Property management in California is always interesting, but perhaps it never gets more interesting than when it’s time to adjust the rent. The market is always shifting, competition is fierce, and tenants are well-informed. Add to that the rent control laws throughout the state and in specific cities, and settling on a price that’s accurate, competitive, and profitable can be a challenge.
But not for investors working with Bell Properties.
We understand how to navigate the market, analyze the right data, and adjust rent prices on newly vacant rentals and during renewal periods with existing tenants in a rental home.
Understanding the nuances of rent adjustment is crucial. Not only do we have to ensure that all rental prices reflect the current market, but we also need to stay compliant with state and local regulations.
Here’s how and when we increase rental prices on the properties we’re renting out across California.
Increasing Rent in Accordance with California Rent Control Laws
Cities like Los Angeles and San Francisco have their own rent control laws in place, and those are to be followed before the statewide rent control laws are considered. If a specific city or town does not have its own rent stabilization ordinance, we are bound to the state law, which was established in The Tenant Protection Act of 2019.
As California property managers, we have spent the last five years and even longer paying close attention to how rent control laws affect owners and landlords across the state, and specifically in our local communities where we manage properties. We stay up to date on the laws. We incorporate any changes.
Here’s what we can report when it comes to rent control across the state and how it impacts the way we make rental price adjustments:
Rents Can be Raised Once a Year
The state rent control law requires that rental increases are limited to once per year or made in two increments in a 12-month period.
Limits on Raising Rent
Rental adjustments and increases cannot be more than five percent plus the annual cost of living increase that’s set by the Consumer Price Index (CPI). The CPI will be different depending on where in California a property happens to be.
Exemptions
Some rental properties are exempt from this law. A property may be exempt if the landlord renting it out is an individual who owns and rents out one single-family home, a townhouse, or a condo. The age of the property will also come into play. If a property received a Certificate of Occupancy in the last 15 years, that unit will also be exempt.
Owners who are not sure whether they have local rent control laws to follow should contact us at Bell Properties. It’s also a good idea to get in touch with us when it’s unclear whether a property is included or exempt in rent control laws.
How We Raise the Rent in California
With rent control in place across the state, how do we increase what we charge residents while still complying with the law? That depends on the CPI. The CPI is a measure of inflation which is established and measured by the Bureau of Labor Statistics.
While rates are measured and reported by the BLS throughout the year, the only statistic that matters is the annualized CPI rate reported for April.
This matters even with homes that are not covered by rent control laws. Even though a property may be exempt, that property is still competing with properties that are likely to be priced lower because of rent control laws.
We approach a rent adjustment by studying the market and the laws. Then, we establish a new rental value.
California law requires that tenants receive a written notice of any rent increase. The notice period depends on the percentage of the increase and the lease agreement. We notify tenants well in advance of their lease renewal date. By clearly communicating about the rent adjustment, we’re able to keep our relationship with tenants strong and positive.
Our increases are always fair and reasonable. They reflect the current market value, and we’re able to communicate that to our residents who are renewing with us. Drastic increases are counter-productive. They will lead to tenant turnover, which only results in higher costs and vacancy losses.
Raising the Rent on Section 8 Tenants in California
When we’re adjusting the rent on a property that’s occupied by a Section 8 tenant, there are specific details that need to be understood and processes that need to be followed. Section 8 tenancies involve the government, and that’s always going to come with some extra steps that aren’t required in other negotiations and adjustments around rental value.
With any open market tenants, we’re required to provide 30 days of notice before we raise the rent. With Section 8 tenants, the law requires us to provide 60 days of notice.
Section 8 is a housing voucher program subsidized by the federal government. However, those funds and each program is administered on the local level. So, the process in Oakland may be different from the process in Santa Barbara or Los Angeles. However, there are some general requirements, and this is what they look like:
To increase the rent, we’ll have to issue a 60‐day notice to the tenant indicating what the new rental amount will be and the effective date of the increase. We also have to send a copy of that notice to the local Housing Authority. In most cases, this can be emailed in the interests of time and efficiency.
The notice must include some specific information, including the date that the notice was served or mailed, the name of the tenant and the address of the property, and the effective date of the change in rent. The Housing Authority will want to know the amount of the new rent. Our contact information is always included so our property owners do not have to be bothered with the administrative details around rental increases.
Any increase in rent will have to be reviewed by the Housing Authority within those 60 days. They will determine whether that requested rental adjustment is reasonable. In some cases, they might find a different amount to be more reasonable.
Generally, it’s a market-driven rent that needs to be proposed, otherwise we’ll get some serious questions. The Housing Authority may compare the rent we’re asking to rent for similar units in the neighborhood.
Once we get the approval to raise the rent to the amount we have requested, we’ll get an amendment from the local Housing Authority. The tenant will get a copy of it, too. The nature of Section 8 and other housing voucher programs is that the government funds a portion of the rent and the tenant is responsible for the rest. So, we’ll get a statement of the new rent portions: what we’ll receive from the government, and what we’ll receive from the tenant.
Landlords working with Section 8 tenants can contact us at Bell Properties when it’s time to renew the lease or raise the rent. We can provide a well-documented, legally compliant system of requesting the rental increase and retaining a tenant who pays on time and takes care of the property.
Rent Control and California Lease Agreements
Everything starts and ends with the lease agreement when we’re leasing, managing, and maintaining rental properties. It’s the first place we turn when there’s a question. It’s where tenants should go if they have a question.
Rent adjustments and rent control need to be included in any California lease agreement. The rent control laws need to be reflected in the lease so tenants understand whether rent control applies to them when they rent a property with us. We also want to be clear about when and how rent is increased, and what they’re entitled to in terms of notice periods.
If we have a rental property that is included in the rent control law, we will include something in the lease agreement to reflect that. It’s even more important to adjust the lease agreement language if we have a rental property that’s exempt from the law. We’re legally required to notify residents that the property they’re living in does not fall under this new law. This will eliminate confusion and disputes. It will also protect our owners from falling out of compliance.
This is a general overview of how to handle rent control and rental increases in California, but a lot of what we talk about will depend on the specific city that a property is in. Let us know where exactly your rental property is located, and we’ll provide a customized explanation of how rent control impacts you. Please don’t hesitate to reach out to us at Bell Properties. These laws and requirements can feel pretty confusing, and we’re here to help.
