New Rent Control Law Could Ensure 5% Annual Increases

David Harrington

California’s new statewide rent control law, which caps annual rent increases at 5% throughout the state, could have an adverse affect. According to David Harrington of Matthews Real Estate Investment Services, investors are planning to increase rents the maximum allowed amount, and some owners are even looking to terminate leases with rents well below the market rate. While these trends are necessarily indicative of an industry-wide perspective, it shows this new law could have unintended consequences.

“In the days following the senate and assembly’s passing of AB 1482 we have had many meetings and conversations with clients on this subject,” Harrington, EVP and national director of multifamily at Matthews, tells GlobeSt.com. “They are all considering their options in how to adjust their operations moving forward.  Many of the private investors expressed interest in issuing a 60-day notice to terminate tenancy to those units that are severely below market rents.  This option appears to still be available to an owner at this time, but likely not for long.  Additionally, many of these owners who have not raised rents in many years have indicated that they are now taking steps to implement this maximum allowable increase and have indicated that they will put these tenants on a plan to ensure their rents are raised every single year as allowed by the new law.”