In California, the days when you had to save up the equivalent of two or three months' rent for a security deposit are almost over.
A law limiting the security deposit on a rental property to a maximum of one month’s rent for all but the smallest landlords went into effect Monday. The law, passed as Assembly Bill 12, was authored by Assemblyman Matt Haney (D-San Francisco).
“Massive security deposits can create insurmountable barriers to housing affordability and accessibility for millions of Californians,” Haney, who chairs the California Legislature’s Tenants Caucus, said in a statement.
Previously, landlords could charge two months' rent for an unfurnished property and three months' rent for a furnished one.
The median rent in Los Angeles is $2,795, according to Zillow, an online real estate marketplace.
An exception is provided in the bill for landlords who own two or fewer properties that together have no more than four rental units.
The bill was drafted in December 2022, passed by the Assembly and Senate last fall and Signed by Governor Gavin Newsom in October.
Along the way, he gained the support of the Los Angeles County Board of Trustees.
Supervisor Lindsey Horvath noted in May 2023 that she was unable to move into rental housing a couple of years earlier because she was asked to pay “Almost half a year's rent in advance.”
“Because I have a well-paying job and earn more than the county median income, I found it difficult to rent a new apartment due to the significant deposits required,” she said.
But the legislation is causing concern among some in the real estate sector.
Sharon Oh-Kubisch, a partner at Irvine-based Kahana Feld who specializes in real estate law, pointed to two potential drawbacks of the legislation.
While he supports the bill's goal of easing high rental costs, the financial burdens are falling on landlords, he said.
He noted that security deposits are meant to cover damages a tenant might suffer when moving out. Lower deposits mean landlords are more likely to have to sue customers who cause significant damage.
“A landlord can demand damages at the end of the lease, but then they will likely have to file a lawsuit and hire a lawyer to get that money,” Oh-Kubisch said.
Additionally, she said reducing security deposits can work against tenants who have less-than-perfect credit or lack a strong rental history.
Oh-Kubisch said higher security deposits allowed landlords to be more flexible. Now that those “safeguards” are gone, she expects landlords to be “more precise and increase scrutiny of tenants.”
Still, others say the legislation will benefit those who have the hardest time finding housing.
Masih Fouladi, executive director of the California Immigrant Policy Center, said in a statement that the law will help vulnerable communities.
“In California’s high-cost rental market, expensive security deposits are often imposed on immigrants and people of color, effectively limiting access to safe and affordable housing,” she said. “By limiting high security deposits, AB-12 advances a measure of equity.”
Catherine A. Rodman, director and supervising attorney at Affordable Housing Advocates, a San Diego-based tenants’ rights legal group, said the news received mixed reviews from her mostly working-class clients.
“I know it's been a huge relief to many across the state, but at least here in the San Diego area, it's not a huge issue,” Rodman said.
Zillow estimates the median rent in San Diego is $3,095.
She said “rising rents” have already led most landlords in the area to no longer require more than one month’s rent as a security deposit.
“I’ve been here 40 years and have only encountered security deposit scams on a few occasions,” Rodman said. “Our problem is rent.”
Rodman said he didn't want to downplay the legislation, but hoped it was part of a broader vision to make housing affordable for larger swaths of the state.
“I’m sure it helps, but we need to address the cost of rent, because that’s really the big hurdle,” she said.
