For many Californians, homeownership just isn’t a possibility because home prices have surged in recent years. This has pushed many people into renting, despite the fact that rental rates have continued to increase in tandem with home prices.
The State of California has recently taken action to help renters retain some semblance of control over the monthly rent they pay to landlords. Assembly Bill 1482 is a game-changer because it establishes rent control on the statewide level, whereas it was previously only enforced locally. The bill caps rent increases at 5% plus inflation and also has changed the laws surrounding eviction. The new law took effect on January 1, 2020, and will last until January 1, 2030.
This is a massive win for renters because, in the past, landlords could raise the rent without any ceiling in places where rent control was not enforced. Imagine resigning a lease each year without any visibility of how much your rent might increase! To me, this new bill seems to level the playing field between renters and their landlords.
Under the new law, landlords are limited to the 5% increase plus inflation annually for the next ten years. To put it into perspective, let’s say a renter was paying $3,000 per month. Their landlord could only increase their rent by $150 annually, which is $12.50 per month.
However, it’s important to point out that this example does not account for inflation, which could increase the total to between 8-9%. The U.S. Bureau of Labor Statistics establishes inflation rates, and under the new rent control law, landlords must adhere to these rates. Inflation is determined by comparing the cost of goods year-over-year.
While the change in rent control is a win for renters, the changes to eviction laws are perhaps more critical. Did you know that in the past, if a landlord was interested in undertaking a major renovation and/or selling their property, they had the option to terminate a tenant’s lease agreement, thus leaving them on the street?
It’s called “no-fault just cause” eviction, and if a landlord could provide reasonable justification for eviction, there was really nothing the tenant could do. Now, if a tenant has lived in the property for more than one year, any eviction must fall under the “just cause” rule. This would be for things like non-payment of rent, violations of the lease, committing a nuisance or waste to the property. The “no-fault just cause” eviction law does still apply to landlords with tenants who have occupied the property for less than 365 days.
For landlords without just cause but who still wish to evict their tenants, they can do so as long as they provide relocation assistance (one month’s rent). This can be handled with a direct exchange of money, or by waiving the tenant’s last month’s rent.
There are certain situations where rent control does not apply. These include properties built within the last 15 years, single-family homes (unless they are corporately owned), and owner-occupied housing, including duplexes and Accessory Dwelling Units (as long as the owner does not rent out more than two rooms or units). The new law will continue to be superseded by rent control laws at the local level.
Rent control is always a touchy subject because there are many proponents and opponents on either side of the argument. Landlords are obviously the ones who stand to lose the most because they could find themselves in a situation where their expenses outweigh their rental income. But for renters who have been bearing the brunt of unregulated rent increases for years, this new law will help level the playing field.
I am a CA licensed real estate broker serving the Pasadena community. If you have questions about rent control or need any assistance with buying or selling a home, I would be delighted to speak with you.