Effects Of The New CA Rent Control Laws

The new California rent control laws are causing quite a buzz throughout the California real estate industry. Governor Gavin Newson signed legislation in mid-December that protects renters from outlandish and unpredictable rent hikes. If you own an investment property in Murrieta, Temecula, Lake Elsinore, or the surrounding areas, the new rent control laws will directly impact how you do business. Here’s everything you need to know:

When Do The New Laws Go Into Effect?

The rent control laws will go into effect on January 1st, 2020. The measure will expire in 2030 unless California residents vote to extend it.

What Is The New CA Rent Control Law About?

The rent control laws, formally known as the Anatomy of The Tenant Protection Act, has two main goals: to protect renters from unreasonable rent hikes and to prevent unjust evictions. The act has three main sections:

Civil Code Section 1946.2

Section one dives deep into the reasons and justifications that a landlord can and cannot evict a tenant. According to this regulation, landlords must have just cause to evict a tenant who has lived in a residence for at least 12 months. Examples of just cause include a consistent pattern of late rent payments or if the owners need to move into the property.

Civil Code Section 1947.12

Section two focuses on rent control. Landlords are no longer allowed to raise the rent in a way that exceeds the local cost of living. Specifically, this means landlords can not raise the rent more than five percent in a year, and there is a maximum increase percentage of 10%.

Civil Code Section 1947.13

Section three applies to publicly assisted housing that is transitioning to market-rate housing. This does not affect private or for-profit landlords, but you can read more about this section here.

These new laws do not apply to new tenancies. The statute states that landlords can set the rate for new tenants with no maximum, and the new laws only apply to future rent increases.

Who Is Impacted By The New CA Rent Control Law?

Amid the palm trees and waterfront mansions, California has the second-highest poverty rate in the nation and a rapidly growing homeless population. Many renters are one rental increase away from not being able to afford to live in their current homes. These laws are put into place to help renters anticipate how much their rent could increase in a single year and budget accordingly. Here are the types of renters and buildings that will be impacted by these new laws:

• These new laws will impact renters who live in apartments that are at least 15 years old and do not currently have rent control laws in place.
• The new laws will apply primarily to apartments and multi-family buildings, but some single-family homes can also qualify.
• Single-family homes are exempt if a corporation owns them, and duplexes and condos are exempt if the owner lives in one of the units. 

It’s important to understand that these new laws don’t apply to every type of investment property, and some properties will qualify for rent control but not just cause, some will qualify for just cause and not rent control, and others will qualify for both.

Those opposing the bill worry that the new rental regulations will put a strain on “mom and pop” landlords by discouraging further investments while encouraging rent increases.

Why Does It Matter?

For landlords and Temecula Property management companies that have been using industry-standard “best practices” when it comes to rent and evictions, these new laws won’t change very much when it comes to the day to day workings of managing an investment property. The Anatomy of The Tenant Protection Act is in place to make it more realistic for renters to afford their housing. Half of California’s residents are “rent-burdened,” which means they spend more than 30% of their income on rent. The legislation will help prevent price gouging, as well as work towards a solution to the state’s growing housing affordability problem.

Benefit National Understands California’s New Laws

Benefit National is a full-service property management company that takes pride in understanding the ins and outs of California’s new rent control laws. As one of the leading Murrietta and Temecula property management companies in the state, we strive to give you all of the information about rent control laws so you can make a confident and informed investment decisions. Helping landlords stay in compliance is a top priority.

If you own an investment property in Southern California and want to learn more about these new laws and how it affects you as a landlord, contact us today!