If you’re a landlord in California, you need to know about rent control – and how it may affect your duplex, triplex or fourplex. This guide explains.
What is Rent Control?
The term rent control is really broad, and it refers to legislation that limits rental rates and how much a property owner can increase rent in a single year. This kind of legislation takes place at the state and local level, so rent control in California (and even specific cities within California) are different from rent control in other states, such as New York.
Rent control laws are an effort to protect tenants from landlords who want to increase their rents sharply. For example, it’s against the law for a property owner to double a tenant’s rent – and that makes sense when it comes to keeping housing affordable.
Rent control is far more common in cities where there’s stiff competition for a limited number of homes and the market makes renting a property out of reach for many people.
How Does Rent Control Work in California?
Rent control means that rent increases you make as the owner of a duplex, triplex or fourplex (or any other residential property) must be limited. Your rent increases must be in line with state or local guidelines. There are two main ways this may affect you as a multifamily property owner:
- Vacancy control means that when a tenant moves out, you can only raise the rent on the property up to the limit set by a rent control board.
- Vacancy decontrol means that when a tenant moves out, you can raise the rent as much as the market can bear. Then, when you find a new tenant, you can only raise the rent by a certain percentage over the previous rent. That way, your tenant only pays a limited increase every year that you choose to raise the rent.
California’s Rent Control Law
As of January 1, 2020, California has statewide rent control. The statewide law, called the Tenant Protection Act of 2019, makes it illegal for landlords to raise rent by more than 5 percent (plus the local rate of inflation) in one year.
Inflation aside, that means if you were renting a property for $2,000 per month all year this year, you can only raise the rent by $100 next year. (That’s 5 percent of $2,000.)
The catch is that California’s rent control law does not apply to cities that already had rent control laws (or that have since made them). In those cities, the city laws supersede the state law unless the state law provides more protection for tenants. For example, if your city has a 7 percent cap on rental increases, the state law provides more protection for tenants – and that means state law applies. However, if your city has a 3 percent cap, the city’s law takes precedence because it provides more protection for tenants.
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