Market Update
Understanding Rent Increase Laws
Navigating rent increase laws as a new landlord is crucial for success. Understand the types of regulations, limits, and exemptions to maintain...
When the Eaton and Palisades fires tore through Los Angeles County on January 7th, the devastation was swift and unforgiving. More than 10,000 structures were reduced to ash, leaving tens of thousands of residents suddenly homeless.
As displaced families scrambled for housing, demand for rental properties surged overnight. But instead of stability, the rental market saw opportunism.
Some landlords responded with massive rent hikes—some as high as 150%. Between January 7th and 18th, more than 1,300 rental listings on Zillow appeared to violate California’s price gouging laws, with 1,100 landlords and real estate agents implicated in predatory pricing tactics. The result? A staggering $92.4 million per year in illegal overcharges.
Los Angeles was already in a housing crisis before the fires, with supply failing to keep up with demand and affordability slipping further out of reach. Now, with so many people in urgent need of shelter, the rental market has become a battleground.
In response, California officials are reinforcing laws to curb predatory pricing and protect displaced residents from exploitation.
California’s Price Gouging Laws: What Landlords Must Know
California has strict laws in place to prevent exploitative rent increases during emergencies. Penal Code Section 396 protects renters by capping rental price increases at 10% for 30 days after a declared emergency. For properties listed after the crisis, rent cannot exceed 160% of the fair market rent as determined by the U.S. Department of Housing and Urban Development (HUD).
These measures exist to curb exactly what has been happening in LA: landlords capitalizing on disaster to drive up rental rates. Despite these protections, violations are rampant. State and local officials are now moving swiftly to enforce compliance and penalize those breaking the law.
How These Laws Impact Rental Pricing
The price gouging restrictions primarily apply to short-term leases of one year or less. Longer-term leases—those exceeding 12 months—are exempt from these pricing limits, allowing landlords to set rates beyond the statutory caps
The law outlines two key pricing restrictions based on listing dates:
- For properties listed before January 7, 2025: Rent increases cannot exceed 10% of the rental price in place on that date.
- For properties listed after January 7, 2025: Rent cannot exceed 160% of HUD’s fair market rent for the area.
Additionally, bidding wars are strictly prohibited. Even if an insurance company or third party offers to pay more than the legal limit, landlords accepting these offers are in violation of the law and risk severe penalties.
The Crackdown: Fines, Investigations, and Legal Consequences
With thousands of renters vulnerable to predatory pricing, state officials have escalated enforcement efforts. The California Department of Justice’s Disaster Relief Task Force is actively investigating landlords suspected of violating price gouging laws. Over 650 warning letters have already been issued, and criminal charges are now being considered for the worst offenders.
To further deter price gouging, the Los Angeles County Board of Supervisors recently approved a maximum fine of $50,000 per violation—a significant increase aimed at holding landlords accountable.
The message is clear: landlords who attempt to take advantage of an emergency will face serious legal and financial consequences.
Key Exception to Price Gouging Laws
While the 10% cap is strictly enforced, one key exception exists:
- Amortized Repairs or Improvements – If a rent increase reflects costs for substantial repairs or upgrades beyond routine maintenance, and those costs are spread over the lease term, the increase may exceed 10%.
How Landlords Can Stay Compliant
With enforcement tightening, landlords must take proactive steps to ensure compliance with California’s price gouging laws:
- Audit Your Rental Pricing: Ensure that rent increases are within the legal 10% or 160% limits, depending on the listing date.
- Consider Longer Lease Terms: Rental agreements exceeding 12 months are exempt from the statute, offering more pricing flexibility.
- Justify Rent Increases: If raising rent beyond 10%, landlords must document substantial repairs or improvements to support the increase.
- Stay Updated on Legal Changes: Regularly check for updates from the California Attorney General’s Office to remain in compliance.
More Than Compliance—A Moral Responsibility
While staying within legal boundaries is essential, landlords also bear a greater responsibility in the wake of disaster. The Los Angeles housing market is in crisis, and unfair pricing practices only deepen the instability. Ethical rental pricing can help stabilize communities, rebuild trust, and provide displaced families with the security they need to recover.
At Rincon Property Management, we are committed to helping landlords navigate these legal complexities while upholding ethical rental practices. Contact us if you have questions about compliance or need guidance on pricing strategies, our team is here to help. By working together, we can ensure Los Angeles recovers fairly and responsibly.