations, rent increase limitations, eviction regulations, and cities exercising rent control to give you a comprehensive understanding of how rent control operates in California.

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. 

For instance, in rent-controlled regions, apartments might have predefined monthly charges like $1,200 for one-bedroom units, $1,300 for two-bedroom units, etc. This largely depends on local rent control laws, which could vary from one municipality to another.

One notable example from U.S. law is the Tenant Protection Act of 2019 in California, often referred to as AB 1482. This law limits annual rent increases to 5% plus inflation, capped at a total increase of 10%. This ensures renters are protected from sharp and unexpected increases in their rent.

Legislation that caps rental rates in a city or state is referred to as rent control. Different municipalities may have various 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. Before making a real estate investment to become a landlord in California, find a suitable lease agreement template to ensure everything goes smoothly.

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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.

To navigate through the maze of these regulations and understand your legal rights and obligations better, consult with real estate lawyers near you.

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.

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 exceeds 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 in 2023 may have slightly varying rules regarding the amounts and times rent can be increased. California’s cities that make a 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 must often consider increasing their properties' rent 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 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
  • Setting a limit on the annual increase of rent that may be imposed on a particular property;
  • A policy that some communities use to restrict the grounds of eviction;
  • Available open market rates for landlords;
  • Promotion of a greater occupancy rate.
Cons of Rent Control
  • Eliminates the effectiveness of the free market system;
  • Severe constraints on the amount of allowed rent;
  • Tenants' freedom of movement is restricted in order to prevent a substantial rent increase;
  • Rent-controlled homes may be in poor condition;
  • Less tax money being collected;
  • Investors in real estate may find it difficult to profit as a landlord;
  • The scheme has greater operational expenses;
  • Continuous fee charges.

Conclusion

With renters making 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. To stabilize its population and address its housing problems, the state is resorting to new California rent control legislation.

You need a trusted template provider to safeguard your interests when dealing with lease agreements and other legal requirements. For more details about real estate documents you may need, explore other real estate templates.

Article by
Yevheniia Savchenko
Lawrina

Yevheniia Savchenko is a Product Content Manager at Lawrina. Yevheniia creates user interface copies for Lawrina products, writes release notes, and helps customers get the best user experience from all Lawrina products. Also, Yevheniia is in charge of creating helpful content on legal template pages (Lawrina Templates) and up-to-date information on US law (Lawrina Guides). In her spare time, Yevheniia takes up swimming, travels, and goes for a walk in her home city.

If you have any questions or suggestions regarding the product or UX content for Lawrina, feel free to contact Yevheniia directly at y.savchenko@lawrina.org or connect with her on LinkedIn.

Frequently Asked Questions

What does the term "rent control" mean in the context of California law?

Rent control refers to government regulations or laws limiting the amounts landlords can charge to rent apartments, houses, or other real estate properties. In California, a notable example is the Tenant Protection Act of 2019 (AB 1482) which limits yearly rent increases to 5% plus inflation (up to a maximum of a 10% increase).

What protections does AB 1482 provide to renters in California?

Besides limiting yearly rent increases, AB 1482 also provides eviction protection to tenants who have lived in a property for more than a year. Landlords can only evict renters for "just cause," meaning they have a reason, such as failure to pay rent, illegal activities on the property, or a violation of the lease. Furthermore, landlords must provide a reasonable chance for renters to resolve any lease infractions.

If I'm a renter, what protections do I have against eviction under California's rent control laws?

Under AB 1482, renters who have occupied a property for over a year have eviction protection against “no-fault” grounds such as owner relocation or property renovations. These renters can only be evicted for failure to pay rent, violation of the lease agreements, or engaging in criminal activity on the property. Landlords must also provide a reasonable chance for renters to resolve any lease infractions.