Inland Empire Rent Increases: How the New 2025 Caps Affect YOUR Property

Inland Empire Rent Increases: How the New 2025 Caps Affect YOUR Property

By Brian Bean, Dream Big Property Management

The ceiling on rent increases drops in August in the Inland Empire – good news for tenants, but maybe not so much for rental property owners.

But before you panic, California’s rent control doesn’t apply to every rental property. And many Inland Empire investors may not even be aware of the laws in effect today, which could be very dangerous.

But it’s true, California has statewide rent control on many homes. They call it a “rent cap,” but make no mistake, this is rent control. And if it applies to your rental, the max you can increase rents is about to be cut by as much as 20 percent.

Current vs. New Rent Increase Limits

Currently, the Tenant Protection Act, which was enacted a few years ago as Assembly Bill 1482, caps annual rent increases at 5 percent plus the consumer inflation rate, up to a maximum of 10 percent. The cap is set on an annual basis, running Aug. 1 to July 31, based on the Consumer Price Index (inflation rate) measured by the Bureau of Labor Statistics. For the Riverside-San Bernardino-Ontario MSA, the stats used to set the annual bar are taken from March preceding the adjustment date.

Through July 31, 2025:

• Riverside and San Bernardino counties: 9.3% maximum increase

Starting Aug. 1, 2025:

• Expected maximum: 7.5 percent to 8 percent (March 2025 data should be finalized sometime this month.)
• That’s a reduction of 1.5 to 2 percentage points. (On a monthly rent of $2,500, the difference could be as much as $45/mo. Though, to be fair, that would only be if someone was increasing the rent by more than $200 per month, which would not be likely unless the home was well below market value.)

Two Critical Scenarios for IE Property Owners

The question then becomes, is your property covered by or exempt from the rent caps? Let’s dive in …

Scenario 1: Properties COVERED by AB 1482

The Tenant Protection Act covers all rental properties in California, but there are exceptions. Typically, properties affected include:

• Multi-unit apartment communities
• Homes built more than 15 years ago
• Corporate-owned properties

For example, A duplex built in 2005 currently priced at $1,800/month per unit could increase rent by $167/month, through July 31. Starting Aug. 1, with the projected decrease in effect, the same property might only be subject to an increase up to $135/month. That’s almost a 20 percent shave on the potential rent increase for that property owner.

Scenario 2: Properties EXEMPT from AB 1482

For owners or properties that are exempt, there is no government-legislated cap on rent increases. The market dictates the rent based on what a resident and the investor negotiate.

Larger investors typically do not qualify, but mom-and-pop investors, sometimes referred to as “Accidental Landlords,” often fall into this category. So how do you know if you are exempt? Well, the smart money says, talk to your attorney. But generally, the guidelines boil down to:

• Single-family homes and condos
• AND the property is NOT owned by a corporation, a real estate investment trust (REIT), or an LLC with a corporate member
• OR, SFRs and condos less than 15 years old

Critical Requirement: If you ARE exempt, you MUST have provided written notice to your residents about your exempt status, or you cannot claim that exemption.

Notice Requirements: Timing is Everything

Regardless if your home is exempt or not, you must abide by the State of California laws on notifications. They include:

• Increase of 10 percent or less: 30-day written notice
• More than 10 percent: 90-day written notice

The Real Question: How Much SHOULD You Increase Rent?

Whether you are exempt or not from rent caps, the market should dictate, or at least be the major deciding factor in what rent to set. Not the government. A property owner or manager must first understand the market and research current activity as well as the current trends to dial in the metrics and fuel a smart business decision.

So, what is the going rate for homes similar to yours? Here are the factors to examine:

• Location: You’re looking at homes located within a mile or so of your home.
• Size: The comparable homes should be within 10percent to 15 percent of the size of your home.
• Age: Try to keep the comps within 5 years, give or take, of your home.
• Amenities: Look for homes that have the same number of bedrooms, baths, and possibly other features such as pools, garage sizes, etc.
• Timeframe: Homes that are currently on the market, pending start of a lease, or leased within the past six months.
• Trends: What can be surmised from the status? For instance, are the list prices on currently available properties higher than those that already leased? Has there been a lot of leasing activity but no current homes available? Supply and demand will weigh in here on whether the market is likely to continue to go up, down or perhaps be flat.

Next, consider these factors:

• Resident Quality: Payment history and property care
• Turnover Costs: Vacancy preparation and marketing time
• Recovery Timeline: How long to recoup lost rent from vacancy

Action Steps for IE Property Owners

With all of this data in hand, now it’s time to take action. Here are the next steps:

1. Determine Your Property Status

Is your property covered by the Tenant Protection Act, or are you exempt? Check with your attorney! Meanwhile, Here is a Link to a Guide from the California Association of Realtors, outlining the TPA, to get you started

2. Know Your Numbers

Research the following

• The current CPI rate for your county (BLS website)
• Market rent for comparable properties
• Your resident’s payment and care history
• An estimate of what it would cost for work if you lost your resident and had to prep for the market

3. Calendar Your Business Decisions

Set annual reminders for rent increase timing based on your property’s notice requirements.

4. Focus on Profitability, Not the Cash Grab

Just because you can raise your rent doesn’t mean you should. If your home is far below market rent, it’s your duty to the business to improve the income, if only because you are going to have a major expense at some point. But keeping good residents in place and reducing vacancy can be just as important. Whatever you do, there will be a reaction. It’s really just a math problem — run the numbers and see what makes sense.

The Bottom Line

Owning a rental property in California is complicated. Sometimes it’s frustrating. Oftentimes it’s stressful. But in the long run, it can be financial blessing. … IF you have a great plan, follow the laws, and make good decisions.

Investing in real estate is THE sure-fire way in this country for an average person to go from zero to financial hero. If you’re patient. If you have a rental property now, perhaps inherited a home form a family member, and you don’t have the time or the constitution to handle it yourself, do yourself a favor and find someone to help you. You’ll look back in 25 years and literally be counting your blessings.

Most real estate investors will tell you that the only regrets they have are the homes they sold. What can you do today to keep those regrets to a minimum?