How Much Can a Landlord Raise Rent in California in 2024? (2024)

The cost of renting in California has climbed steadily over the last two decades. Now, it is one of the most expensive locations to live in. So, how much can a landlord raise rent in California?

In response to the state’s high housing costs, declining middle-class employment, and influence of the worldwide COVID-19 pandemic, California has had to enact a series of measures to keep affordable housing for low and moderate-income tenants available in these tough economic times.

On January 1, 2020, a new set of regulations were implemented in California that restricted evictions and leases. This change has led many rental owners to wonder – How much can a landlord raise the rent in California?

Rent control is a government regulation that limits the amount that landlords can charge for rent on certain properties. The goal of rent control is typically to make housing more affordable for low-income renters and to prevent rapid increases in rent that can displace long-term residents. Rent control laws vary by jurisdiction, and can include limits on how much landlords can increase rent each year, restrictions on evictions, and requirements for landlords to provide just cause for evicting tenants. Rent control is a highly debated topic, with some arguing that it helps to protect renters and stabilize communities, while others argue that it reduces the incentive for landlords to maintain their properties and can lead to shortages of rental housing.

‍There are generally two types of rent regulation:

Both require landlords to limit their rates for tenants based on factors such as salaries and inflation. Eviction controls specify criteria under which tenants cannot be evicted, whereas price controls define how landlords can increase rent.

Controlling the eviction rates is often difficult due to constant changes in housing markets; therefore, wage-related regulations are more common.

Rent control is more common in cities where competition for limited housing stock raises market-rate prices out of reach for these residents. According to the National Multifamily Housing Council’s website, rent control is not applicable in all United States.

For example, some states have neither rent control nor premonitions, including the following: Montana, Wyoming, Nebraska, Ohio, Maine, Hawaii, Delaware, Alaska, Nevada, Virginia, West Virginia, and Pennsylvania.

Under normal circ*mstances, landlords can raise rental prices for their properties when they sign a new lease agreement (generally once 12 months) – as long as they're giving tenants proper notice.

For example, if a landlord wants to raise the price of their unit from $1,000/month to $1,300/month, they must provide a written notice to the renter at least 30 days before their next payment is due. However, in California, there are different rules.

On January 1, California implemented statewide rent control. For the first time, the state has set limits on rent increases. The law that defines this is AB 1482 or the Tenant Protection Act. AB 1482 is a law in California that limits the amount that landlords can increase rent on certain properties. The law, which went into effect on January 1, 2020, applies to most rental properties that were built before February 1, 1995 and it restricts landlords from increasing rent more than 5% plus the local inflation rate, whichever is lower. However, it doesn’t apply to properties that are newly constructed, owner-occupied duplexes, and certain other types of properties.

The law also requires landlords to provide a "just cause" for eviction, which means that landlords can only evict tenants for specific reasons such as non-payment of rent, violating the lease, or committing a crime on the property. This law was enacted to help protect renters from skyrocketing rent increases and unjust evictions. However, it's also been criticized by some landlords and property owners who argue that it could lead to reduced investment in rental properties, which could in turn lead to a shortage of rental housing.

In addition, if the rental price increases take effect before August 1 of any year, the “Last Year” CPI adjustment, from April two years ago through April one year ago, should be utilized to compute the acceptable rent hike for the area in which property is located.

Furthermore, all CPI percentages should be rounded to the nearest tenth of a percent. The median Fair Market Rent in California is $1,907 for a 2-bedroom home in 2023.

The Costa-Hawkins Act also permits vacancy decontrol of rent-controlled units, enabling landlords to raise rents to market levels when tenants leave (voluntarily or after being evicted for not paying rent).

Apartments, condominiums, and houses not subject to rent control include owner-occupied buildings with three or four units. Depending on local law, short-term rentals (such as Airbnb), government-subsidized tenancies, detached “granny” units that could not be sold separately from the main house.

There are a few other exceptions for this bill, including the following:

The AB 1482 legislation, like most rent control laws, includes tenant safeguards in the form of a ‘just cause’ showing for landlords wanting to end residential tenancies.

Because of these restrictions, landlords cannot evict tenants and set higher rents with their new tenants to avoid the rent caps imposed by the legislation. These ‘just cause’ rights apply when all of the tenants in a unit have lived there for at least 12 months, or when some of the tenants have resided there for less than 12 months, but at least one tenant occupied the property for 24 months.

If a rental property is unoccupied, the gross rental rate for the vacant unit may be reset to market rentals. On the other hand, the law prevents a landlord from displacing a tenant who has resided in a rental home for at least 12 months unless the landlord has ‘just cause.’

The statute establishes two distinct ‘just cause’ criteria:

‍At-Fault Just Cause: A landlord can terminate a tenancy for ‘at-fault just cause,’ which includes, among other things, the tenant:

If the breach is curable (i.e., overdue rent payment), as required by California Code of Civil Procedure § 1161, the landlord must provide the tenant with a reasonable opportunity to mend it.

‍No-Fault Just Cause: A landlord can terminate a tenancy for ‘no-fault just cause,’ which includes, among other things, the following situations:

If the landlord wants to terminate a tenancy for “no-fault just cause,” he must pay the tenant with one month’s worth of relocation assistance.

The bill also eliminates the just cause showing required before terminating a residential tenancy for certain housing types.

These are:

Rent control has numerous advantages for tenants, allowing them to achieve more excellent financial stability, keeping families in their houses, and preventing working-class individuals from being priced out of their long-time homes and communities.

Landlords also profit from rent control. Tenants are more likely to reside in a property for an extended period of time. Fewer tenant turnover leads to less work and stress for the landlord. It saves money since vacant periods might result in a loss of value.

However, one study has discovered that rent control frequently backfires and may keep housing inaccessible. The study found that while rent control’s expansion stopped tenant displacement, landlords in San Francisco responded to the legislation by departing from the rental market, selling their properties, and converting their rent-controlled structures into condominiums.

The supply of rental housing diminished as landlords converted their apartment buildings into more expensive condominiums and replaced old structures with new construction to avoid rent control restrictions. In the long run, the reduction in rental housing prompted rent hikes.

The housing bubble also exacerbated the city’s affordability crisis. Because many multi-family structures were converted to condos and new construction was delayed, it pushed up the cost of living.

There is no research or analysis on the effects of rent control in California. However, according to Avail, while the new law does not prevent landlords from hiking the rent after a tenant vacates, stronger eviction protections and a cap on rent hikes might reduce profit and boost turnover, limiting more significant increases.

Rent control has the potential to wreak havoc on a landlord’s bottom line. It might discourage them from maintaining or repairing their rental units since doing so may lead to fines. In California and across the United States, rent control can also raise property tax costs for landlords. Here are some other considerations -

AB 1506 will impose strict limits on how much rents can be raised annually, as well as for the eviction process.

Therefore, the bill has explicit provisions on how much a landlord can raise the rent in California, allowing them to only increase the rent by a maximum of 5% each year if they live up to the following requirements: