As a landlord, part of your job is to get the maximum ROI from your rental properties by ensuring your rental rates match the demand in your area. With inflation and the steadily increasing cost of living, landlords may consider raising their rents to cover expenses.
But it’s more complicated than simply increasing your rental rate by 20% yearly—you also have to balance your need for ROI with local and state requirements governing rent increase rates.
Part of increasing rent is properly informing your tenants. You need to deliver a rent increase notice to stay in line with California state law. But when? And how? And how much can you increase the rent?
Read on to learn about California’s rent increase laws, how much you can increase your rent, and how to create a notice that will keep you compliant and on good terms with your tenants.
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How much can rent increase in California?
California’s Tenant Protection Act (AB 1482) regulates how much landlords can raise rent for their rental properties. This law puts a state-wide limit on rent so that annual increases don’t exceed 5% plus the current rate of inflation, or 10% of the current rent—whichever is lower.
For example, if the inflation rate is 2.8%, your tenant’s maximum increase could be 2.8% (inflation rate) plus 5% (base rate) for a 7.8% rental increase.
However, if the inflation rate is 6%, your tenant’s increase would be capped at 10% because the inflation rate plus the base rate would exceed the 10% cap (6% + 5% = 11%).
How to calculate rent increases in 2024
To calculate the cost of living increase for Orange County, you can turn to the Consumer Price Index (CPI). The Bureau of Labor and Statistics publishes this measure of inflation and is a reliable source to use in your calculations. The Tenant Protection Act requires all landlords to use the CPI from the previous April for their specific market area to calculate rent increases.
Let’s crunch the numbers: you own a residential property with a monthly rent of $1,700, and the applicable CPI for the designated period has increased by 3.5%. To calculate the allowable rent increase, you would multiply the current rent by the CPI increase percentage plus 5%.
$1,700 (monthly rent) x (3.5% + 5%) (inflation + base rate) = $144.50
Who is exempt from AB 1482?
| Type of Housing | Exemption |
|---|---|
| New construction | Properties that have received a certificate of occupancy within the last 15 years are generally exempt. |
| Single-family homes and condos | The rental is exempt if a property is not owned by a real estate investment trust (REIT), corporation, or LLC and is not a duplex where the owner occupies one of the units. |
| Affordable housing | If specific affordability restrictions are in place on a rental property, the rental is exempt. |
| Student housing | The rental is exempt when housing is provided to students through a public or private university or college or by a nonprofit affiliated with the university or college. |
| Short-term rentals | When a rental is offered for short-term rentals through a rental platform like Airbnb or VRBO for 14 days or less, the rental is exempt. |
| Government subsidized housing | Rentals with restrictions set by government agencies limiting rent increases are exempt. |
| Employee housing | When an employer provides housing to an employee as a condition of their employment, the rental is exempt. |
Are you not sure if your property qualifies? Check with your real estate attorney or consult with a professional organization like the California Apartment Association or California Association of Realtors for up-to-date information.
The ins and outs of giving your tenants a rent increase notice
It’s never easy for a renter to hear that their rent is increasing. But there are ways to go about it to ensure you and your tenants stay on good terms and stay compliant with California laws.
The most important part? Providing your tenants with an official rent increase notice.
Why do you need to provide a notice of rent increase?
First and foremost, it is a legal requirement in the state of California to provide your tenants with a written rent increase notice. It also ensures you’re being transparent and upfront with your tenants.
There are many reasons to give tenants notice of rent increases.
- Respecting your tenants and their rights: Delivering a written rent increase notice shows that you respect your tenants and their rights.
- Open communication leads to informed decision-making: When tenants receive a rent increase notice, they can make informed decisions about their housing choices. This kind of open communication leads to a more positive landlord-tenant relationship.
- Allow your tenants to plan their budgets accordingly: When you give them advanced notice that the rent will increase, they can rework their budgets. This makes it easier for them to manage their finances while still making rent each month.
