California lawmakers are considering putting a limit on the amount of security deposit landlords can charge renters, drawing opposition from several of the state’s property owners and realtors’ groups.
If passed by lawmakers and signed by the governor into law, the bill would prohibit landlords from charging tenants more than one month’s rent as a deposit for furnished or unfurnished rental property.
The bill is now under consideration by the Senate. If passed by both chambers and signed by the governor, California would become the 12th state in the country to impose a one-month cap on rental security deposits.
Supporting and Opposing ArgumentsMany labor organizations support the bill, pointing to the high cost of rent and security deposits required in the state. The California Nurses Association, the University of California Student Association, the Western Center on Law and Poverty, and other groups told legislators the cost of housing has pushed working families into extreme situations, such as living in a vehicle, shelter, garage, or having to share a house with multiple families.
The groups also say such a burden is pushing people into homelessness at a faster rate than the state is able to provide services, according to an April Assembly bill analysis.
Several landlords and real estate groups also oppose the measure.
Razmik Tatos, a residential and commercial real estate owner in Burbank, California, said he usually only charges a one-month security deposit on his properties but said it made more sense to charge two months of deposit on a furnished unit.
“I think [the legislation] would be unfair because the furniture could have material damage, and that would be an additional cost,” Tatos told The Epoch Times.
Dan Yukelson, executive director of the Apartment Association of Greater Los Angeles, told The Epoch Times, “[The bill is] going to have the opposite impact that legislators would like.”
With the current system, landlords can ask applicants who have pets or have poor credit to pay a higher security deposit to make up for not meeting certain rental criteria. If AB 12 passes, some landlords may withdraw their properties from the market or stop renting to people who can pose a higher risk, he said.
“There are instances when owners want to try to work with applicants because they have a good feeling about it and [the applicant] may have a good track record with other rental properties, but they aren’t going to be able to do that,” Yukelson said.
In general, he said, renters can also negotiate security deposit payments, and possibly ask to get some of it returned after a year if they prove to be reliable.
Another issue on landlords’ minds, according to Yukelson, was the increase in fraudulent documents used in applications. If a property owner finds he or she rented to someone using fake identification or paperwork, it could take months and thousands of dollars in court costs to evict such a tenant.
The onslaught of state regulations also has become burdensome for some property owners.
“It’s just gotten way too complicated and risky to be in this business and [some owners] will withdraw their property,” Yukelson said. “Owners are leaving the state and we’re seeing that happen left and right.”
The California Apartment Association, the largest statewide rental housing trade organization in the United States, wrote a letter to the state Assembly Judiciary Committee opposing the measure, saying AB 12 wasn't the answer to tenants’ challenges.
The California Rental Housing Association and the California Association of Realtors also argued against the legislation.
Rental Prices in CaliforniaThe average cost of a California rental slightly declined in major metropolitan areas in April. According to a Realtor.com report published on May 18, 14 markets in the state had seen year-over-year declines, including Riverside-San Bernardino at -10.9 percent, Sacramento at -1.6 percent, San Diego at -1 percent, San Francisco at -2.5 percent, and Los Angeles at -2.1 percent.
Tech-centered San Jose was an outlier, growing by 3.2 percent during the same period. However, a year ago, San Jose was growing by 19 percent.
The recent wave of job cuts in the tech industry likely impacted the rental demand in large metropolitan areas, Realtor.com reported.