If you own a single-family rental home or condo in California, you need to pay attention to AB 1157. This assembly bill was pulled from consideration in April 2025. But, it isn't dead. It's just waiting. And, if it comes back in 2026 (which many expect it will)? It could fundamentally change the economics of owning rental property in California.
Right now, single-family homes and condominiums are exempt from most rent control regulations under AB 1482. That exemption has allowed owners of these properties to adjust rents to market rates. This helps to offset California's skyrocketing insurance premiums, property taxes, and maintenance costs. AB 1157 would eliminate that exemption entirely. Overnight, your single-family rental would be subject to the same strict rent increase caps as apartment buildings. It could be a rental nightmare.
But, it gets worse. The bill would also remove the 2030 sunset clause from AB 1482. This would make California's rent control framework permanent. It would also slash the allowable annual rent increase from the current 5% plus inflation (capped at 10%) down to just 2-5% plus inflation. This problematically doesn't offset an environment where insurance alone is increasing 20-30% annually. For many property owners, these numbers simply don't work.
What Happened to AB 1157?
The California Apartment Association managed to derail AB 1157 in late April 2025. This was less than a week after it advanced through the Assembly Housing Committee. The bill was pulled from consideration for the remainder of 2025. But, here's the thing about California's legislative process: this is what's known as a "two-year bill." That means it can come back in 2026 without starting from scratch.
Assemblyman Ash Kalra, who authored the bill, has made affordable housing a central focus of his work. The bill has 8 co-authors in the Assembly and one in the Senate. That's not a small coalition. The CAA's own statement after the bill was pulled made it clear they're expecting round two. They said they "remain vigilant and committed to opposing policies" like AB 1157. You don't stay vigilant against something you think is dead.
The Real Impact on Property Owners
Let's talk actual numbers. If you own a single-family home in Los Angeles that you rent for $3,500 per month, you're currently able to adjust rent to market rates when a tenant moves out... although you still need to follow proper notice requirements. Under current AB 1482 rules for covered properties, you could increase rent by up to 10% annually if inflation supports it.
Under AB 1157, your hands would be tied. With a 2% base plus inflation cap, you might be looking at 4-5% maximum annual increases. Meanwhile:
Property insurance in California increased an average of 34% in 2024
Property taxes continue climbing with reassessments
Maintenance costs for everything from HVAC to roofing have surged
Utility costs that owners cover (water, trash) keep rising
Legal compliance costs continue to expand
You do the math. A 4-5% rent increase doesn't come close to covering a 34% insurance hike. And once the 2030 sunset is removed? There's no end date. No "wait it out." This becomes the permanent reality of owning rental property in California.
What Smart Property Owners Are Doing Now
Here's what we're seeing on the ground: many of our income property owners and owners of multifamily rental properties are exploring their options of doing a 1031 exchange in which they'll sell their existing properties which are located in rent control cities, like Los Angeles, Culver City, Santa Monica and others, and purchase replacement properties in cities that don't have rent control and, as of now, aren't discussing the possibility of invoking rent control any time in the near future. We've helped several clients do this over the past years. Ideally, those new cities don't have rent control and, as of now, aren't discussing the possibility of invoking rent control any time in the near future.
Is this the outcome California legislators want? Probably not. But, when the economics of owning rental property in one city become untenable compared to neighboring areas, capital moves. It always does. The unintended consequence of aggressive rent control is often a reduction in available rental housing. Owners either sell to owner-occupants or move their investments elsewhere.
How AB 1482 Currently Works
To understand what AB 1157 would change, you need to know where we are now. AB 1482, also called the Tenant Protection Act, went into effect in 2020 and applies to most rental properties built before January 1, 2005. The current framework:
Annual Rent Increase Cap: 5% plus local inflation (CPI), with a maximum total increase of 10% per year.
Exemptions: Single-family homes and condos are exempt if not owned by a corporation, REIT, or LLC where at least one member is a corporation. Individual owners and some small LLCs can still adjust rents to market.
Just Cause Eviction: Landlords must have a legally valid reason to terminate a tenancy (non-payment, lease violations, owner move-in, substantial remodeling, etc.).
Sunset Clause: The entire framework is set to expire on January 1, 2030, unless extended.
Required Notices: Landlords must include specific language in leases informing tenants of their rights under AB 1482.
This system, while restrictive, at least provided a pathway for rent adjustments that could keep pace with some cost increases. The single-family exemption recognized that individual property owners operate differently than large corporate landlords. And, the sunset clause meant there was a point where the state would reassess whether these restrictions were working.
AB 1157 would dismantle all three of those provisions.
Is There a Better Way than AB 1157?
Look, nobody wants to see families priced out of housing. That's not the goal here. But, rent control that ignores the actual costs of property ownership doesn't solve the housing crisis. It just shifts who bears the pain.
What if California took a different approach? What if an assembly bill focused on:
Indexed caps tied to actual costs. Instead of arbitrary percentages, allow rent increases that track with documented increases in property insurance, property taxes, and major utility costs. If insurance goes up 34%, the rent cap could adjust proportionally.
Exemptions for small landlords. The vast majority of rental housing in California is owned by individuals or small investors... not corporations. These owners don't have the capital reserves or economies of scale that large REITs do. Treating a person who owns one rental condo the same as a company that owns 500 apartments doesn't make sense.
Offer incentives, not just restrictions. Instead of only penalizing property owners, create tax incentives. Or, reduce regulatory burdens for owners who keep rents below market rate. Reward the behavior they want to see.
Geographic flexibility. Housing costs vary wildly across California. A one-size-fits-all approach to rent control treats Fresno the same as San Francisco. Local governments should have more flexibility to craft solutions that match their specific markets.
Sunset clauses with built-in review. Include mandatory reviews every 5-10 years to assess whether rent control changes are actually increasing housing availability and affordability... or just creating more problems.
The housing crisis in California is real. But, AB 1157, as written, would make it harder for individual property owners to maintain and operate rental housing. And when that happens, the rental housing stock shrinks. Units convert to owner-occupied housing or sit vacant rather than deal with the regulatory burden. Maintenance gets deferred because there's no financial margin to address it.
That doesn't help renters. It just reduces their options.
What You Should Do Now
If you own rental property in California, especially single-family homes or condos, you need to be prepared for if AB 1157 potentially returns in 2026. That means:
Review your current rent levels and understand where you stand relative to market rates.
Document all property expenses carefully. Track insurance increases, tax changes, major repairs, and maintenance costs.
Consider your long-term strategy. Is your city in California still the right place for your rental investments? Or, should you explore options like 1031 exchanges? Some are moving capital to more landlord-friendly markets.
Work with professionals who understand California's complex and constantly changing landlord-tenant laws. The penalties for non-compliance are severe, and getting expert guidance is not optional anymore.
AB 1157 was pulled from consideration in 2025, but it isn't gone. Property owners need to stay informed and engaged. They may need to decide their investment strategy before the next legislative session begins.
It feels like California's rental housing market is at a bit of a crossroads. Let's hope our legislators find a good path. It can't be for only tenants or property owners. It needs to work for both tenants and the property owners who provide housing. Because without property owners willing to rent in California, there won't be any rental housing left to regulate.
