Money and Risk | Rent and Tenants

California Rent Cap and Tenant Rules for Small Multiplex Owners

Tenant law decides two things for a small multiplex owner in California: how much the rent on existing units can rise, and whether a rented house can be torn down or split at all. This page covers the statewide rent cap from AB 1482, the just cause rules for ending a tenancy, the Costa-Hawkins rule on new construction, the Ellis Act, and the tenant history tests in SB 9 (2021), SB 684 and SB 79. Cities can set stricter rules, so check your city too.

The Statewide Rent Cap

The Tenant Protection Act, passed as AB 1482, set a cap on yearly rent increases in Civil Code 1947.12. The rule: "an owner of residential real property shall not, over the course of any 12-month period, increase the gross rental rate for a dwelling or a unit more than 5 percent plus the percentage change in the cost of living, or 10 percent, whichever is lower." The increase is measured from the lowest rent charged in the prior 12 months.

"Cost of living" means the Consumer Price Index for All Urban Consumers (CPI-U) from the US Bureau of Labor Statistics for your region. The statute names the region for each group of counties, including these:

As a worked example, if the regional index rose 3 percent, the cap would be 8 percent (5 plus 3). If it rose 6 percent, the cap would be 10 percent, because 5 plus 6 is more than the 10 percent ceiling. Look up the actual index change for your region before you set a new rent.

When the Rent Cap Ends

The cap has an end date written into it. Civil Code 1947.12(o): "This section shall remain in effect until January 1, 2030, and as of that date is repealed." The just cause rules in Civil Code 1946.2 carry the same 2030 end date in the code history. SB 567 (Chapter 290, Statutes of 2023) re-enacted the rent cap section with that same 2030 date. A search of every bill chaptered in 2025 and 2026 found none that moved it.

The 2026 bills that start on January 1, 2027, listed on the hub overview, cover ADUs, SB 9 processing, small-lot subdivisions, townhomes and fees. None of them changes the 2030 end date: the code history for both sections still shows it.

Which Properties Are Exempt

Seven exemptions in Civil Code 1947.12(d) and 1946.2(e) decide whether a small multiplex is covered at all. The table lists the ones that matter for owners of two to four units.

Sources: Civil Code 1947.12(d) and Civil Code 1946.2(e). A REIT is a real estate investment trust; an LLC is a limited liability company.

Two results follow for small owners. A new duplex, triplex or fourplex is outside the statewide cap for 15 years from its certificate of occupancy, the city's sign-off that the building can be lived in. And an owner-occupied duplex is exempt only when both homes are in one structure and neither is an ADU or junior ADU: "neither unit is an accessory dwelling unit or a junior accessory dwelling unit." A house with a rented ADU does not get the duplex exemption, though the owner-occupant may still be outside the just cause rule when renting no more than two units or bedrooms.

Costa-Hawkins and Local Rent Control

The Costa-Hawkins Rental Housing Act, in Civil Code 1954.52, limits what local rent control can cover. An owner "may establish the initial and all subsequent rental rates for a dwelling or a unit about which any of the following is true: (1)It has a certificate of occupancy issued after February 1, 1995." The same rule covers separately sellable units such as single-family homes and condominiums, with exceptions.

Local programs can attach rent rules as a condition of extra units. San Francisco's four-unit density exception says units created above the base zoning "will be subject to rent control." Read any local program's conditions before you plan rents. See the San Francisco page.

Just Cause for Ending a Tenancy

Civil Code 1946.2 starts with this rule: "after a tenant has continuously and lawfully occupied a residential real property for 12 months, the owner of the residential real property shall not terminate a tenancy without just cause." The 12 months becomes 24 months for any tenant when adults were added to the lease. The notice must state the cause.

No-fault causes include an owner or close relative moving in, withdrawing the unit from the rental market, and demolishing or substantially remodeling it. Each no-fault ending requires relocation help: "The amount of relocation assistance or rent waiver shall be equal to one month of the tenant's rent."

SB 567 (Chapter 290, Statutes of 2023), effective January 1, 2024 and operative April 1, 2024, tightened two no-fault causes. For an owner move-in, the owner or relative must move in within 90 days after the tenant leaves and live there for at least 12 consecutive months; if not, the owner must offer the unit back at the same rent and pay moving costs. A "substantial remodel" must require the tenant to leave for at least 30 consecutive days.

Tenant History Tests for Redevelopment

Each state law that adds homes has its own look-back period. If a tenant lived in the home within that period, you cannot use the law to demolish or alter that housing, even after the tenancy ends.

The SB 9 test looks at the housing, so it still applies after a sale. If the house you buy was rented in the last three years, you cannot use SB 9 to demolish or alter it until three years after the last tenant left. SB 79 projects must also follow the Housing Crisis Act replacement rules in Government Code 66300.6, amended by SB 21 (Chapter 511, Statutes of 2025) from January 1, 2026, which apply to projects that demolish "protected units." Read that section with a lawyer before you plan a demolition near transit.

Rental Rules for SB 9 Homes, ADUs and Junior ADUs

The housing laws add their own rental terms. Every rental of an SB 9 home must be "for a term longer than 30 days," under Government Code 65852.21, so nightly and weekly rentals are out. Lots created by an SB 9 split are limited to residential uses. For ADUs, a city may require rentals longer than 30 days, and ADUs approved under Government Code 66323 and all junior ADUs must be rented for more than 30 days. A junior ADU is a unit of 500 square feet or less inside the house.

Owner residence rules differ by unit type. A city cannot require an owner to live on a lot with an ADU. For a junior ADU, owner occupancy is required only when the junior ADU shares a bathroom with the main house, under AB 1154 (Chapter 507, Statutes of 2025) from January 1, 2026. For an SB 9 lot split, the applicant signs an affidavit of intent to live in one of the units for three years.

These rules combine with the exemptions above. An owner who lives in the house and rents out an ADU or a junior ADU, with no more than two units or bedrooms rented, is outside the just cause rule. The same owner does not get the rent cap's duplex exemption, because that exemption excludes ADUs and junior ADUs.

How Lenders Count the Rent

Rent rules also shape your loan. For a two- to four-unit home you live in, Fannie Mae's Selling Guide counts 75 percent of the gross monthly rent, then subtracts the property's housing payment. FHA uses 75 percent of the lesser of the appraiser's market rent or the lease rent when there is no rental history. For a three- or four-unit property, FHA also requires the housing payment to be no more than the net rent from all units, including yours. Because the cap limits how fast rent can rise on older units, test a purchase with the rents in the current leases. The financing page has the details.

The Ellis Act

The Ellis Act, Government Code 7060, says no public entity may "compel the owner of any residential real property to offer, or to continue to offer, accommodations in the property for rent or lease." There is an exception for residential hotels. Owners use it to leave the rental business.

It carries a cost under the state housing laws. If an owner used the Ellis Act to take units off the market "within 15 years before the date that the development proponent submits an application," the parcel cannot use SB 9 or SB 684. Check the parcel's history with the city before you buy a lot to redevelop.

Where to Go Next

Related on VanPlex: the SB 9 guide and the San Francisco page, where extra units come with rent control.

Frequently Asked Questions

Official sources (checked October 2026)