SB 1365 Is Law: How California's 10% Emergency Rent Cap Works for LA Apartment Owners

SB 1365 is law. Governor Newsom signed it on September 30, 2026, and on January 1, 2027 California’s 10% emergency rent cap will reach every lease term, not just leases of a year or less.

Los Angeles owners do not have to wait until January to feel the cap. On October 15, 2026 the Governor proclaimed a state of emergency for Tropical Storm Rachel in Imperial, Los Angeles, Orange and San Diego counties, which switches on the rental protections in Penal Code 396. Inside the City of Los Angeles, the local emergency declared after the January 2025 fires is still in place, so the City’s own price-gouging ordinance is running too. Here is what applies where, what changes on January 1, and what to do about it.

Is the emergency rent cap in effect in Los Angeles right now?

Yes, across Los Angeles County, but under two different sets of rules depending on which side of the City line a building sits.

So for the next few weeks, a 13, 18 or 24-month lease signed outside the City is outside the state cap. Inside the City, it is not, because LAMC 47.12 already covers every rental term.

Two cautions. The County’s own wildfire rent-gouging order, the one that ran for roughly sixteen months after the January 2025 fires, expired after May 28, 2026; it is not what is running now. And other cities in the county can declare their own local emergencies or adopt their own ordinances, so check the city where the building sits. Cal OES keeps the current list of state declarations, and the City Attorney reports on the City’s emergency in Council File 25-0006-S77.

What SB 1365 changes on January 1, 2027

SB 1365 does not touch the 10% figure. Everyone reaches for that number first, and it is not where the change is. The change is in who the cap covers, and in what an owner has to prove to get out from under it.

It also says expressly that the housing cap does not authorize a rent above what a local rent control ordinance allows. The emergency cap is a ceiling on top of the RSO, never a way around it.

One drafting detail is worth knowing because it is the kind of thing that gets reported wrong for months. SB 1365 was double-jointed with SB 493: it carried a contingent second version of Penal Code 396 designed to absorb SB 493's war language, operative only if both bills were enacted and SB 1365 was enacted last. SB 493 was not enacted. That contingent version never becomes operative. If you see coverage saying the enacted statute now includes a wartime trigger, it does not.

The three words coming out of the statute

This is where most of the trade coverage is imprecise. Headlines say SB 1365 extends the emergency cap to long-term leases, which invites owners to assume their standard annual leases were previously exempt. They were not.

Until January 1, 2027, Penal Code 396 defines housing as rental housing with an initial lease term of no longer than one year. A twelve-month lease has an initial term of exactly one year, which is no longer than one year. It is covered today. So is a month-to-month tenancy. The population that sits outside the statute right now is narrow and specific: leases with an initial term of more than a year.

That narrowness is the point. A 13-month or 18-month initial term is a real leasing tool in Los Angeles, used to push expirations out of a soft season, to hold a tenant through a repositioning, and in some hands to price above an emergency cap while a declaration is running. SB 1365 removes that door. From January 1, 2027, term length stops being a lever, and the statute says so twice: the definition changes, and a separate provision states that it is not a defense that an increase was based on the length of the rental term.

Inside the City of Los Angeles, that door is already shut. The City’s own price-gouging ordinance, LAMC 47.12, covers any rental unit in the City, applies to existing and prospective tenants, and says in its own words that it is not a defense that an increase was based on the length of the rental term. For a building in the City, SB 1365 writes into state law what the City already requires while its emergency lasts. For a building elsewhere in the county, January 1 is the real change, unless that city has its own rule.

The change is not that annual leases get captured. They already are. It is that writing a longer lease stops being a way out.

The same provision forecloses two other arguments owners reach for. An increase cannot be justified by bundling additional goods or services, apart from a narrow furniture allowance, and it cannot be justified by the fact that an insurance company or other third party is paying the rent on the tenant's behalf. After January 2025, that last one is not abstract. Displaced households living on insurance loss-of-use coverage were a large part of the demand behind the run-up in Westside asking rents in the weeks after the fires.

The repair defense gets a calendar

Until January 1, 2027, an owner can escape the 10% cap by showing the increase is directly attributable to repair or addition costs beyond normal maintenance, amortized over the rental term. There is no timing rule. The test is about amortization, not about when the work happened.

