How can owners navigate California’s strict rent control laws and keep themselves and their investment properties in compliance?
It starts with understanding rent control and rent caps and knowing which properties are included and which are exempt.
At Bell Properties, we spend a lot of time managing risk and liability for real estate investors and rental property owners. Get to know the real rent control issues and the potential legal pitfalls by working with our property management team.
Our Summary:
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The Tenant Protection Act and California’s Statewide Rent Control Law
California’s Tenant Protection Act of 2019 established statewide rent control and eviction protections for many residential tenants. Formally known as Assembly Bill 1482, the law was enacted in response to rising housing costs and increasing displacement in many parts of the state.
Here are the highlights:
The Act applies primarily to multifamily housing that is more than fifteen years old, although certain properties are exempt, including many single-family homes, owner-occupied duplexes, and some newer developments.
Under the Tenant Protection Act, annual rent increases are capped at 5 percent plus the local rate of inflation, or 10 percent total, whichever amount is lower. This limitation is designed to prevent excessive rent hikes while still allowing property owners to adjust rents in response to operating expenses and market conditions.
Landlords may generally raise rent no more than twice within a twelve-month period, and any increase must comply with notice requirements established under California law.
In addition to rent caps, the Act created “just cause” eviction protections for tenants who have occupied a unit for at least twelve months. But we are focusing on rent control today, so let’s talk about properties that are included, exempt, and how to raise the rent at renewal time with these laws in place.
Something that we’re always reminding owners in specific Northern California cities: the law does not replace stricter local rent control ordinances already in effect in cities such as San Francisco. Instead, it functions as a statewide minimum standard. Where local regulations provide greater tenant protections, those local rules continue to apply.
Which Rental Properties are Included in California’s Rent Control Law?
As we mentioned, this is a law that mostly applies to older multifamily properties. Single-family homes and condos owned by individuals (rather than corporations or REITS) are exempt. Owners who live in a duplex or a triplex and rent out the additional units in their property are exempt. Apartments in multifamily buildings that were constructed within the last 15 years are exempt (this is a rolling timeline; once a building turns 15, it becomes covered). Anyone renting out affordable or subsidized housing is exempt.
Owners who are not sure about the age of their property or their exemption status should contact us at Bell Properties right away. There is specific language that must be included in lease agreements notifying tenants if the property is included in or exempt from California rent control.
Rent Control Formulas: How Much Can Rent Be Raised?
The rent cap is calculated annually as 5% plus the local cost of living (regional CPI), with a hard ceiling of 10%. This means that allowable rental increases could vary from region to region in California, depending on the CPI.
The CPI figure reported for April of every year is what’s used. California property owners can rely on this number each year to calculate the maximum rent adjustment permitted under the rent control law.
However, the updated April CPI data is typically not released until late May or sometimes mid-June, which often creates uncertainty for landlords attempting to plan rent increases in the spring. Shortly after the law took effect, lawmakers revised the Tenant Protection Act to address the delay in the publication of the CPI figures.
Here’s how it works in general:
Rent increases that take effect before August 1 of the calendar year must comply with the CPI that was published for April of the previous year. If April figures are not published for the geographic area, it uses the CPI published for March of the prior calendar year.
This means landlords should be using the CPI figure from April of 2025 when calculating rent increases that take effect between August 1, 2025, and July 31, 2026. Increases that take effect on or after August 1, 2026, are based on the April 2026 CPI. And good news, we have those numbers. So as an example, in Marin County, the April 2026 CPI was recorded at 3.8%, and it’s easy enough to do the math that leads owners to see that the allowable rent increase in Marin County for rent controlled properties is 8.8%.
To calculate the exact permitted rent increase based on a specific property's region, consult us at Bell Properties.
What’s The Impact of Rent Caps on Northern California Rental Returns?
Rent control and rent caps have significantly influenced the financial and operational landscape for rental property owners throughout Northern California. We’re working in regions where housing demand remains high and operating costs continue to rise, and we have seen owners adjust their long-term investment strategies to accommodate limits on rental income growth.
Increasing Expenses
One of the most immediate impacts on property owners is reduced flexibility in responding to increasing expenses. Insurance premiums, utility costs, property taxes, maintenance expenses, labor costs, and repair materials have all risen substantially in recent years. While rental income may increase incrementally, those increases do not always keep pace with the actual cost of owning and maintaining residential property. As a result, some landlords experience shrinking profit margins despite strong demand for housing.
Preventative Maintenance Becomes a Priority
For small property owners, particularly those who rely on rental income for retirement or supplemental earnings, the financial pressure can be especially difficult. Many independent landlords own only one or two properties and may not have the financial reserves available to absorb unexpected expenses such as roof replacements, plumbing failures, wildfire-related insurance increases, or major building upgrades. In Northern California, where aging homes are common in many cities, deferred maintenance can become a growing concern when owners feel financially constrained. We’re always recommending a strong preventative maintenance program.Improvements and Updates
Rent caps can also influence decisions regarding property improvements and modernization. Some owners may postpone renovations or major capital investments if they believe future rental income will not adequately offset the cost of the work. This can affect everything from energy-efficiency upgrades to appliance replacement and structural improvements. In competitive housing markets, landlords often weigh whether investing heavily in a property will provide a reasonable long-term return under restricted rent growth conditions.
Shifting Investment Behavior
Another effect involves property valuation and investment behavior. Multifamily property values are often tied closely to projected rental income. When rent growth potential becomes limited, investors may reassess the attractiveness of acquiring or holding rental housing in regulated markets. Some owners choose to sell properties, convert units to other uses, or move investment capital into regions with fewer restrictions. In some Northern California communities, this has contributed to concerns about reduced housing supply over time.
More Management and Administration
Administrative and legal burdens have also increased for many landlords. Property owners must remain informed about changing regulations, notice requirements, tenant protections, and local ordinances that may differ from one jurisdiction to another. Compliance mistakes can lead to disputes, financial penalties, or litigation. As a result, many investors and owners see professional property management less as an expense and more as an investment.
At Bell Properties, we also see the upside. There are certain benefits associated with stable, long-term tenancies. Lower tenant turnover can reduce vacancy losses, advertising expenses, and unit preparation costs between renters. Tenants who remain in place for several years may also contribute to more predictable occupancy and fewer disruptions.
Overall, rent control and rent caps have created a more regulated and financially complex environment for property owners. While the policies are intended to improve housing stability for tenants, owners continue to balance those objectives against rising operational costs, investment risks, and the long-term sustainability of maintaining rental housing.
FAQs
How do I know if my property falls under rent control laws?
It depends on property type and age. Contact us at Bell Properties and we’ll let you know if your property is included or excluded.
How do rent caps affect long-term rental property investments?
Rent caps can influence investment decisions by limiting how quickly rental income may increase over time. While some landlords value the stability of long-term tenants, others may find it more difficult to keep pace with rising expenses such as insurance, maintenance, taxes, and repairs.
Can local rent control laws be stricter than California’s statewide rules?
Yes. California’s statewide rent cap law establishes baseline protections, but many cities and counties have adopted additional local rent control measures that are more restrictive. In areas with local ordinances, landlords may face lower allowable rent increases, expanded tenant protections, or additional procedural requirements. When local rules provide greater tenant protections than state law, the local regulations generally take precedence.
Questions about rent control or not sure how to raise the rent at renewal time? Contact us at Bell Properties, and we’ll make sure you’re compliant.
