After ignoring the will of the voters, who just last year decided against loosening statewide restrictions on rent control, California state legislators recently passed a new law that will cap annual rent increases at 5 percent plus inflation.
While the allowed increase is more generous than current restrictions in rent-controlled markets like San Francisco and Santa Monica, it is certain to impact multifamily owners in previously unregulated markets.
Read on to find out more about the new restrictions and the rights you still have in California rental properties.
The New Rules of Rentals
On October 8, Governor Gavin Newsom signed AB 1482, which put in place a statewide rent increase cap of 5 percent plus inflation throughout California. The new law also adds more restrictions surrounding so-called “no fault” evictions.
The cap applies to most rental properties. Single-family homes that are not owned by a corporation, and owner-occupied duplexes are exempted. Properties built in the last 15 years are also exempt, but that exemption is rolling. Therefore, buildings built in 2006 will lose their exemptions in 2021. Those built in 2007 will lose their exemptions in 2022, and so on. By the time the law is due to sunset in 2030, properties built before 2015 will be impacted.
The bill is similar to one that passed in Oregon earlier this year, which was the first of its kind in the nation. Like the Oregon law, the new California legislation also disallows certain evictions. Renters who have been in place over one year must now be evicted with a “just cause”—typically a violation of the lease. But owner and relative move-ins are still allowed, with proper notice and relocation payments due to tenants.
Owners can also still make changes to the terms of existing tenancies, such as adding a utility bill-back program like Livable. Those seeking to add these cost-effective conservation services will likely want to make sure that the notice implementing the program also includes a not-to-exceed amount to ensure that fluctuations in utility charges are not considered improper rent increases.