In California, the days of needing to save two to three months of rent as a security deposit are essentially over.
The legislation, which came into force on Monday, stipulates that security deposits for all but the smallest rental properties must be capped at one month’s rent. The law passed as Assembly Bill 12, authored by Assemblyman Matt Haney (D-San Francisco).
“Hefty security deposits could create insurmountable barriers to housing affordability and accessibility for millions of Californians,” Haney, chair of the California Legislature’s Renters Caucus, said in a statement.
Previously, landlords could charge two months’ rent for unfurnished properties and three months’ rent for furnished properties.
According to statistics, the average rent in Los Angeles is $2,795 Zillow, an online real estate marketplace.
The bill creates an exception for landlords with two or fewer properties and no more than four total rental units.
The bill was written in December 2022 and passed by the Assembly and Senate last fall. Signed by Governor Gavin Newsom in October.
Along the way, we have received support from people from all walks of life. Los Angeles County Board of Trustees.
Supervisor Lindsey Horvath noted in May 2023 that she was unable to move into a rental home she owned several years ago because she was required to pay “Prepay nearly half a year’s rent“.
“As someone who has a high-paying job and makes more than the county average income, it’s difficult for me to rent a new apartment because of the large deposit required,” she said.
But the legislation has raised concerns among some in the real estate industry.
Sharon Oh-Kubisch, a partner at the Irvine-based law firm Kahana Feld, pointed to two potential flaws with the bill.
She said that while she supports the bill’s goal of alleviating high rental costs, the financial burden is being passed on to landlords.
She noted that the security deposit is intended to cover losses incurred when the tenant moves out. Lower deposits mean landlords are more likely to sue customers who cause significant damage.
“Landlords can ask for compensation behind the scenes, but they will most likely have to sue and hire a lawyer to get the money,” Oh-Kubisch said.
Additionally, she said reducing security deposits could be detrimental to tenants with bad credit or lack of a positive rental history.
Higher security deposits give landlords more flexibility, Oh-Kubisch said. With these “safeguards” gone, she hopes landlords will be “more precise and scrutinize their tenants more.”
Others, however, said the legislation would benefit those who have the hardest time finding housing.
Masih Foradi, executive director of the California Immigration Policy Center, said in a statement that the law will help vulnerable communities.
“In California’s high-cost rental market, immigrants and people of color are often charged expensive security deposits, which effectively limits their access to safe and affordable housing,” he said. “AB-12 increases a level of fairness by limiting high bond amounts.”
Catherine A. Rodman, director and supervising attorney at Affordable Housing Advocates, a tenant-rights legal group based in San Diego, said the news was met with mixed reactions among her mostly working-class clients.
“I know this is a big relief to a lot of people across the state, but at least in the San Diego area, it’s not a big issue,” Rodman said.
The median rent in San Diego listed on Zillow is $3,095.
She said “surging rents” have led landlords in most areas to require no more than one month’s rent as a security deposit.
“I’ve been here 40 years and I’ve only had my security deposit stolen a few times,” Rodman said. “Our problem is rent.”
Rodman said she doesn’t want to “turn her nose up” at the legislation but hopes it’s part of a broader vision to make housing more affordable in more parts of the state.
“I’m sure it will help, but we need to address the cost of rent because it’s really a huge barrier,” she said.