SB 1365 replaces that with a dated test. As chaptered, it is an affirmative defense if the owner can prove the increase was directly attributable to additional costs for repairs or additions beyond normal maintenance incurred within the year prior to the proclamation or declaration, and either:

• the housing was rented, advertised for rent, or offered for rent at the time the costs were incurred; or
• the owner can prove that, within a year before the proclamation, the intent to offer the housing for rent within six months of the repair already existed.

Read the timing clause carefully, because it runs against the ordinary sequence of an LA repositioning. Costs incurred after an emergency is declared are not costs incurred within the year prior to it. On the face of the text, money you spend renovating a unit during a declared emergency does not support the defense.

Consider the pattern that plays out after every LA disaster. An owner takes a vacant unit down in month two of a declaration, spends $40,000 on a kitchen, baths and systems, and brings it back at market in month eight. Today, that owner argues amortized repair costs. Under SB 1365 as written, the costs fall outside the one-year lookback and the defense is unavailable on its face. The second condition does not rescue it either, since it also reaches backward: the documented intent has to have existed within the year before the proclamation.

Whether courts read it that strictly is a question for counsel, and reasonable lawyers will argue about it. But this is a criminal statute with a misdemeanor attached, and the drafting is not ambiguous about direction. Plan around the text, not around the reading you would prefer.

How the cap is actually calculated

The 10% is a percentage of a defined baseline, and the baseline is where the real answers are. Penal Code 396 sets it four ways.

All four are existing law, not new. The baseline may be raised 5% if a unit previously offered unfurnished is now offered fully furnished, and it may not be adjusted for anything else, including utilities or gardening that used to be bundled.

Why this lands harder in Los Angeles

Here is the part almost nobody underwrites. Penal Code 396 caps the price you advertise, offer, or charge to an existing or prospective tenant. Prospective. It reaches the rent you list a vacant unit at.

Neither of the rent laws LA owners actually plan around does that. The LA RSO governs increases on a sitting tenancy and, under Costa-Hawkins, leaves the initial rent to a new tenant uncapped. AB 1482 works the same way: it limits increases during a tenancy and does not cap what you ask a new one. The turnover reset is the one place LA rent regulation deliberately does not reach, and it is where most of the value in a repositioning gets realized.

An emergency declaration reaches it. For 30 days, and for as long as the declaration is extended, the asking rent on a unit rented in the prior year is capped at 110% of what the last tenant actually paid. That is a vacancy-decontrol override, and it is the single most consequential sentence in the statute for anyone running a market-rate repositioning in Los Angeles.

There is one meaningful piece of relief in the existing text, and it cuts in owners' favor. If a unit is rented when the emergency is declared and goes vacant during it, and the unit sits under a local ordinance that sets a maximum rent, the baseline is the greater of the previous tenant's rent or the 160% fair-market-rent figure. Read literally, that reaches rent-stabilized stock under both the City and County ordinances. On a rent-stabilized two-bedroom with a long-tenured $1,400 tenant, the greater-of test would put the baseline near $4,742 on FY 2027 rents rather than $1,400. Whether a given ordinance qualifies is a legal question worth putting to counsel before you rely on it, but if you own stabilized product it is the provision to know.

Note that AB 1482 is a state statute, not a local ordinance, so it does not appear to trigger that greater-of sentence on its own.

Inside the City of Los Angeles, LAMC 47.12 carries the same greater-of rule for units under the RSO, with one exception: where the unit was vacated through an eviction, the rent to the next tenant cannot exceed what the prior tenant paid.

Enforcement is not theoretical

A violation of the housing provision is a misdemeanor punishable by up to one year in county jail, a fine of up to $10,000, or both, and it is separately an unlawful business practice and an act of unfair competition, which opens civil exposure on top of the criminal charge.

In February 2025, six weeks after the fires, the Attorney General filed criminal charges against a Southern California real estate agent and a landlord over a Hermosa Beach home listed at a 36% increase after the emergency order took effect. The case started with a single consumer complaint. Anyone who thinks a listing price is invisible has not looked at how easy it is to screenshot a rental listing and its history.

