Navigating rent control laws anywhere in California can be challenging, but they are just a bit more complicated in Santa Rosa.
Why? The city keeps thinking about passing its own rent stabilization measures, but something inevitably gets in the way. While there is a statewide rent control law that covers many rental properties in Sonoma County, specifically in Santa Rosa, locally, it can be difficult for landlords to understand what they can and cannot do.
That’s why we like to share our expertise and knowledge about rent control laws and how best to navigate them. At Healdsburg Property Management, we’ve been following local and state laws for years, and we can offer you some advice and support when you’re trying to figure out how much you can raise the rent on your Santa Rosa property – if you should at all.
Let’s take a look at rent control in Santa Rosa and what you need to know.
Santa Rosa’s Rent Control History
In 2016, the Santa Rosa City Council passed a rent control law. The people didn’t love it, though, so it was brought to a special election in 2017. It was defeated, with 52% of the local electorate voting against it.
Not that it mattered. The Tenant Protection Act of 2019 went into effect on January 1, 2020, bringing rent control across the state of California.
First: Is Your Santa Rosa Rental Included in Rent Control Laws?
As a landlord, you first need to know whether your investment property is covered or exempt.
Nearly all multifamily properties in Santa Rosa that were constructed at least 15 years ago are subject to the rent stabilization laws and the just cause eviction laws that are the focus of The Tenant Protection Act.
Exempt properties include:
- Single-family homes and condos not owned by a Real Estate Investment Trust (REIT) or a corporation.
- Those multi-family properties have received a certificate of occupancy within the last 15 years. In this case, your property is exempt until it has reached the point of being 15 years old.
- Mobile homes, dormitories, and hotels. Duplexes are also exempt from rent control laws when the owner of the property lives in one of the units.
Here’s something important to know: if your Santa Rosa rental property is exempt from rent control, you must say so in your lease agreement. This is an important detail to check. If you have not updated your lease agreement since this law was passed, it’s time to do that.
Raising Rents in Santa Rosa
The state-mandated rent control limits are 5% plus the Consumer Price Index (CPI) increase or 10%, whichever is lower. This means that before landlords can raise their rent on a property covered by rent control laws, it’s important to know what the CPI is.
The CPI component of rent control has become especially relevant in the last few years, as inflation has skyrocketed and costs for everything have increased. As inflation eases, you can expect to be closer to the 5% allowable increase than the 10% maximum increase. Be sure to observe the economic news and follow what the California Department of Finance does with the Consumer Price Index.
When Can You Raise the Rent?
Rent control laws allow Santa Rosa landlords to raise the rent up to the allowed amount over a 12-month period. Most landlords will raise the rent one time during that 12-month period, and that’s at the end of the lease term when you’re negotiating a renewal. While you can raise the rent at other times during the tenancy, you’d have to include that timing in your lease agreement, and you still could not raise the rent more than the allowed amount.
The Tenant Protection Act applies to month-to-month rentals as well as fixed lease agreements. That means if your initial lease agreement has ended and you and your tenant are now operating on a month-to-month schedule, the law still applies; both the limits on rental increases and the timing in which you can raise the rent.
There’s also the matter of timing and notice.
Santa Rosa landlords must give tenants proper notice before raising the rent. The new amount and the date it will apply must be put in writing sixty days before the rent increase goes into effect.
Increasing Rents Outside of Rent Control Laws
We are discussing the logistics around raising the rent on properties that are included in rent control laws. When you’re exempt from the statewide rent control laws, you can raise your rent as much as you want to.
Even if your property is included in the rent control laws, you can set the rent at any rate you want once a tenant has vacated, and you’re preparing to lease the property to a new tenant – unless a state of emergency is in effect, like it was from the Covid years, for example.
However, the rent control limits still have an impact, thanks to market competition. Even if you’re renting out a property exempt from stabilization concerns, you’re still competing with rental units that must follow those laws. So, if you raise your rent at renewal time to an amount that’s much higher than what other units can raise their rent to, your tenants will have the option of leaving your property in order to find a cheaper place to live.
Setting your rent or your rent renewal at a price that’s too high for what the market demands may lead to a longer vacancy because there are more competitively priced homes out there for Santa Rosa tenants to choose from.
What Does This Mean for Your Santa Rosa Investment Property?
Santa Rosa rental property owners expect to make money on their homes, so it’s important to raise the rent consistently yearly. If you’re operating under these rent control laws, can you continue increasing your profitability and increasing your return on investment?
Yes. Here are some things to think about.
Generally, these rent control laws mean you won’t be able to raise your rent by more than seven or eight percent every year. This law is in effect for 10 years, and we have no reason to believe it won’t be renewed when the time comes.
The CPI changes annually, so landlords must understand its current level before they add their own five percent if they plan to raise rent by the maximum amount the law allows.
When you have an investment property that’s subject to rent control laws, you have to be strategic about how you price the property, attract tenants, and negotiate lease renewals.
To maximize the return you earn on your rent-controlled investment, we recommend:
- Strategically pricing your vacant property. The rent control laws do not limit what you can set your rent at when the property is vacant. You’ll want to study the market and remember that you’ll need to compete with properties subject to rent control. Their prices will be lower. But, you will want to avoid underpricing your rental property at the point that you list and market it. Otherwise, you’ll have a difficult time increasing the rent year after year because you’re bound by those rent control limits.
- Screen tenants carefully. You are hoping to retain good tenants, and thanks to the just cause eviction laws that come with rent control laws, you’ll have these tenants in place for longer than the initial lease unless they decide to leave or they give you a just cause reason to evict them. In a market without rent control, tenants feel free to look around at lease renewal time. They may find something cheaper, making it worthwhile to move. With rent control in place, tenants know their rent is capped. They’re more likely to stay in place longer. Plus, the just cause eviction laws make it difficult to evict a tenant without cause. You’ll want to know you’re placing great residents.
- Professional help matters. Always partner with a local property manager before you invest in a property, set a rental value, or raise your rent at renewal time. The tenant protections make the management of your property more challenging. It’s an excellent reason to work with property managers who can help you navigate the laws and keep you in compliance.
Rent control impacts each market and even each property a little differently. How you respond to it depends on where you are and what you need from your property. The law is always changing. There are nuances that arrive every year, and we want to make sure you’re prepared. The rent control laws are unlikely to get less complicated in Santa Rosa. We can help you understand the law and stay in compliance. Contact us at Healdsburg Property Management.
Healdsburg Property Management manages single-family homes, duplexes, fourplexes, and multi-unit properties of up to seven units throughout Sonoma County’s Wine Country, including Healdsburg, Geyserville, Windsor, Northern Santa Rosa, Cloverdale, Sebastopol and Forestville.