Legislative Update: California Rent Cap Reform Effort Falls Short in Committee

A recent attempt to significantly tighten California’s statewide rent control framework has been put on hold, offering near-term relief for multi-family owners and investors.

Assembly Bill 1157, a proposal aimed at reducing allowable rent increases and expanding rent cap coverage, failed to advance out of committee and will not move forward this legislative year. While the bill may resurface in a future session, it is effectively paused for now.

What the Proposal Would Have Changed

AB 1157 sought to make several material changes to the state’s existing rent cap law under the Tenant Protection Act:

• Lower annual rent increase limits, reducing the allowable cap from 5% plus CPI (currently capped at 10%) to 2% plus CPI, with a maximum of 5%.

• Expanded coverage to include single-family homes, condominiums, townhomes, and accessory dwelling units that are currently exempt in many cases.

• Permanent rent control provisions, eliminating the scheduled sunset of the Tenant Protection Act.

For owners of multi-family and mixed housing portfolios, these changes would have had meaningful implications for revenue growth, underwriting assumptions, and long-term asset planning.

Committee Outcome

The bill did not receive enough votes to move forward and has been designated as a two-year bill. This designation effectively suspends further action until a future legislative session, removing the proposal from immediate consideration.

Industry Pushback Played a Key Role

Housing provider groups and industry advocates strongly opposed the measure, citing concerns that tighter rent caps could:

• Further compress operating margins amid rising insurance, labor, and maintenance costs

• Discourage reinvestment in existing housing stock

• Reduce the feasibility of new housing development

• Increase regulatory uncertainty for long-term investors in California rental housing

This coordinated opposition was instrumental in preventing the bill from advancing at this stage.

What This Means for Multi-Family Investors

While the outcome is a short-term positive for owners, it also reinforces several broader themes investors should continue to monitor:

• Rent regulation remains a priority issue for lawmakers, and similar proposals are likely to return in revised form.

• Regulatory risk should remain part of underwriting and hold-period strategy, particularly for assets subject to statewide or local rent controls.

• Active engagement matters — industry advocacy continues to play a meaningful role in shaping policy outcomes that affect property operations and valuation.

For now, the existing statewide rent cap framework remains unchanged, but investors should expect continued legislative attention on housing affordability and rent policy in the years ahead.