The City of Los Angeles enforces its own rules separately. LAMC 47.12 carries civil penalties of up to $30,000 per violation and gives tenants a private right of action. In May 2026 the City Attorney announced a settlement with Blueground, a furnished-rental company accused of raising prices on Los Angeles units by more than 10%, and in some cases by more than 50%, within days of the fires: $1.2 million in civil penalties to the City and County, plus full restitution to affected tenants.

What to do now, and before January 1

1. Check whether your building is under a declaration today. In Los Angeles County the answer right now is yes. Watch the Cal OES list for the date the Tropical Storm Rachel declaration lapses or is extended and, for a building in the City of Los Angeles, the status of the City’s local emergency. Price every new lease and every listing against the cap until then.
2. Pull every lease with an initial term over twelve months. That is the population SB 1365 captures on January 1, 2027, and the population LAMC 47.12 already captures inside the City. If you have been using an 18-month term as a scheduling tool, keep it; just stop treating it as an emergency-pricing tool.
3. Make your rent roll remember the last tenant's actual rent per unit. That number, not your asking rent and not market, is the baseline you would be measured against. Most LA rent rolls do not carry prior-tenant rents in a retrievable form. Fix that now, not during a declaration.
4. Date and document renovation spend. Keep invoices with dates, and keep evidence that the unit was rented, advertised, or offered for rent when the costs were incurred. Where it was not, create the contemporaneous record of intent to offer it for rent within six months. Under SB 1365 that documentation is the defense.
5. Retire three arguments. Term length, bundled goods or services, and the fact that an insurer is paying are all expressly off the table as justifications from January 1, 2027, and term length already is inside the City.
6. Do not convert a long-term unit to a daily rate after a declaration. SB 1365 prices that at one-thirtieth of the fair-market-rent benchmark, which is far below what a short-term listing would otherwise carry.
7. Put it in the underwriting. On a value-add LA deal built on turnover velocity, an emergency declaration during your lease-up window is a timing risk with a number attached. Model it the way you model a rent-increase ceiling, because that is what it is.

What happened to SB 493

SB 493 (Becker) was the price-gouging bill most owners heard about, and it is not the one that passed. It would have added war to the definition of a state of emergency, gated on a written Attorney General opinion finding a nexus between the conflict and the price increases. On August 30, 2026 it was ordered to the Assembly inactive file on request of Assembly Member Aguiar-Curry, and August 31 was the last day for each house to pass bills. It died with the 2025-26 session and does not carry over; anything like it in 2027 starts as a new bill.

Whether it ever reached rents was contestable. The Legislative Counsel’s Digest scoped the war trigger to essential consumer goods or services, while the housing cap sits in its own subdivision of the statute. The question is now moot.

Questions owners are asking

Is the emergency rent cap in effect in Los Angeles right now?

Yes. The October 15, 2026 Tropical Storm Rachel proclamation covers Los Angeles County, and Cal OES lists the rental protections through November 14, 2026 unless extended. Inside the City of Los Angeles, the City's local emergency is still in place, so Penal Code 396 and the City's own ordinance, LAMC 47.12, apply as well.

When does SB 1365 take effect?

January 1, 2027. The Governor signed it on September 30, 2026 (Chapter 1028, Statutes of 2026). It has no urgency clause, so the current declaration runs under the existing text of Penal Code 396 until then.

What does SB 1365 change for landlords?

It removes the one-year lease-term limit, turns the repair-cost exemption into a dated affirmative defense, makes a pre-emergency contractual increase an affirmative defense, bars lease-length, bundling and insurer-paid justifications, and closes a daily-rate conversion. The 10% figure does not change.

Do 18-month and 24-month leases fall under the cap?

Inside the City of Los Angeles, yes, today, because LAMC 47.12 covers every rental term. Elsewhere in the county, not until SB 1365 takes effect on January 1, 2027.

Does the cap apply to new tenants, not just existing ones?

Yes. The statute reaches the price advertised, offered, or charged to an existing or prospective tenant, which means it caps what you can ask for a vacant unit. That is where it overrides vacancy decontrol.

How is the cap calculated on a unit with no recent rental history?

The baseline is 160% of HUD fair market rent and the ceiling is 110% of that, so 176% of FMR. On HUD's FY 2027 rents for this metro, effective October 1, 2026, that is about $5,217 for a two-bedroom.