Rent Drives Up California’s Cost of Living

 Many landlords in California can only raise the rent a certain amount. Thursday, they — and their tenants — found out how high. 

A 2019 law caps how much landlords can bump up rent, starting each Aug. 1: Either by 5% plus inflation, or by 10% (whichever is lower). In California, the average median rent is $2,850 a month, 33% higher than the national average, according to real estate company Zillow.

Inflation rates vary for different regions, depending on their consumer price index. In most counties, rent increases will be capped for the next year at 8.8%, including in a few Bay Area counties, such as San Francisco and Alameda. In other places, rents can go higher: Some Los Angeles County residents could see their rent climb by 8.9%, while rent for those in San Bernardino could rise by 9.3%.

There are a handful of exceptions. Tenants living in newer buildings, for example, or some single-family homes may see higher rent increases. Affordable housing units that received government subsidies were also exempt when the law first passed, but in April a state committee closed that loophole, and imposed rent caps for certain low-income housing. 

Some cities also set their own rent restrictions, such as Los Angeles, which can supersede the statewide cap.

Similar to last year, inflation rates are below 5%, meaning rent caps across the state remain less than 10%. But there was one exception in 2023: In San Diego County, inflation was 5.3%, resulting in a 10% rent cap. 

The law sought to help curb the state’s soaring housing costs — an issue that’s still a major concern for residents today. According to a June poll by the Public Policy Institute of California, 36% of California adults surveyed said that the cost of living, economy and inflation are the state’s most pressing issues. 

Some potential beneficiaries of higher rents are public pension funds, including the California State Teachers’ Retirement System, reports the Los Angeles Times. It found that public pension systems are putting billions of dollars into real estate investment funds that are buying up apartments across the country and that promise big returns. 

At 133 California properties bought by funds with California pension investments, over the eight years ending in 2022, the rent increased by an average of 7.7 percentage points more than in buildings in surrounding neighborhoods, according to the Times analysis. 

So is there anything that can be done to keep housing affordable? One possible solution is the growing popularity of community land trusts — nonprofits that buy land and sell or rent the buildings on top of that land to low-income residents, reports CalMatters’ Felicia Mello. Since 2014, the number of community land trusts has tripled. In the pricey Mission neighborhood in San Francisco, tenants in the six-unit Queen Anne building known as Pigeon Palace pay $1,500 to $2,800 a month in rent. That’s because the San Francisco Community Land Trust helped place the winning $3 million bid on the building, then rented the units back to the existing tenants.Keith Hennessy, a Pigeon Palace resident of 22 years: “We shifted from being renters in a market where someone could buy our building any day, to where no one’s coming to buy our building.”