Cracking the Code: Orange County's Rental Market and Rent Caps

Lisa Mailhot  |  December 13, 2023

Buyers

Cracking the Code: Orange County's Rental Market and Rent Caps

 

When California lawmakers passed a rent cap four years ago to protect tenants from large and frequent rent hikes, they exempted hundreds of thousands of units reserved for some of the state’s poorest renters. This exemption raised eyebrows, especially among low-income housing units built with federal tax credits. Even though these units were intended to provide stability for low-income renters, many residents found their rents skyrocketing.

The 2019 law, known as the Tenant Protection Act, was designed to limit rent increases to a certain percentage each year, offering a level of security for tenants like Miguel Contreras. However, Contreras, a 53-year-old mechanic, received a letter from his landlord that jolted him. His rent was set to rise from $1,828 to $2,138, an increase of 17%. This two-bedroom apartment in San Jose, financed with low-income housing tax credits, was meant to be affordable. Although it had a rent ceiling, it wasn't subject to state or local caps on rent growth.

Rent Hikes Spark Protests and Concerns

Contreras, who had lived in the apartment for over two decades, had experienced modest rent increases until recently. The past two years, however, saw higher hikes. With the latest increase, he paid 25% more than just 13 months earlier, devouring over half of his monthly earnings. His predicament led him and others in similar situations to protest these rent increases with the help of the Regional Tenant Organizing Network.

This issue extends beyond individual cases. Companies like KDF Communities, which own several low-income housing buildings, have faced backlash for implementing rent hikes in their properties. KDF Communities, with numerous apartments in the San Jose area and across California, came under fire from residents and activists. Despite protests, the company chose not to engage with tenants.

 

So why are these privately owned low-income housing units exempt from rent caps? The exemption was meant to protect small landlords and unique rental situations. However, it has inadvertently led to complex policy debates. Factors such as inflation, rising insurance costs, and tenants' inability to pay rent during the COVID-19 pandemic have resulted in particularly high rent increases in low-income housing. The rent restrictions on tax credit-funded units are tied to the local median income, which can create exceptionally high rent ceilings, especially in affluent areas.

While some argue for stricter rent caps on these units, others caution against it. Property owners often need to raise rents to cover operating costs and repairs, especially after years of stagnant incomes. Many affordable housing landlords work with tenants to keep rents low and prioritize raising rents for those who can afford it. A blanket cap, they fear, might remove this flexibility.

Bottomline

In Orange County, where the real estate market is diverse and dynamic, understanding the intricacies of rent cap regulations and their impact on affordable housing is crucial for both buyers and sellers. If you're considering a move to Orange County, whether as a buyer or seller, let's connect. Stay informed about our region's latest trends and developments to make the most informed decisions for your real estate journey.

If you want to move to Orange County and navigate the complexities of its rental market, reach out to us today. Let's connect and help you make informed decisions in this dynamic real estate landscape.

 

Reference: CALMATTERS | CALmatters.org


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