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Determining Maximum Allowable Increases Under AB 1482

Posted on 28. Oct, 2019 by in Current Events

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With the inception of AB 1482, determining the maximum allowable rent increases has become a much discussed, complicated matter.  To simplify it, below is a breakdown of the civil codes governing the maximum allowable rent increases statewide for buildings older than 15 years, as well as the full civil code verbiage.

Breakdown:

Per Civil Code 1947.12(a)(1) the annual rent increase is limited to 5% + CPI or 10% – whichever is lower.

Civil Code 1947.12(g)(2) defines the CPI percentage to use is the “regional Consumer Price Index [California falls under the West Region].  This civil code specifically states to use “regional CPI” – it makes no mention of “area CPI”, such as Los Angeles area, Riverside area, San Diego area, or San Francisco area.  This civil code verbiage is limited to the regional CPI.

Civil Code 1947.12(g)(2) further states to use the most recent April 12-month CPI.  Each year, when the new April 12-month CPI is released, landlords can take that CPI and add 5% to get the current year’s maximum allowable increase percentage.

April 2019 12-month CPI was 2.9%.  Which means, until the next April 12-month regional CPI is released, the statewide rent cap is 7.9% (5% + 2.9% CPI).

References:

1947.12. (a) (1) Subject to subdivision (b), an owner of residential real property shall not, over the course of any 12-month period, increase the gross rental rate for a dwelling or a unit more than 5 percent plus the percentage change in the cost of living, or 10 percent, whichever is lower, of the lowest gross rental rate charged for that dwelling or unit at any time during the 12 months prior to the effective date of the increase. In determining the lowest gross rental amount pursuant to this section, any rent discounts, incentives, concessions, or credits offered by the owner of such unit of residential real property and accepted by the tenant shall be excluded. The gross per-month rental rate and any owner-offered discounts, incentives, concessions, or credits shall be separately listed and identified in the lease or rental agreement or any amendments to an existing lease or rental agreement.

1947.12(g)(2) “Percentage change in the cost of living” means the percentage change from April 1 of the prior year to April 1 of the current year in the regional Consumer Price Index for the region where the residential real property is located, as published by the United States Bureau of Labor Statistics. If a regional index is not available, the California Consumer Price Index for All Urban Consumers for all items, as determined by the Department of Industrial Relations, shall apply.

Full text of AB 1482 Statewide Rent Caps

Consumer Price Index, West Region – September 2019 or (PDF Version)