$10,000 to move into a new apartment? Bill would give California renters a break on high security deposits

In California, it’s perfectly legal for landlords to ask renters to cough up more than $10,000 before handing over the keys to a new apartment.

That’s because under state law, property owners can charge up to two months’ rent as a security deposit, on top of the initial lease payment. For a furnished unit, deposits can be as much as three months’ rent.

But a new bill making its way through Sacramento aims to put an end to those high charges, capping security deposits at one month’s rent for most apartments, condos and single-family homes.

The measure would provide relief to many of California’s roughly 17 million renters already struggling to afford the state’s exorbitant rental prices, said Matt Haney, the Democratic state assemblymember from San Francisco behind the bill.

“The result of these high security deposits is families are either taking on debt to afford them or staying in housing situations that are crowded, insufficient or even unsafe,” said Haney, a member of the Legislature’s recently launched renters caucus.

The proposed legislation, known as Assembly Bill 12, passed the state Assembly with overwhelming support last month and is currently being considered by the Senate. Most Republican assembly members, who make up a small minority in the chamber, voted against it. Some argued the new regulations would only exacerbate the state’s dire housing shortage by convincing landlords to get out of the rental market.

But backers of the measure say it’s needed as rent prices are on the rise after cratering in many cities during the height of the pandemic when many people fled urban centers. Today, the median cost of a two-bedroom apartment in the Bay Area ranges from more than $2,500 in San Jose and San Francisco to about $1,750 in Oakland, according to rental listing site Apartment List.

Across the nine-county region, almost half of all renters pay more than 30% of their income on housing costs, classifying them as “rent burdened” by federal standards, according to academic researchers with the Bay Area Equity Atlas.

Michael Wonders, a retiree on a fixed income, couldn’t have afforded the $1,300 security deposit on his San Francisco low-income apartment without the money he received to move from his previous apartment when the landlord took it off the rental market.

But if he had to move again, he might not have enough for a new deposit that’s more than a month’s rent.

“It would be a concern,” Wonders said. “It’s hard to save money these days.”

Haney said he got the idea for the bill after meeting a janitor in his district who worked two full-time jobs but couldn’t move his wife and two young children out of their one-bedroom apartment because he was unable to afford a deposit for a larger unit. The measure, backed by various labor and anti-poverty groups, wouldn’t change how property owners can recoup costs for damages or add any restrictions on what landlords can charge for rent.

“This is a common sense and fair way to ensure California residents can access and afford housing,” Haney said.

Landlords, however, argue current regulations on security deposits are already strict enough. They say Haney’s bill could put many property owners in financial peril if a tenant damages a unit or fails to pay rent.

“Rental property owners and managers typically use security deposits to accommodate higher-risk applicants (with prior evictions, no credit history, low credit score, etc.),” Derek Barnes, chief executive of the East Bay Rental Housing Association, said in an email. “With no exemptions in the bill, it also hurts small rental property owners who have already suffered losses over the last three years due to prolonged eviction moratoriums.”

Haney responded that a one-month security deposit — especially given the state’s steep rental prices — should be enough to cover damages in most cases. Landlords can also still recover costs in court, Haney said, though property owners contend many mom-and-pop landlords lack the resources to do so.

He also pointed out that nationwide, a dozen states as politically diverse as Alabama, Delaware and New York already have similar laws on the books.

Still, Haney said he’s open to making changes, including possible exemptions for small landlords renting single-family homes. But he’s confident the bill will pass with its core intact.

“We need to build a lot more housing and a lot more affordable housing,” he said, “but this is something we can do right now to lessen the burden of housing costs.”