In January 2022, national asking rents continued to rise rapidly. What does this mean for landlords and tenants in the Golden State?
Nationwide, asking rents are up 15% from a year earlier as of January 2022, according to Redfin. In California, the year-over-year increase in asking rent is:
- 32% in Riverside;
- 24% in Sacramento;
- 19% in San Francisco;
- 19% in Oakland;
- 16% in San Diego;
- 10% in Los Angeles;
- 10% in Anaheim; and
- 9% in San Jose.
While rent in California increased in every major metro, some of the fastest rent increases are occurring in what are typically less costly, inland metros, like Riverside and Sacramento. These metros are popular with both homebuyers and renters due to the open spaces and room for growth, but rent is rising quickly — far more quickly than recently passed legislation on rent caps ought to allow.
Putting a cap on rent
Why are rents increasing so quickly here in California — especially when the state recently passed legislation to prevent huge rent spikes?
While most rental units are subject to rent caps, many of the units in areas with an abundance of new construction, like Riverside and Sacramento, are not. That’s because units constructed within the past 15 years are exempt from The Tenant Protection Act (TPA).
The TPA went into effect in 2020, with the goal to:
- cap annual rent increases at 5% plus the rate of inflation for much of California multi-unit residential properties; and
- require “just cause” to evict tenants in place for 12 months or more.
The rent caps favor tenants of older units. New buildings are exempt until they have been around for at least fifteen years.
Related article:
The TPA enforces a limitation on rent increases for rental properties which do not fall under any exemptions.
For rent increases occurring on or after March 15, 2019, an owner of residential real property may not, over the course of any 12-month period, increase the gross rental rate for a unit more than the lesser of:
- 5% plus the percentage change in the applicable Consumer Price Index (CPI); or
- 10% of the lowest gross rental rate charged for that dwelling or unit at any time during the 12 months prior to the effective date of the increase.
A certain amount of the recent jump in rents can be attributed to the multitudes of exemptions put on rent caps. There are also smaller occurrences to account for — like people moving between units, which has remained popular for tenants seeking more space to take advantage of remote working during the pandemic.
The biggest obstacle fueling rapid rent increases across California is restrictive zoning regulations — a huge obstacle for creating new construction. With sufficient residential construction, rent caps are not even necessary. Even with the state’s new rent caps, California renters continue to overpay for rent, with rents far exceeding income increases.
Overly restrictive zoning is the force which fuels the housing inventory shortage and high demand. As long as construction falls below demand, watch for rents to continue to rise at a severe pace.
Related article:
For rent increases occurring on or after March 15, 2019, an owner of residential real property may not, over the course of any 12-month period
Our rent increased $238
It’s pretty sad when you worked most of your life and you become a senior citizen through no fault of your own live on a limited income move into a place that’s for seniors only and every six months the rent goes up how can we live when this keeps happening did they want there to be more homeless people because we can’t afford our ribs here this is ridiculous absolutely ridiculous and scary very scary
It is very scary!! I’m also a senior citizen and have very limited income
This is normal now. Inflation This year’s mad in the US, the highest from 1981 is all because of the crown and war in Ukraine. And it affects many areas of life in people, not excluded and rental real estate, because you have to put up with this and take this fact. Thanks for the excellent article and statistics!
That’s ridiculous!~! Why should we be punished because of something that’s happening in another country? They are always looking for a reason to raise rent, gas etc… This world is so screwed up and it will keep getting worse and worse. It’s too far gone to be fixed!
Ever notice that CA new home construction is only supplying homes for the very well off? It’s not zoning that is causing high prices, it’s government regulation, fees and corruption. Fees have increased enormously over the past forty years. Regulation has a strangle hold on developers, and no developments get approved without generous donations to our politicians favorite funds, or what I would characterize as bribery. All of these costs must get passed on to the consumer, and so the only housing being built is expensive. If we still had governments that acted as they did back in 1979, developers would happily build cheap houses, but in today’s California, it is impossible to do. So, politicians will cleverly point their fingers at zoning, but the truth is that governments (fees, regulations & corruption) have priced most people out of the housing market. Don’t fall for that zoning baloney. And by the way, people who bought homes in zones that only allow single family, paid for that right, and now government wants to steal that from them. It’s not right. Those homeowners are entitled to keep their neighborhoods as they were originally zoned. That’s why we have zoning laws.
John Davis, I am 100% with you. Thank you.
Also keep in mind that every new time a builder wants to build a tract of homes, they have to pay fees in the $100Ks to the City for Affordable housing. These costs get passed on to the Buyer reflected in the price of the home. Effectively you are paying a fee so that housing can be more affordable… for someone else.