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California bill would cap the amount landlords can charge for rental security deposits

Posted at 6:30 PM, May 25, 2023

Assembly Bill 12 is headed to the State Senate. The California bill would cap the amount landlords are able to charge for security deposits on rentals.

“Landlords in many cases around the State of California are asking for three times the monthly rent as a security deposit and tenants, frankly, can't afford to pay that," said Assemblymember Gregg Hart, District 37.

Those in favor of the bill say it’s a small step toward solving an urgent housing crisis across the state.

“There’s no single solution to a very complex challenge like housing, but we're trying on many fronts to increase the supply, to increase the affordability of housing units, and in this instance, to try and provide some protections on renters so that they can stay in their units, and when they do have to move, that the security deposit isn't too crushing of a financial impact," Hart added.

Under current law, landlords are allowed to charge up to two months' rent for a deposit and an amount equal to three months' rent in the case of furnished properties. That’s in addition to the first month’s rent.

But that would change with AB 12, reducing the deposit down to one month’s rent.

“It provides some certainty for the tenant to know that this is what they have to get together in order to move to another apartment," Hart said.

“When you back somebody to a corner, they're going to look for solutions and be creative. One of those solutions could be driving up the rental market to make sure that they're protecting their investment," said Kirsten Kersten, McNamara Realty General Manager.

McNamara Realty provides management services to 99 clients and 300 properties in San Luis Obispo County.

“We do get to see it from the client's perspective, but we also get to see it from the owner's perspective. I think it gives us a unique view because I can see clients of mine calling me, being very concerned about this and how they're going to protect their investment," Kersten added.

She said some of her clients could be impacted by this bill.

“I think it depends on the amount of rent you're receiving for your property. I would say if you have a studio that you're renting for $1,000 and you can only collect $1,000 worth of a deposit, you're going to see higher damages likely than you're able to collect from," Kersten explained.

California wouldn’t be the first state to limit security deposits. States like New York and Delaware already have something similar in place.

The California Apartment Association opposes the bill and said in a statement, "The implications of AB 12 could be particularly challenging for smaller landlords and those who rent out single-family homes. These property owners need to rely on a security deposit to offset potential damages or unpaid rent.”