California Rent Control – What It Means for Home Values and for Landlords

California has a statewide rent control law that took effect on January 1, 2020. The goal of the law is to deal with a housing crisis, which has resulted in an increase in homelessness in almost 45 percent in the past two years.

The law prohibits landlords from raising rent more than 5 percent each year plus inflation. They also can’t evict tenants without a valid reason. California is only the second state to enact such a law. Oregon is the other state with rent control, which is at 7 percent plus inflation. However, there are cities throughout the country that use rent control. Cities with stricter rent control laws will still take precedence over the state law.

The Idea of Rent Control vs. the Facts

The idea behind rent control is to make properties affordable for the middle class. The view is that landlords can’t raise the rent whenever and how much they want, allowing tenants to continue to live in their homes at their current budget. However, rent control often hurts more than it helps. One of the primary issues to result from limiting rent increases is lack of maintenance for those properties.

A landlord updates properties to stay competitive and to keep tenants happy. They raise rents to get back the cost of the renovations. If they can’t increase rent to cover those costs, they have no incentive to make the improvements. The properties become neglected and unfit for occupancy. Those homes end up with lower market value along with other properties in the same area.

Rent control hurts tenants because they have difficulty finding housing. Landlords have no motivation to buy more housing if they can’t get a good return on their investment. Fewer properties are available for the tenants, which may mean they end up homeless after all. The quality of the housing is also lower, which makes it more difficult for the tenant to find a place that is safe and in good condition for their families. 

Property owners and developers no longer are motivated to build more properties since they are limited on how much they can make. Any new developments built are usually for the wealthy because luxury properties are likely not included in rent control.

While rent control seems like a good idea in theory, it can hurt property owners and renters in the long-term. Anyone who has property and doesn’t want to deal with the limitations of rent control may want to consider selling now. Quick Home Offers is always looking for rental properties and will provide a fair price. Contact Quick Home Offers today for a no-obligation quote.