Are ADUs/Garage Conversions/Granny Flats Rent Controlled?

With the average rental of an ADU in Los Angeles hovering around $1700, many people are asking, are ADUs/garage conversions/granny flats affected by rent control?

The answer is...still fuzzy.

The state of California instituted rent throughout the state beginning in January 2020. The law makes it illegal for residential landlords to raise rent more than 5 percent, plus the local rate of inflation, in one year. 

The law affects areas that do not have local rent control laws. The cities of Los Angeles, Santa Monica, West Hollywood, Inglewood, and Beverly Hills currently do have their own rent control laws on the books. 

In Los Angeles, rent currently can only be raised 4 percent each year. In Santa Monica, the rent hike is capped at 2 percent, with a $44 maximum dollar increase. West Hollywood allows a 2.25 percent rent increase, while Beverly Hills currently allows a 3.1 percent increase (or 3.07 percent for tenants who paid less than $600 per month when they moved in). In Inglewood, the annual rent hike rate is 3 percent or the annual rate of inflation, whichever is higher. That camp on yearly rent hikes in Inglewood will expire in 2025. Unincorporated Los Angeles County also has rent control in place. Rents in those areas can go up according to the annual rate of inflation up to 8 percent. 

Which buildings in Los Angeles City and County are under rent control?

Typically, if the rental is 15 years old, that unit is under rent control. The new state rent control law exempts buildings constructed in the last 15 years. That means, if you build your ADU this year, it won’t be eligible for rent control for 15 years.

The state rent control law applies mostly to apartments and other multi-families buildings, along with some single-family homes. Single-family homes and condos are exempt unless they are owned by a corporation or real estate investment trust.

ADUs may make other residences eligible for rent control

Rent control laws in the city of Los Angeles only apply to residences built before 1978. Single-family residences are excluded from rent control. 

HOWEVER, things get interesting if you add an ADU, garage conversion, or granny flat to your property. If you move into your ADU and offer up the main house for rent, there will be rent control on the main house if it was built before 1978. That’s because the ADU adds a unit to the property, thus negating the single-family categorization.

How much can rent go up?

So, let’s say you move into your ADU and rent out your main residence. That main residence now qualifies for rent control.

In the city of Los Angeles, the rent control law applies only to buildings constructed before 1978. So, if your main residence was built before 1978, it will fall into that category.

However, if your main residence was built after 1978 and is at least 15 years old, the state rent control law will apply to that main residence and rent increases will be capped at 5 percent, plus inflation.

For more information regarding rent control, contact your local planning department or a legal advisor.

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Whether you decide to live in your ADU and rent out your main residence or rent out the ADU, an ADU is a fantastic way to make money on one of your primary investments -- your home. Recent laws passed by the state have made it faster and easier to add ADUs to your property. Let the professionals at LA Garage Conversion guide you through the process. Call 818-532-0482 for your free estimate today.