I’ve had a few calls from clients asking about the new rent control law and thought I’d share some highlights of what it entails. There are many details involved, so please know that this only highlights some of the aspects of the new law. There are exemptions and each situation is different and unique. Please feel free to reach out with any questions or for legal referrals if needed.
In September, 2019, California passed a bill that extends rent control across the entire state. Rent increases will be capped at 5% (plus inflation) and eviction laws have changed. Both of these are effective January 1, 2020 and will remain in effect for the next 10 years.
Rent Increases
Rent increases will now be capped at 5% (plus inflation). So, if a tenant’s rent is $2000, a landlord would be limited to increasing their rent by only $100 per year (which is 5%). They may also increase according to the inflation rate by city, as calculated and published by the US Bureau of Labor Statistics. (California city's inflation rates ranged from 2-4% last year). This would mean that the actual rent increase may be anywhere between 7-9%.
Eviction Laws
In the past, a landlord could evict a tenant for no-fault of the tenant, but for reasons like selling the property, doing renovations, etc. However, under the new law, the landlord can only evict tenants for no-fault if the tenants have lived in the property for less than a year. If a tenant has lived in the property longer than a year, a landlord can only evict them for just cause, such as lease violations, failure to pay rent, etc. Otherwise, a landlord must offer the tenant relocation assistance equal to one month of the tenant’s rent.
Exemptions
The new rent control law does not apply to every property. First, if there is already local rent control, that remains in place and supersedes the new state law. Also the following properties are exempt:
1) Properties built within the last 15 years
2) Single family homes, unless they are owned by corporations
3) Owner-occupied housing (including duplexes and Accessory Dwelling Units or ADUs), provided the owner does not rent out more than two rooms or units.
A note to renters:
You can now anticipate what your rent may be knowing that there is a maximum possible increase. If I were to guess, I would think many landlords will now increase rent by the max knowing that if they don’t they will not be able to increase at a higher rate to make up the difference the following year. It will also be harder for landlords to evict you as long as you are paying rent on time and abiding by the terms of your lease agreement.
One of the benefits of home ownership is not having to worry about these increases or evictions while building your own equity. There are several loan programs available with as low as a 3-5% down payment which will ensure you have a consistent payment amount over the life of the loan. If you are tired of renting, let’s talk! You may be closer to being able to buy than you think!
A note to property owners & investors:
I don’t think that you should see this as a hindrance for investing. Real estate is still one of the best ways to build wealth. If you are concerned about how this new law may affect you, let’s talk. I have spoken with investors who have decided that now is the right time for them to liquidate their properties and pursue other avenues. Whatever the case is for you, I am here to help. If you have questions, I am happy to answer them with you and help you decide what your next move should be. If you need professional or legal referrals, I am able to provide those as well.
As always, whether you are buying, selling, investing or just have questions, I am here to help any time!
~ Carol
Resources:
AB-1482 Tenant Protection Act of 2019: tenancy: rent caps - full bill
California Passes Statewide Rent Control, TellusApp Blog post