San Diego is in the top ten largest cities in the United States. The beautiful beaches, thriving economy, and ever-growing real estate market make it a hot spot for investors in the residential space. As a result, San Diego is one of the nation's most coveted areas for residential real estate investing. Not only are properties in this area highly valuable, but they are also on an upward trend predicted to remain steady for many years. While these properties can be highly profitable, landlords must be careful when raising rents as the county and the State of California have recently imposed new rent control ordinances to protect renters from a skyrocketing real estate market.
Is There Rent Control in San Diego?
Many landlords initially shy away from California rentals because of their skepticism about the state's rent control policies. However, there is an important distinction between rent control and rent increase limits in San Diego and other California real estate markets.
San Diego does not technically have a rent control policy—the State of California only limits how much you can increase rent and how often you are allowed to increase the rent during or between leases.
Rental Cap Rates in California
In 2019, California passed The Tenant Protection Act of 2019 (TPA), which went into effect on January 1, 2020. This statewide legislation does not limit the dollar amount for rent but rather the amount a landlord can increase rent year-over-year or between leases. The new law states:
"This bill would, until January 1, 2030, prohibit an owner of residential real property from, over the course of any 12-month period, increasing the gross rental rate for a dwelling or unit more than 5% plus the percentage change in the cost of living, as defined, or 10%, whichever is lower…"
The Tenant Protection Act (TPA) also limits the number of times a landlord can increase rent each year. They may increase up to two times, but the increase can not exceed the yearly maximum cap rate within the year. The current cap rate for San Diego is calculated as such:
5% base + 4.1% CPI = 9.1%
Landlords must also provide a 30-day notice before increasing rent and may not increase rent more than once if it is not stated in the lease.
Properties Exempt From San Diego Rent Caps
This statewide rental cap is designed to protect renters from being priced out of their current housing. However, not all rentals in San Diego county are subject to the rental ordinance. These may include:
- Housing less than 15 years old;
- Single-family homes or condos with no corporate ownership. This means the landlord is not a corporation, real estate investment trust, or a limited liability corporation (LLC).
- A duplex when the landlord lives in one unit and rents out the other;
- School-owned housing;
- Mobile homes;
- Low-income housing;
- Housing that is already subject to stricter rent control.
The ordinance is designed primarily to protect long-term renters in San Diego and other parts of California from major price increases that leave them without other options. These laws may not affect your property if you have a new rental or are already under rent control measures.
Other Tightening Restrictions For Rentals in San Diego
New rental restrictions are also being passed in California to protect both tenants and landlords in other ways. Some examples include:
- Law AB 491 law written by San Diego former assemblywoman Lorena Gonzalez and assemblyman Chris Ward requires mixed-income multifamily buildings To provide equal access to amenities, common areas, and entrances for both low-income and market-rate housing units.
- California strengthens its "no pet" policies to require more thorough physician evaluations for an emotional support animal certificate. In addition, physicians must designate a specific pet to be the emotional support animal and have a relationship with the patient for 30 days before signing the order. This prevents tenants from designating pets as emotional support animals solely to get around no pet policies.
- California Law SB 60 allows cities to impose fines of up to $5,000 on tenants who violate short-term rental ordinances.
California's restrictions protect landlords and tenants from unfair renting practices and do not have to get in the way of your rental's success. To find the best rental tools for pricing, listing, and vetting tenants for your property, contact us to schedule a RentSpree demo.