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California Emergencies: How Anti-Price Gouging Impacts Landlords and Tenants

As drought conditions persist in California, so does the threat of devastating wildfires. When the state or local government declares an emergency, California’s anti-price gouging law automatically takes effect. 

In general, it is illegal for landlords to raise monthly rent by more than 10 percent of the pre-emergency amount until the end of the emergency order. Even though an emergency declaration may apply to a specific geographic area, the rule applies anywhere in California if demand increases as a result of that emergency.

What is a State of Emergency in California?

California is no stranger to natural disasters such as wildfires, floods, earthquakes, etc. In response, the state governor or local officials may declare a state of emergency that temporarily suspends typical governmental procedures.

California’s Anti-Price Gouging Law

Under California law (Penal Code 396), excessive pricing of goods and services is illegal during any declared state of emergency. This applies to most items that would be essential during or after a disaster. That includes residential rents.

Violations are a misdemeanor and subject to criminal prosecution with one-year imprisonment in county jail and/or a fine of up to $10,000. Civil penalties may include fines of up to $5,000 per violation, injunctive relief and mandatory restitution. Local ordinances may impose additional penalties.

The Goal of Anti-Price Gouging Laws 

Unfortunately, unscrupulous characters attempt to exploit and profit from a natural disaster. The purpose of anti-price gouging laws is to protect the consumer in the event of an emergency and allow access to goods and services when they need them the most. 

This includes housing, food items, goods or services used for emergency cleanup, emergency supplies, medical supplies, building materials, transportation, freight, and storage services, gasoline or other fuels.

Rental Rates and Anti-Price Gouging Laws

In California, emergency declarations often extend beyond 30 days, depending on the severity of a natural disaster. In these situations, landlords and tenants should understand how it may impact rental rates in their local area.

Keep in mind, rent increase bans do not only apply in the direct area of a disaster. Anti-price gouging laws extend to other areas that may experience increased demand as a result of the disaster. 

What Tenants Should Know About Price Gouging

Tenants who believe they are impacted by price gouging can file a complaint with their local district attorney’s office or with the Attorney General. Remember, rent increases over 10% are prohibited until 30 days after the state of emergency was declared, unless stated otherwise or extended.

If a statewide emergency order is still active, tenants still have those protections until the order ends. State protections remain in effect even if the county order has expired. 

In addition, San Francisco and Oakland tenants have local rent control. As a result, their landlord is limited to that amount of rent increase. Tenants must be notified ahead of time about an increase in writing. 

What Landlords Should Know About Price Gouging

For landlords, understanding the rules and how they’re enforced is not always easy, as there are few published court decisions on price gouging. It is also difficult to know when one emergency declaration ends and another begins. In 2018, the Sonoma County District Attorney’s office filed charges against landlords in Sonoma and Marin for raising rent by thousands of dollars immediately following fires that destroyed residences in the area.

For this reason, it’s wise for owners to proceed with caution. In the event of a dispute between the landlord and tenant, rent increases will certainly come under scrutiny. An unlawful rent increase may easily come to light. Landlords should make sure to take proper steps to avoid improper increases, especially when emergency declarations are in place.

The Camp Fire 

The 2018 Camp Fire decimated nearly 95% of structures in the town of Paradise, CA. It was one of the most devastating fires in our state’s history.

One month before the disaster, Butte County rental vacancies were less than 2% for multi-family units and less than 3% for single family residences. Total available housing was less than 2,000 units across the area — a fraction of what was needed to accommodate 56,000 fire victims seeking shelter. 

California Wildfires Trigger Price Gouging Protections

Under the Camp Fire emergency order, the district attorney reminded the public of the  provisions of California’s anti-gouging law. Hotels, motels and gas stations were warned of the penalties of violating the statute.

The majority of Paradise homeowners who lost their homes were either underinsured or not insured at all. Fewer than 3% of tenant fire victims had a renter’s insurance policy. Coupled with the shortage of both short-term and long-term housing options in the region, many people in the area have found themselves in an unstable living situation. 

Long Term Housing Effects from Wildfires

Home prices and monthly rent rates in Butte, Glenn, and Tehama counties surged during the six months following the fire. The increase of those in search of housing caused sales prices and rental rates to soar to record highs. After several extensions, the statewide emergency order related to the fires is no longer in effect. 

The surrounding areas continue to experience a strained housing market. Limited housing supply means owners receive multiple offers from people looking to buy their house, and they often decide to sell. Rental rates continue to climb. Both Butte and Tehama counties are now considered high housing cost areas.

Legislators Examine Anti-Price Gouging Law Around Rentals

Senate Bill 1133 may offer some clarity in California’s existing anti-price gouging law as it relates to rental housing. The bill proposes that emergency declarations:

  • Explain how the emergency situation directly impacts the rental housing market if the order extends beyond one year. 
  • Be posted on the California Office of Emergency Services website. 

Should SB 1133 become law, the 10% rent cap may only continue if the emergency is proven to cause unusual disruptions in the rental housing market.

Whether you’re a landlord or tenant, Steven Adair MacDonald & Partners can clarify how California’s anti-price gouging laws may affect you. To schedule a consultation with one of our attorneys, please call 415-991-6078.

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