Californians won't pay more than one month's rent for security deposit under new law

FILE - This Monday, Jan. 8, 2017, file photo shows a "For Rent" sign outside an apartment building in Sacramento, Calif. California Gov. Gavin Newsom reached a deal with apartment owners and developers Friday, Aug. 30, 2019, on legislation that would cap how rapidly rents can rise as the state grapples with a housing crisis. (AP Photo/Rich Pedroncelli, File)
The state has implemented Assembly Bill 12, which limits a security deposit to one month's rent for all but the smallest of landlords, beginning July 1. (Rich Pedroncelli / Associated Press)

The days of needing to save two to three months' worth of rent for a security deposit are largely over in California.

Legislation took effect Monday that limits a security deposit on a rental property to no more than one month's rent for all but the smallest landlords. The law, passed as Assembly Bill 12, was authored by Assemblymember Matt Haney (D-San Francisco).

“Massive security deposits can create insurmountable barriers to housing affordability and accessibility for millions of Californians,” said Haney, who chairs the California Legislature’s Renters Caucus, in a statement.

Previously, owners could charge two months of rent for unfurnished property and three months for furnished.

The median rent in Los Angeles is $2,795, according to Zillow, an online real estate marketplace.

An exception in the bill was carved out for landlords who own two or fewer properties that collectively have no more than four rental units.

The bill was written in December 2022, passed by the Assembly and Senate last fall and signed by Gov. Gavin Newsom in October.

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Along the way, it earned support from the Los Angeles County Board of Supervisors.

Supervisor Lindsey Horvath noted in May 2023 that she was unable to move into a rental a couple of years earlier because she was asked to pay “nearly a half a year’s rent upfront.”

“As someone with a well-paying job, making more than the median income of the county, it was difficult for me to rent a new apartment because of the substantial deposits that were required,” she said.

But the legislation raises concerns among some in the real estate industry.

Sharon Oh-Kubisch, a partner at Irvine-based Kahana Feld, which practices real estate law, noted two potential drawbacks to the legislation.

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While she supports the bill's aim of alleviating high costs of renting, financial burdens are being flipped to landlords, she said.

She noted that security deposits are intended to cover damages when a tenant moves out. Lower deposits mean landlords are more likely to have to sue clients who cause considerable damage.

“A landlord can demand damages at the back end, but then they’re more than likely going to have to sue and hire counsel to get that money,” Oh-Kubisch said.

Additionally, she said that reducing security deposits may work against tenants who have less than perfect credit or lack a strong history of renting.

Higher security deposits allowed landlords to be more flexible, Oh-Kubisch said. With those "safeguards" gone, she expects landlords to be "more precise and heighten scrutiny for tenants."

Still, others say the legislation will benefit those who have the most trouble 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," he said. “By capping high security deposits, AB-12 advances a measure of equity.”

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Catherine A. Rodman, director and supervising attorney of San Diego-based Affordable Housing Advocates, a tenants rights legal group, said the news received mixed reviews among her mainly working-class clients.

“I know that it’s been a big relief to many throughout the state, but at least here in the San Diego area, it’s not a big issue,” Rodman said.

Zillow lists the median rent in San Diego at $3,095.

She said “soaring rents” have already led most area landlords to require no more than one month’s rent as a security deposit.

“I’ve been here for 40 years, and I’ve only encountered security deposit gouging on a few occasions,” Rodman said. “Our issue is rent.”

Rodman said she didn’t want to “pooh-pooh” 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 to rent, because that’s really the big roadblock,” she said.

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This story originally appeared in Los Angeles Times.