Real estate experts say California’s anti-price-gouging laws could make it impossible to rent out housing to the thousands of families displaced by the ongoing wildfires unless the governor issues an executive order excluding rentals from the rules.
On Sunday, California Gov. Gavin Newsom signed an executive order that enforces the state’s anti-price-gouging rules for disaster areas through Jan. 7, 2026. Under California Penal Code 396, landlords cannot increase asking rents by more than 10% for existing units that were already on the market before the declaration of emergency went into effect.
Experts warn this law comes with even more stringent standards for individuals who are seeking to bring their homes to the rental market for the first time, and could result in the maximum allowable rent being far lower than what the owners are paying for the mortgage.
“In a state of emergency, new rentals can’t be priced higher than 160% of the fair market rents established by HUD,” Mott Smith, a real estate development professor at the Sol Price School of Public Policy at the University of Southern California, told The Center Square. “So if someone in Santa Monica [ZIP code 90402] decides to put their three bedroom house up for rent, they couldn’t charge more than $6,736 for it. That likely wouldn’t cover the mortgage for many homes in the area.”
The cheapest three-bedroom house for sale in 90402 is priced at $2.85 million, with a $50,000 price cut one week before the fire as the property’s most recent price change, which means a buyer would pay a nearly $20,000 per month mortgage. Even for homeowners who were able to lock in a mortgage at lower rates and at a lower price, the maximum allowable rent still may not be enough to cover the mortgage, to say nothing of the cost of property taxes and fire insurance.
“Without an executive order from the governor that excludes this particular restriction from the emergency declaration, this could become a barrier to new homes coming on the market for rent,” Mott continued.
In response to concerns about price hikes, especially regarding rentals, Los Angeles Mayor Karen Bass told residents to report prices that violate the emergency declaration to the city’s non-emergency line.
“We’re launching a new, simple intake system to report price gouging — call [311] to report illegally hiked rents and prices,” Bass said on X, formerly known as Twitter. “We have no tolerance for it.”
Investor and Palantir founder Joe Lonsdale responded that the mayor’s emphasis on limiting prices, and enforcing the price-gouging rules as they are could hamper reconstruction efforts.
“Prices going up in an emergency is how you allocate scarcity, and send signals to investors and builders to rush in more supply,” Lonsdale said on X. “This is the only thing she’s built so far to help people in this crisis. A signal to deter market aid.”
