California’s Rent Control Bill And What It Means for Landlords
California Governor Gavin Newsom signed a rent control bill last month that will take effect January 1, 2020, lasting until 2030. Here’s a breakdown of California’s new rent control bill 1482 and what it means for landlords and renters.
7 Points to Understanding California’s Rent Control Bill:
- The essence of the rent control bill will limit annual rent increases to 5% plus the cost of inflation — AKA the percent change in the cost of living OR 10%, whichever is lower.
- The new cap will retroactively apply to any increases made this year since March 15, 2019. So the new rent in 2020 will be the rent as of March 15, 2019 plus the max allowed increase. This is to prevent landlords from jacking up the rent before the new law takes effect.
- The measure does not affect rent limits in local jurisdictions with existing rent-control laws, ie. Los Angeles, Santa Monica, Culver City, Gardena, Palm Springs and more. Their existing laws will reign. However, cities like Long Beach and Lakewood that don’t have rent control will fall under the new state law.
- Owners who share a home with their tenants OR owner-occupied duplexes are exempt from the caps.
- Age is more than a number on this one. The new rent control bill affects all apartments that are at least 15 YEARS OLD. It doesn’t apply to housing built within the last 15 years. This provision is to encourage new housing developments that California desperately needs. Houses and condos owned by corporations or REITs, that are also 15 years old or older are also subject to the rent caps.
- Just-cause eviction protections. Tenants who have lived in their rental for at least a year and are following the terms of their lease can only be evicted if the owner plans to move in, demolish or renovate the unit, or cease renting it at all.
- The percentage change in the cost of living is measured from April 1 of the prior year to April 1 of the current year in the regional Consumer Price Index for the region where the property is located. If a regional index isn’t available, the California Price Index shall apply.
So Why Now?
According to Market Watch California’s rent control bill was designed to combat the state’s housing crisis and protect tenants from insanely high rent hikes that could leave them homeless. As the most populated state in the country, California has 17 million renters. But with all the exceptions, California’s new law will apply to about 8 million of those renters.
Like any new bill there are pros and cons and we’re here to help you understand what the new law means for you and your rental property. With variances from city to city due to existing rent control this new statewide law might not affect you. On the other hand, it might make you curious about investment opportunities in other states and we’re here to help you understand your options and discuss a 1031 Exchange.
Are you a renter? If you feel like you are already paying too much in rent you’re not alone. Let us help you explore if what you’re paying could translate into owning a home of your own! Give us a call at The Oriana Shea Group 562.270.1775 or contact us here.