The cost of housing is rising in many parts of California. Real estate investors view this as good news, of course, because higher property values and higher rent often mean greater returns on investments. The state government is seeking to balance property owners’ and tenants’ interests. It is hard to dispute that rising housing costs often outpace people’s earning capacities. Whether California’s new “rent control” law is the right way to address the problem, however, is likely to remain a contentious issue for some time. The new law caps annual rent increases and establishes additional standards for evictions. Prospective California real estate investors should be aware of how the new law could affect them.
What Is Rent Control?
The term “rent control” refers to laws that limit landlords’ authority to raise the rent and evict tenants in various situations. In California, rent control laws have existed for some time at the city and county levels in Los Angeles, the Bay Area, and the Sacramento area. California’s new law, which will go into effect at the beginning of 2020, is the first such law to apply statewide.
New York City probably has the most well-known rent control law in the country. Television shows set in Manhattan often cite “rent control” to explain characters’ improbably-large apartment. Rent control laws can range from fixed ceilings on rent, with no further increases; to limits on how much a landlord may increase the rent from one time period to another. Most jurisdictions have laws that establish eviction procedures. Rent control laws may add further limitations on landlords’ authority to evict tenants.