Rental security deposits in California cut substantially under new law

Rental security deposits in California will be cut substantially under a new law that limits them to one-month’s rent.

The cost to move into a furnished rental in California will be cut in half under Assembly Bill 12, which took effect Monday, July 1. For an unfurnished unit, maximum move-in costs will be a third less.

The one-month limit applies to landlords who own more than two rental properties or more than four units.

For mom-and-pop landlords below that two-property, four-unit threshold, deposits will be limited to two months’ rent unless the new tenant is a military service member. In that case, the one-month limit holds.

The new law seeks to make housing more affordable in a state where more than half of all renters are “cost-burdened” and where homelessness has ballooned to about 180,000 people.

“Massive security deposits can create insurmountable barriers to housing affordability and accessibility for millions of Californians,” the bill’s author, Assemblymember Matt Haney (D-San Francisco), said in a recent statement.

“Despite skyrocketing rents, laws on ensuring affordable security deposits haven’t changed substantially since the 1970’s,” Haney said. “This new law is a simple, common sense change that will have an enormous impact on housing affordability for families in California, while also balancing a landlord’s need to protect themselves against potential liability.”

California joins 11 states that limit security deposits to only one month’s rent, Haney’s statement said.

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A Legislative Analyst’s report on the new law noted that rents have increased disproportionately faster than the costs of most goods since the old limits were established.

While the cost of consumer goods and services quadrupled since the old security deposit limit took effect in 1977, rent has increased eight-fold in that time, the analyst’s report said. As a result, the security deposit “would likely significantly exceed” the amount landlords need to make repairs, the report said.

A statement from the California Apartment Association called the new law “a significant change from previous regulations.”

Landlord groups opposed the new limit as “an unfair imposition” on housing providers, impairing their ability to cover damage or unpaid rent, the report said. They argued further that the new limits could cause smaller property owners to pull their rental units off the market.

In Los Angeles and in Anaheim, a median-priced two-bedroom unit rents for around $2,400 a month, according to Apartment List.

When you include the first month’s rent plus the maximum amount a landlord could charge under the old limit, that brought the move-in cost to around $7,200 for an unfurnished unit and to $9,600 for a furnished unit.

Under the new law, the maximum move-in cost for that typical apartment would be just $4,800.

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