[HOLD] Newsom orders anti-price-gouging protections for rental homes through March

(The Center Square) – California Gov. Gavin Newsom issued a new executive order clarifying that the state’s anti-price-gouging protections for rental homes would only be in effect through March 8, 2025, not January 2026.

Experts warned that the policy, which sets a rental rate maximum well below pre-fire market rents, would prevent homeowners from choosing to rent their houses out to families who have lost their homes to the ongoing Los Angeles fires.

“As thousands of Los Angeles residents have been faced with sudden displacement, the state is taking decisive action to help provide housing and assistance as quickly as possible,” Newsom said in a statement on his new order, which also streamlined red tape for building temporary and additional housing. “Today, we are expediting the creation of new temporary housing by removing roadblocks and strengthening protections against exploitation.”

In addition to the price-gouging clarification, Newsom’s three-year order also exempts the construction of new accessory dwelling units, and allows for placing manufactured homes, mobile homes, and recreational vehicles on private lots for use while homes are repaired or rebuilt.

The City of Los Angeles permitted just 8,706 new homes in 2024; with over 12,000 buildings destroyed by the fire, the city’s housing stock could decline in the absence of new construction. The governor’s new order could relieve some of the pressure on housing demand, but the rules regarding rental pricing could still cause challenges for families seeking shelter until then.

Under California Penal Code 396, landlords cannot increase the price of homes that were already on the market before the declaration of an emergency went into effect by more than 10%.

However, homeowners trying to bring their homes onto the market as rentals for the first time face maximum allowable rents under Code 396 that are often far lower than what the market rate – or rate at which they may not even break even – may be.

Because new rentals can’t be priced higher than 160% of the fair market rents established by HUD – which are based on the number of bedrooms, regardless of whether the home is an apartment or a single family home – and on ZIP code, for much of Los Angeles these fair market rents are well below feasible rental rates.

In 90204 in Santa Monica, for example, the area’s cheapest three-bedroom house – listed at $2.9 million before the fires – would have a mortgage just short of $20,000 per month, and rented for about half that. Under the anti-price-gouging rules, the home cannot be priced more than $6,736, which just isn’t worth it for many owners.

“I think that number is ludicrous for a lot of listings, so the right move is simply not to lease the unit,” said apartment complex and property management service owner Moses Kagan on X. “(This is the problem [with] price controls, obviously.”