California bill would limit security deposits for potential renters

A bill moving through the California legislature could help low-income Americans struggling to find affordable housing by limiting the amount of money renters would have to pay for a security deposit.

The state Assembly passed Bill 12 in May and it is now in the state Senate, where it will be reviewed by the policy committee. The bill, which was introduced in December, could become law in September if it passes the Senate. The bill would limit security deposits to one month’s rent, but would not change tenants’ liability for damages, according to its author, Democratic Assemblyman Matt Haney.

“California is behind the rest of the country on this,” Haney told MarketWatch. “People see this as a common sense and fair solution to reduce the burden of housing costs and provide relief for families.”

Landlords in California can ask for up to two months’ rent for unfurnished units, according to FindLaw, and three months’ rent for furnished apartments. That can sometimes be as much as a down payment on a house, Haney said.

A typical one-bedroom apartment in San Francisco rents for around $2,300 per month in May, according to Apartment List. A two-bedroom apartment rents for around $2,500 a month. In Los Angeles, the typical rent for a bedroom is $1,700 per month; a two-bedroom rental approximately $2,200.

The main opposition has been from the owners, he added.

As the cost of home ownership skyrockets due to high mortgage rates and home prices, many may be renting longer. That creates an urgency to introduce more protections to help renters, the assemblyman said.

“We have the third lowest home ownership rate in California,” Haney said. Homeownership rates are lowest in DC, where only about 41% of residents own a home, followed by New York and California, according to the US Census Bureau.

The median home price in San Francisco or Santa Clara was $1.46 million in the third quarter of 2022, according to the National Association of Realtors.

“We have to make sure that tenants aren’t forced into too much debt or have such a big financial burden that they can’t meet other needs,” he added.

About 5.3 million households are behind on rent and owe about $11.4 billion, according to the National Equity Atlas, which is a collaboration between research group Policy Link and the Equity Research Institutes. from USC. About 688,000 California households owed about $2.6 billion.

Meanwhile, pandemic-era state programs that shielded renters from evictions and offered protections ended in June of last year, putting pressure on some renters facing eviction, according to Cal Matters.

Of all the homeless people in the US, 30% were in California, according to a report by the Public Policy Institute of California.

Meanwhile, Congress also wants to limit how much tenants must pay on new leases. That bill, introduced in Congress this week by New Mexico Sen. Martin Heinrich and California Congresswoman Barbara Lee, aims to help low-income renters with their security deposits.

Specifically, the bill will expand federal support and help low-income renters with security deposits.

Security deposits are “one of the biggest barriers low-income renters face when moving into a new apartment, often required in addition to two months’ rent,” Senator Heinrich said in a statement. “This legislation unlocks support to help renters overcome this barrier so their families can settle in a safe place to call home and build a foundation for a better future.”