Property Management Blog

How Does Rent Control Impact Sacramento Property Management? | California Tenant Protection Act Explained

System - Friday, February 5, 2021
Property Management Blog

The California Tenant Protection Act went into effect on January 1, 2020, before any federal and state eviction moratoriums and before we know the impact the COVID-19 pandemic would have on the ability of landlords and property managers to collect rent. 

The pandemic is ongoing, but it will end sooner or later. When it does, rent control and just cause eviction policies established by the Tenant Protection Act will still be in place. 

If you’re renting out a home in Sacramento, it’s important you understand the details of this huge rent control law.

This new ordinance touches on things outside of rent control, and includes new regulations on evictions and Section 8 tenants as well. You have to be in compliance, even as rental property owners and landlords throughout Sacramento and California struggle to figure out what this really means for their particular properties. 

Sacramento Rental Increases and Rent Control

With the implementation of AB1482, landlords in California are required to restrict their annual rental increases to five percent plus whatever the Consumer Price Index (CPI) determines to be the inflation increase. 

Generally, it means you won’t be able to raise your rent more than seven or eight percent every year. This law is in effect for 10 years. 

The CPI changes annually, so landlords will be required to understand what it’s been set at before they add their own five percent if they’re planning to raise rent by the maximum amount the law allows.

Sacramento Rent Control Exclusions

Your rental property may be exempt from the rent control laws if you meet one of these conditions:

  • Your property is newer than 15 years old. If you received a certificate of occupancy in the last 15 years, you’re exempt for now. A rental home that’s 12 years old is not covered by rent control laws now, but will be in three years. It applies to properties that are 15 years old or older.

  • You’re renting out a single-family home or a condo and you’re not a REIT, corporate entity, or an LLC with one member being a corporation. Individuals renting out a single-family property are exempt from rent control laws. 

  • You’re renting out a duplex and you live in one of the units as your primary residence.

  • Owners of mobile homes who are renting out their property.

There are additional exemptions that include properties like dormitories and hospitals, but it’s unlikely you’re investing in those particular assets.  

Just Cause Evictions in Sacramento

The state law also addresses evictions and the requirements that landlords and property owners must meet in order to evict someone. If it’s a just-cause eviction, meaning the tenants have violated the lease in some way by damaging the property, not paying rent, or engaging in criminal activities while inside the home, you can evict your residents the same way you normally would. We recommend getting legal or property management advice just to make sure you’re compliant. 

If you’re evicting a tenant due to no fault of theirs, you may have to pay a relocation fee that is equal to a full month’s rent. For example, if you want to take possession of the property back so you can do some major renovations or move into it yourself, the tenants currently living there are entitled to a month of rent.

Does Rent Control Promote Affordable Housing?

house searchThe problem of affordable housing is real and urgent in Sacramento and throughout California. At Titan Property Management, we do not believe rent control is the answer. 

With this new law in place, owners are more likely to increase their rents every year to keep up with inflation. They’re going to have less incentive to renovate older units and buildings because of the expense of paying tenants to vacate. 

There are other ways to encourage the development of affordable housing. Reducing the cost of permits and fees for builders who want to develop affordable housing would help. Reducing some of the regulations that make the process so cost-prohibitive would also encourage construction of affordable housing. 

We know that staying on top of the laws and requirements is difficult, particularly in California and especially now. We’re here to help. Contact our team at Titan Property Management, and we’ll keep you compliant and informed.