California eyes reining in security deposits

Add in the requirement that renters put up the first month’s rent before they can move in and low-income families are most likely to give up hope of finding a home.

The state Assembly on May 22 passed a proposal that could change that.

Assembly Bill 12 would limit security deposits to one month’s rent, regardless of whether a unit is furnished or not. If the bill passes and gets Gov. Gavin Newsom’s signature, California could become the 12th state to limit security deposits.

“Security deposits present barriers for people to move into apartments, which can lead them to stay in apartments (and) in homes that are too small, crowded or even unsafe,” said Matt Haney, the Democratic Assemblymember from San Francisco who authored the bill. “In other cases, people take on debt or financial burden that leaves them unable to afford other necessities.”

Haney said the bill has attracted widespread support in the Assembly, including from lawmakers who are landlords as well as labor organizations representing teachers, nurses and grocery store workers.

Assemblymember Diane Dixon, a Republican from Newport Beach, was among the Nos in the 53-14 vote. She cited concern about the bill’s potential to reduce the housing supply.

“The more we over-regulate people’s ability to offer a successful product, the scarcer it will become,” she said in a statement. “Landlords charge security deposits to cover potential damages and any unused funds are returned to the renter.”

Like a downpayment

Haney said the issue caught his attention when a janitor in his district described living with his wife and three children in a one-bedroom apartment.

“He wanted to move into a larger unit so his kids didn’t have to sleep in the same room as him and his wife,” Haney said. “He said he could afford the rent, but he couldn’t afford the deposit and first month’s rent to move in. Unfortunately that’s not an uncommon situation.”

In California, the median rent for a two-bedroom apartment is $2,538 and for a three-bedroom home is $3,795 according to Zillow. For a $3,000-a-month unfurnished unit, a landlord can charge as much as $9,000 for a security deposit and the first month’s rent.

“People are being asked to pay the equivalent of the down payment of a home in many parts of the country just to move in,” Haney said. “It’s really untenable.”

Tina Rosales, housing attorney and policy advocate with the Western Center on Law & Poverty, said the bill could help fight homelessness.

She came across a San Francisco apartment that called for $10,000 up front, including a security deposit, first month’s rent and fees.

“That’s a lot of money for anybody,” she said, “but especially for low-wage workers, and particularly for Black, Latin and indigenous households. No one can afford market rate housing, plus first, last and two months of security deposits, on top of other excessive fees landlords are permitted to charge.”

Alternatives to security deposits

Debra Carlton, spokesperson for the California Apartment Association, said the landlord group is disappointed that Haney did not consider alternatives.

“The vote on the bill came earlier than we thought, and we had hoped that he would work with us to find perhaps a different solution, but obviously that didn’t happen,” she said.

Carlton said security deposits are important because they allow landlords to pay to repair damage to units. And, should an eviction be necessary, deposits help landlords cover those costs. The average court eviction can take as long as six months and cost an average of $10,000, the association said.

Carlton suggested tenants participate in insurance or bond programs, which could help cover potential damages, like security deposits.

She added that the bill could force landlords to increase rents and become stricter when vetting tenants, ultimately making it harder for tenants to find housing.

Haney said his staff met with the California Apartment Association and he is open to talking with them, but he believes the limits are necessary.

He said he would consider amending the bill to exempt homeowners who rent out a single room or a guest house.