Understanding the Changing Laws for Your California Income Property

Understanding the Changing Laws for Your California Income Property

  • 04/29/24

Understanding the Changing Laws for Your California Income Property

In recent years, California's housing landscape has undergone significant transformations, driven by a confluence of factors ranging from the COVID-19 pandemic to legislative reforms and changing market dynamics. Amidst these shifts, the state has witnessed elongated evictions, zoning changes, the implementation of rent control measures, fluctuations in interest rates, proposed legislation concerning pet ownership in rental units, and alterations in tax laws. Understanding the nature of these changes is essential for navigating California's complex housing environment and anticipating future developments in the realm of real estate and rental markets.

Elongated Evictions

During the COVID-19 pandemic, tenants were given the right to break contract law and not pay rent. Thus, the eviction process has gotten more litigious in the last two years than ever before in California history. The increased time to remove tenants averages over 100 days.

Zoning Changes - SB 9

Beginning in January 2022, new development rules do not allow for the ability to create fewer units than what exists on a property. For example, a duplex cannot be turned into an SFR without the addition of an ADU. Triplexes and Fourplexes have become increasingly challenging to develop under any circumstance. On the other hand. Most properties currently limited to an SFR can be used to create up to four housing units, with certain restrictions. 

Rent Control - AB 1482

Beginning in 2020, AB 1482 was put in place to limit rent increases across the state of California to 5 percent per year plus the local rate of inflation. In addition to the rent-control measure, AB-1482 will also require landlords to establish “just cause” before evicting tenants who have lived in a unit for more than a year.

Higher Interest Rates

Due to the changes in development laws, rental properties can now only be valued on a rental income basis. Higher interest rates and higher returns on alternative investments such as bonds have put downward pressure on income property values.

Proposed New Laws - AB 2216

A new bill has been introduced to legislation that prohibits blanket pet bans in rental units in California. AB 2216 will require landlords to have reasonable reason(s) for not allowing a pet in a rental unit and only allow landlords to ask about pet ownership after a tenant’s application has been approved.

Changing Tax Laws

Prop 19

Effective April 1, 2020, the proposition allows eligible homeowners to transfer their tax assessments anywhere within the state and allows their tax assessments to be transferred to a more expensive home with an upward adjustment.

Part A includes people who are 55 years or older, disabled, or affected by a natural disaster. This tax transfer benefit can be used up to 3 times.

Part B includes significant restrictions to preferential parent-child/grandparent-grandchild exclusion that allowed parents/grandparents to pass property down with a lower property tax base. An inherited property with an assessed value of greater than $1,000,000 with also have a reassessment for the amount over the first million dollars.

To view all of the new California housing laws, click HERE.

To see our other blog regarding the new California Real Estate law changes, click HERE.

As your trusted real estate advisors, we stay up to date with all changing laws to keep you informed. Contact us to discuss how these recent changes may affect you and how to plan for the future. 

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