How Much Can You Raise Rent on Your Property in California?

California’s rent control laws place significant limits on how much rent can be raised in The Golden State’s rental markets each year. Under the statewide rent control law, AB 1482, landlords now have set limits, tied to inflation, for rent increases. This law applies to most rental properties, including single-family homes not owned by corporations or real estate investment trusts (REITs ). Local rent control ordinances may impose stricter limits than what’s in AB 1482, so landlords must understand these laws to remain compliant and ensure that how much they should charge for rent reflects market conditions.

If you want to build a real estate portfolio, a financial advisor can help you analyze and manage investments.

What Are Rent Control Laws?

Rent control laws are regulations designed to prevent excessive rent increases by the landlords managing rental properties . These laws provide stability in the housing market, particularly in areas where housing is scarce and rents are rapidly rising. By capping how much rent can be raised, California's rent control laws help keep long-term residents from getting priced out of their homes due to market pressures.

There are different forms of rent control, with the most common being “hard” rent control, which strictly limits rent increases, and “vacancy control,” which extends these limits even when tenants move out. Another form is “rent stabilization,” which allows for moderate annual increases tied to inflation or other economic indicators.

In cities with high demand for rental properties, landlords might otherwise raise rents significantly, making it difficult for lower and middle-income tenants to remain in their homes. Rent control also fosters community stability by reducing the frequency of forced moves due to unaffordable rent hikes, allowing residents to stay in neighborhoods where they have established social and economic ties. It also helps reduce homelessness.

Critics argue that these regulations can discourage property owners from maintaining or investing in rental property , as the potential for higher returns is limited and developers may be less inclined to build new units in areas with stringent rent control policies. Proponents counter that the social benefits, particularly in protecting vulnerable populations from sudden rent increases, outweigh these potential downsides.

California Rent Control Laws

California’s rent control laws aim to prevent large rent increases and help maintain housing affordability in a state where the cost of living can be high. The main law, AB 1482, enacted in 2019, applies to many rental properties. It limits rent increases to 5% plus the local inflation rate, with a maximum cap of 10% per year, regardless of inflation.

The law also provides protections against unjust evictions, requiring landlords to provide a valid reason for removing tenants, such as non-payment of rent or breach of lease terms. Known as "just cause" it protects tenants who have not violated any laws or lease terms during the length of the contract. If a tenant is given notice to vacate without just cause then they qualify for relocation assistance from the landlord in the form of a payment equivalent to one month's rent or a waiver for the last month of tenancy.

AB 1482 does not apply to all rental properties. Single-family homes and condos that are not owned by corporations or real estate investment trusts (REITs) are generally exempt, as are newer buildings that have been in existence for less than 15 years.

In addition to AB 1482, several cities in California have their own, stricter rent control laws. For example, San Francisco, Los Angeles and Oakland have local ordinances that offer additional tenant protections beyond the state law.

Tips for Managing a Rental Property in California

California’s rent control laws, tenant protections and market conditions will require careful management for both new and experienced landlords. Here are five general tips to consider:

• Stay informed on rent control laws : California's rent control laws, such as AB 1482, cap rent increases and impose eviction restrictions. Landlords should regularly review these laws and any local ordinances to ensure compliance and avoid costly legal issues.
• Thorough tenant screening : Conducting a thorough screening process helps you select reliable tenants who are more likely to pay rent on time and take care of the property. Consider credit checks, references and employment verification as part of your vetting process.
• Maintain open communication : Establishing and maintaining open lines of communication with your tenants can prevent misunderstandings and help address issues before they escalate. Regular check-ins and prompt responses to maintenance requests build trust and foster positive landlord-tenant relationships.
• Regular property inspections : Conducting regular inspections ensures your property remains in good condition and allows you to address maintenance issues proactively. It also provides an opportunity to ensure that tenants are complying with lease terms.
• Understand your legal obligations : California has extensive tenant protection laws, including security deposit limits, disclosure requirements and habitability standards. Familiarize yourself with these obligations to avoid disputes and ensure your property meets all legal standards.

Bottom Line

Knowing how much rent can be raised in California is important for running a rental business. Laws like AB 1482 set limits on rent increases, so landlords need to stay informed and proactive in tenant communication. Whether you’re experienced or new to the rental market, understanding California’s rent control laws helps you manage your property effectively. Consulting a real estate attorney can also help you comply with state and local regulations.

Tips for Real Estate Investment

• A financial advisor can work with you to build a real estate portfolio based on your investment goals and level of risk. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• If you want to calculate how much your investments could grow over time, SmartAsset's free calculator could help you get an estimate .

Photo credit: ©iStock.com/sanfel, ©iStock.com/fizkes, ©iStock.com/Deagreez

The post How Much Can You Raise Rent on Your Property in California? appeared first on SmartReads by SmartAsset .