California Initiative Risks Upending State Apartment Market; Investor Due Diligence Increases in Importance

Proposition 21 introduces a new law that alters how rents are adjusted during tenant turnover. Currently, operators are able to lift rent to the market rate during a vacancy. Under the new law, rents will be controlled during vacancy. Furthermore, thousands of additional apartments will be eligible for rent control.

Key Features:

• Rent growth limited through vacancy, permanently altering the apartment market

• Potential law could discourage reinvestment in older properties

• Properties older than 15 years will be eligible for rent control