- Build trust with your tenants: As mentioned before, it’s never easy for a tenant to hear that their rent is increasing. Clearly communicating promptly about rent increases will help build trust between you and your tenants. Hopefully, by keeping your tenants in the know, you can create an amicable environment and reduce potential issues.
How much notice do you need to give for rent increases in California?
When raising a tenant’s rent in California, you need to deliver a formal written rent increase notice to each tenant. You might think a quick email or text is enough, but you’d be wrong.
Landlords must provide a written notice—a phone call, text, or informal email is insufficient.
You must also give your residential tenants sufficient warning before you can increase their rent. If the rent increase is 10% or less, you must provide 30 days’ notice before the rent increase can take effect. If the rent increase is more than 10%, you must provide 90 days’ notice before the rent increase can take effect (Civ. Code § 827).
Again, if the notice is not in writing or delivered on time, landlords risk legal recourse.
What should you include in a rent increase notice?
When creating your rent increase notice, there are key components that should always be included. If you’re unsure what to include, consult your attorney to ensure your notice contains all applicable information for your market.
Here is a list of components to include in your rent increase notice:
- Name of resident: The rent increase notice should clearly state the name of each resident on the lease.
- Address: The property’s address, including unit number, must be included.
- Effective date: Ensure the date that the change comes into effect is clearly stated to allow tenants time to adjust their budget in advance.
- Current and new rent amount: Provide the current rent amount and the new amount after the increase so tenants can clearly understand the change.
- Legal compliance: Your rent increase notice must comply with local laws and regulations. This ensures you aren’t opening yourself up to potential legal issues in the future.
Rent increases in Santa Ana, Orange County
The Santa Ana Rent Stabilization and Just Cause Eviction Ordinance, the Santa Ana Rent Registry requires a bit more leg work from landlords when it comes to increasing rent. Landlords must register their residential rental units and pay a registration fee in order to be able to issue rent increases.
Once you’ve paid your registration fee, you are able to pass on up to 50% of the fee to your tenants in twelve equal monthly payments. Tenants must be given appropriate notice of the monthly payment and it can be applied each year after landlords have paid the registration fee.
How to increase rent on rental properties in Orange County
5 steps to increase rent on Orange County rental properties
- Set the new rent price
- Prepare a written notice
- Deliver the written notice to tenants
- Communicate the reasons why the rent is increasing
- Keep a written record of all rent increases
1. Set the new rent price
When deciding what your rental increase percentage should be this year, it’s time to research.
First, look at the Consumer Price Index (CPI) to determine the inflation rate. From there, look into other houses in your neighborhood—what they sell for and what other landlords charge for similar units. These market trends can help you determine if your rental property is competitive or if you need to increase the rent.
Think about the unit and how much your expenses will increase—consider repairs, mortgage, taxes, and maintenance costs. Once all these expenses are covered, you’ll want to make a profit.
Finally, ensure that you are compliant with AB 1482 and are not paying more than 10% of the current rent or are exempt from this regulation.
2. Prepare a written notice
Once you’ve determined the rent increase and the new net price, it’s time to create a rent increase notice to deliver to your tenants.
Remember, California law requires you to provide a written notice 30 days before the price change occurs. You can draft your rent increase notice, have an attorney draft one for you, or use a template. Be sure it includes all of the elements mentioned above.
3. Deliver the written notice to tenants
4. Communicate why the rent is increasing
While you are not required to disclose why you are increasing your rent, explaining the reasons behind the increase can help foster a healthy landlord-tenant relationship.
When inflation and repair costs increase, landlords must ensure their rental operation remains functional. This requires landlords to increase rent. Presenting a united front and empathizing with your tenants can help ease the impact of unwanted rent increases.
5. Keep records of all rent increases
Your easy-to-use rent increase template
Are you looking to create a rent increase notice for your rental property in Orange County? Our easy-to-use rent increase notice template can help you seamlessly create your notice to comply with state and local laws.
Download your copy today for free.
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Rent increase notice FAQs
How much rent increase is permitted in Orange County?
How many days’ notice must be given for rent increases in California?
Can a landlord raise rent after a lease expires?
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Steve Welty
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