On September 12 of this year, Sacramento passed its own version of rent control called the Tenant Protection and Relief Act. This ordinance serves to further tighten restrictions on rent increases and reduce the number of ways in which a landlord can evict a tenant.
Specifically, rent increases will now be capped at 6% plus CPI, which is essentially a cost-of-living index. Currently, that index is at 2.5%, meaning you’d now have a total maximum increase of 8.5%. That’s down from the state’s prior law of 10%.
In addition to this, landlords will not be able to evict tenants without cause. The specific causes necessary to evict someone are listed as:
- Failure to pay rent
- Criminal activity
- Failure to give notice
- Substantial repair
- Owner move-in
- Removal from market
Further still, beyond capping rent increases, the ordinance also limits the number of increase to one per each 12-month period.
In my opinion, the restriction placed on the circumstances under which a landlord can evict a tenant is one of the most important pieces of the new rent control act. However, there are a few important exemptions that both landlords and renters need to be aware of:
- The ordinance only applies to multi-family homes—properties with two or more units that were built before February 1, 1995.
- There is a provision in the law called the “Fair Rate of Return”: This allows landlords to petition the city for an increase in rents above the maximum allowable limit. This will only be relevant in circumstances where a new buyer has purchased a property that brings in negative cash flow; this provision will allow the owner to get some additional rent relief.
What does this all mean for the tenant-landlord relationship in Sacramento moving forward?
I think we may see some landlords pass through some of their operating expenses to tenants in circumstances where they can’t increase rents enough. That means you might see some utility bills and parking fees being passed through to tenants. I also think that landlords may not be able to achieve maximum sales prices when they sell their properties if they have one of the properties that qualify for the protection and they have lower rents for renters.
It’s ultimately important to understand whether or not you’re in one of the protected properties, what your rights are as they pertain to your lease agreement, and, of course, the new ordinance itself.
If you have any questions about rent control, buying or selling property, or real estate in general, don’t hesitate to reach out to us. We look forward to hearing from you soon.