Layer one: the Tenant Protection Act (AB 1482)
The Tenant Protection Act caps annual rent increases on covered units at 5% plus the regional change in the Consumer Price Index, with a hard ceiling of 10% in any 12-month period. The CPI figure is measured April to April, so the allowable percentage updates each August and differs by region. Rent can be raised up to twice in a year as long as the total stays under the cap.
The cap covers most multifamily buildings more than 15 years old, and that window rolls forward every year, so a building finished in the early 2010s is now coming under the law. Common exemptions include housing already under a stricter local rent ordinance, deed-restricted affordable housing, an owner-occupied duplex, and single-family homes and condos not owned by a REIT or corporation where the required exemption notice was given to the tenant.
The law also adds just-cause rules once a tenant has lived in the unit for 12 months. Terminations must rest on an at-fault reason, such as nonpayment or a material lease breach, or a listed no-fault reason, such as owner move-in or substantial remodel, and a no-fault termination requires relocation help equal to one month’s rent. Amendments that took effect in 2024 tightened the owner move-in and remodel grounds. The statute is scheduled to sunset at the start of 2030, and a 2026 attempt to lower the cap stalled in committee, but proposals to extend or change it are likely to return.
Layer two: city rent stabilization ordinances
Many California cities run their own programs that are stricter than AB 1482. Los Angeles applies its Rent Stabilization Ordinance to most multifamily buildings with older certificates of occupancy, San Francisco regulates most pre-1979 rental housing, and Oakland, Berkeley and Santa Monica each run long-standing programs with their own boards, registration systems and fees. Several other cities, including some that adopted ordinances in recent years, have similar rules.
These programs typically set an annual allowable increase below the statewide cap, require the owner to register units and pay fees, restrict terminations more tightly and require larger relocation payments. Some also allow owners to petition for increases tied to capital improvements or to a fair return. A buyer will want to see that the building is registered, that fees are current and that any past petitions or tenant complaints are resolved.
Costa-Hawkins, the Ellis Act and why they matter to a buyer
The Costa-Hawkins Rental Housing Act limits what local ordinances can do. Cities cannot apply rent limits to units first certificated after February 1995 or to most single-family homes and condos, and they must allow vacancy decontrol, meaning the rent can be reset to market when a tenant leaves voluntarily or is evicted for cause. That turnover reset is where much of the upside in a local rent-controlled building comes from. Voters have rejected repeal measures, most recently in 2024, so vacancy decontrol remains in place.
The Ellis Act lets an owner withdraw all units in a building from the rental market. It is a narrow, heavily regulated exit: cities impose notice periods, relocation payments and limits on re-renting, and some buyers see little value in it. Treat it as background rather than a strategy, and talk with a California landlord attorney before relying on it.
Prop 13 reassessment changes the buyer’s math
Under Proposition 13, a sale generally resets the assessed value to the purchase price, with the base property tax rate of 1% plus local voter-approved charges, and later increases in assessed value limited to 2% a year. If you have owned the building for a long time, your tax bill may be a fraction of what the buyer will pay.
That is one of the biggest line items in a buyer’s underwriting of a regulated building, because the higher tax arrives immediately while rent growth is capped. It is why a building can look very profitable on your statements and still price below what you expect.
How Skyline buys California rent-controlled buildings
We start by sorting each unit into the right bucket: local ordinance, AB 1482 only, or exempt. We model rent growth by bucket, estimate turnover using each unit’s tenancy length, and re-underwrite taxes at the new assessed value. We also budget for local registration fees and any relocation obligations. Skyline buys 5 units and up, occupied and as-is, whether the building is stabilized or needs work.
On the terms side, a seller-carry note can bridge the gap Prop 13 reassessment creates, and we can set a later closing date to fit a 1031 exchange. You will typically get clear feedback within 48 hours of sending us your deal.
