California’s new security deposit law went into effect Monday. Now, when landlords charge a security deposit, in most cases, that deposit cannot be larger than one month’s rent. The security deposit cap has some exceptions. Below is a guide to the new law.
Why was this reform sought?
Some landlords used to charge two or three times the monthly rent as a security deposit. The cap puts an end to that practice, with an exception for small landlords.
“Massive security deposits can create insurmountable barriers to housing affordability and accessibility for millions of Californians,” State Rep. Matt Haney, D-San Francisco, who chairs the California Legislature’s Renters’ Caucus, wrote in an emailed statement, adding that the new law “will have an enormous impact on housing affordability for families in California, while also balancing a landlord’s need to protect themselves against potential liability.”
A statement from Haney’s office said 53 percent of California renters said they can afford rent, but “they’re unable to get an apartment because they simply can’t afford to pay the two month’s rent as a security deposit.”
Among the assemblymembers who voted on the bill in September, AB 12 passed 50 to 18, with unanimous support from Democrats and full rejection by Republicans.
What do renters need to know about the new security deposit cap?
The law, called AB 12, went into effect July 1. Gov. Gavin Newsom signed it into law in October.
Small landlords, defined by the law as those who own two properties with a total of no more than four units, are exempt.
For small landlords below that two-property, four-unit threshold, deposits will be limited to two months’ rent unless the new tenant is a military service member. In that case, the one-month limit holds.
The law does not cap potential liability. This means that if a tenant damages a property, a landlord can still seek damages if the amount owed by a tenant is larger than the security deposit.
What do tenant advocates think?
Parisa Ijadi-Maghsoodi, a poverty and civil rights lawyer with San Diego-based Pease Law who has previously represented tenants in real estate disputes, said the law will make housing more accessible to people who can’t afford the higher security deposits.
“Because security deposits serve as a financial barrier to obtaining stable housing — especially for low-income families and seniors — this is certainly a step in the right direction,” she wrote in an email.
Ijadi-Maghsoodi said it is important for tenants to know their rights and be prepared to assert them.
She offered one example related to security deposits.
“While the law allows a landlord to use a tenant’s security deposit to repair damages, it does not allow a landlord to use it to cover the cost of ordinary wear and tear,” she wrote. “At move-in, tenants can protect their rights by documenting the condition of the rental unit by taking photos and videos. Then, before moving out, tenants can exercise their right to a pre-moveout inspection, so that the landlord identifies — and the tenant has time to remedy — all defects or repairs the landlord plans to use the tenant’s security deposit to address.”
Ijadi-Maghsoodi said this web resource from the state lists the four reasons a landlord can use a tenant’s security deposit:
https://landlordtenant.dre.ca.gov/resources/guidebook/gb10_movingout.html#refund
What do landlord advocates say?
“It’s a bit early to tell what ultimately the impacts will be,” said Molly Kirkland, the director of public affairs for the Southern California Rental Housing Association.
One concern of property owners as the bill moved through the legislature was that the cap exposes landlords to more risk in the case of damages when someone moves out.
“Quite often, tenants will use the security deposit as last month’s rent, and then that means there might not be any money left for any repairs or cleaning or damages, and then it’s really tough for a housing provider to collect that” in small claims court, she said.
Kirkland said the law could make it tougher for some people to find housing.
“A lot of times, tenants may not qualify for a rental unit, whether it be credit or poor rental history, and a lot of housing providers would take an additional deposit to offset that risk and qualify the tenant, so without that flexibility to go beyond that one month, there are going to be some people who just won’t be able to qualify for the housing anymore because you don’t have that ability to take an additional deposit.”
One Republican assemblymember said in 2023 the bill could hit housing supply.
“The more we over-regulate people’s ability to offer a successful product, the scarcer it will become,” Diane Dixon, from Newport Beach, said in a statement published by CalMatters. “Landlords charge security deposits to cover potential damages and any unused funds are returned to the renter.”
