5 New Changes to California’s Rental Laws for 2025

In the dynamic landscape of real estate, apartment buildings have long been regarded as a stable investment. However, recent macroeconomic factors have formed a confluence of rising costs and new regulations for Owners and Managers that are difficult to navigate. Fortunately, there are some concrete strategies to help navigate this difficult world of increasing expenses. 2 of the most common factors are soaring insurance costs and escalating utility rates, and there are ways savvy owners and managers can mitigate these factors. Utility rate increase are the first area of concern. Apartment building owners are vulnerable to upcoming hikes in utility rates, particularly water and sewer charges. Older properties are more likely to be master metered, so the owner will bear the brunt of utility increases. As an example, The Metropolitan Water District has passed a budget projecting an 8.5% increase in water rates for both 2025 and 2026. Moreover, owners can also expect their sewer bills to double in the next four year as LA Sanitation needs to complete upgrades to the aging infrastructure. These rate hikes have already been approved by the LA City Council. The best way for owners and manager to address these impending increases is to implement a RUBS program as much as possible (in addition to all the standard energy efficiency upgrades, like LED lights and low flow toilets). Older, rent controlled properties will be more limited in their RUBS adoption, however all new leases can and should be put on a RUBS program to help defer and share the costs of utilities at a property. As more units turn over time, the share of units on RUBS for a rent controlled property will only increase. Possibly the most concerning increases right now are the skyrocketing costs of insurance. Over recent years, insurance premiums have seen a dramatic surge as many carriers have left the market. This abrupt escalation in insurance expenses has caught many property owners off guard, straining their financial resources and eroding profit margins. The best way to combat this affront is to have multiple great insurance brokers working for you. We know and work with many excellent insurance brokers, as not every broker has the best insurance partner for each property type or location. Good brokers know that sophisticated property owners need to get multiple bids for different kinds of coverages. Most good brokers know that they specialize in one or more particular type of asset class, and they focus their resources on maximizing the utility of that specialty. Recently, some potential 50% insurance rate hikes have been brought down to more-palatable increases of 5% - 20% by spending the time and energy to really understand coverages and get multiple bids. The above said, have no fear! Crescent Canyon is skilled in navigating all kinds of property challenges and we have many different strategies to help maximize your investments.

California's rental market is undergoing significant changes in 2024 with the implementation of 10 new rental laws, marking a crucial shift for both landlords and tenants. These legislative alterations aim to address various concerns within the state's rental sector. Here, we'll explore these changes in detail to understand their implications and how they will impact landlords and tenants alike. Staying informed about these updates is essential for landlords, property managers, and owners to navigate California's dynamic real estate market effectively this year. SB 567: Just Cause Eviction An amendment to the Tenant Protection Act of 2019 introduces stricter conditions for landlords invoking the no-fault just cause eviction policy. Landlords now need to provide tenants with specific advance notices, and if the landlord or their family plans to move in, they must do so within 90 days and reside for at least a year. Non-compliance with these new stipulations may result in financial penalties for property owners. AB 12: Security Deposits Commencing July 1, 2024, there will be a significant change in security deposit requirements for California landlords and tenants. Property owners will be limited to collecting a maximum of one month's rent as a security deposit. There is one exception that small property owners with no more than two rental properties containing four units or fewer can request up to two months' rent for a security deposit (the “Mom & Pop exception). However, there is an exception to this exception for Military personnel. Any active military renter can be charged no more than one month’s rent for the security deposit. SB 712: Micromobility Devices (E-Scooters, etc) Acknowledging the increasing popularity of eco-friendly transportation, California tenants now have the right to store and charge electric scooters and bikes within their apartments, provided the devices meet specific safety standards. Landlords can require insurance for these devices if safety standards aren't met, and they may offer secure, long-term storage solutions on the premises. SB 721: Balcony Inspections SB 721 enhances the safety of multi-unit properties by mandating professional inspections for structures with three or more units containing balconies or “exterior elements.” Qualified safety inspectors must conduct this inspection, with the initial deadline set for January 1, 2025, followed by mandatory inspections every six years to ensure ongoing safety and compliance. AB 1418: Nuisance Ordinances and Evictions Under AB 1418, local governments will no longer be able to mandate that landlords must evict and exclude tenants for alleged or prior criminal conduct. It does not prevent landlords from initiating nuisance-related evictions and screening prospective residents based on criminal histories of their own accord, however. SB 267: Credit History Landlords are now prohibited from using a tenant's credit history to determine eligibility for rent-subsidized housing without providing alternate means for tenants to prove their ability to pay rent, such as income verification or renting history. AB 1620: Renters With Mobility-Related Disabilities This law authorizes local jurisdictions to adopt regulations requiring property owners to allow tenants with permanent mobility-related disabilities to move into an accessible comparable (or smaller) apartment unit and retain their current rental rate and terms. Statewide Rent Control Enacted in response to COVID-19, the California Tenant Protections Act of 2019 establishes statewide rent control, capping yearly rent increases at 10% or 5% + local CPI, with some jurisdictions imposing even stricter regulations. City of Los Angeles Rent Increases Los Angeles' rent-controlled apartments experienced an unprecedented rent freeze until February 1, 2024, after which property owners could implement a 4% rent hike on most tenants with an additional 1% increase per utility if landlords cover utilities such as electricity and gas. Unincorporated L.A County Rent control regulations in unincorporated areas of Los Angeles County allow for rent increases of up to 3% as of February 1, 2024, as determined by county elected officials. These 10 new rental law changes in California for 2024 signify a significant update to the state's housing regulations. From tenant rights to safety inspections and rent increases, these laws underscore the importance of awareness and compliance for both landlords and tenants. For further inquiries on how these rental laws may impact your business or investments, feel free to contact us at info@crescent-canyon.com or 310-338-0500.