California's SB 1365 Caps Rent on Long Leases

Eleanor — Kribel AI Concierge

Kribel helps California owners price renewals with the records and dates that compliance now demands — kribel.com

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October 3, 2026

California's SB 1365 extends the state's 10% emergency rent-gouging cap to long-term leases from Jan. 1, 2027, ending the one-year-plus exemption. Owners should lock down baseline rents, dates and documentation before then.

If you own rental property in California, a signature in Sacramento just changed how you can price a renewal the moment the state declares an emergency — even on leases that used to sit outside the rules.

What happened

Gov. Gavin Newsom has signed SB 1365, bringing rental housing under California's price-gouging law regardless of the initial lease term. The bill, by Sen. Ben Allen, D-Santa Monica, amends Penal Code Section 396, and the change takes effect Jan. 1, 2027. The governor announced the signing on Sept. 30, the last day he could sign or veto bills this year.

Here is the mechanism. Penal Code Section 396 generally bars rental housing providers from raising prices by more than 10% after a covered emergency declaration. Until now, the definition of covered housing excluded rentals with an initial lease term longer than one year. SB 1365 removes that carve-out, so the 10% ceiling applies across the board once an emergency is declared.

The law also reshapes how an owner can defend an increase above the cap. According to the California Apartment Association, a housing provider may raise as an affirmative defense that a tenant agreed to an increase before the emergency declaration. There is also a defense for an increase tied directly to costs for repairs or additions beyond normal maintenance, incurred within the year before the declaration — but only if the housing was rented, advertised or offered for rent when the costs were incurred, or the provider can prove they already intended to offer it for rent within six months of the work.

One piece fell away before signing: an earlier version would have let certain city attorneys bring claims under California's Cartwright Act, but lawmakers removed those antitrust provisions in August.

Our take

We understand the instinct behind price-gouging law. When a wildfire or flood displaces thousands of families, nobody wants to see a vacant home listed at double its value the next morning. That protection is reasonable, and good owners don't want to be anywhere near that behavior.

But extending the cap to long-term leases is a different thing from stopping disaster profiteering, and it deserves an honest word. The California Apartment Association and a coalition of business and housing groups opposed the bill and asked for a veto, arguing it stretches the price-gouging law beyond its intended purpose and piles onto rent restrictions that already exist statewide and locally. Their warning is practical: the change can complicate compliance for owners who are simply making lawful pricing decisions.

That concern is not abstract, because the stakes are criminal. A violation of Penal Code Section 396 can be prosecuted as a misdemeanor, carrying up to one year in county jail, a fine of up to $10,000, or both. When a routine renewal decision sits that close to a criminal statute, the margin for a sloppy spreadsheet or a forgotten emergency declaration disappears.

Our position is straightforward. We support protecting displaced families, and we push back on blanket caps that ignore the double-digit cost pressures owners already carry — insurance, taxes, repairs, financing. The answer isn't to grumble about the law; it's to build pricing discipline that respects it automatically.

What this means for you as an owner

If you hold California rentals, treat the period before Jan. 1, 2027 as a setup window, not a countdown. A few concrete moves:

• Know your baseline rent on every unit. The 10% ceiling is measured against the price before a covered emergency. If you can't instantly state the current rent and the date it took effect for each lease, that's the first gap to close.
• Watch for declarations, not just disasters. The cap triggers on a covered emergency declaration, which can cover a wide area and last longer than the event itself. Build a habit of checking whether a declaration is active before you issue any increase above 10%.
• Document the defenses while you still can. If a tenant agrees to an increase, capture the date in writing — an agreement reached before a declaration is a recognized defense. Likewise, keep clean records of repairs or additions beyond normal maintenance, including when the work was done and that the unit was rented, advertised or offered for rent at the time.
• Stop relying on the old one-year exemption. Longer leases no longer sit outside the rule. Any renewal logic you built around that carve-out needs retiring before the new year.
• Flag increases above 10% for a second look. Make a rule for yourself: any proposed jump over the cap gets paused and checked against active declarations and available defenses before it goes out.

The owners who will navigate this cleanly are the ones who already run pricing like a documented process rather than a gut call. That's the quiet advantage here — the law rewards records, dates and consistency, all of which you control.

Looking ahead

California's rulebook keeps growing, and SB 1365 is one more reason to treat pricing as a workflow rather than a once-a-year guess. Get your baselines, your dates and your documentation in order before January, and an emergency declaration becomes a condition you manage calmly — not a scramble that puts you near a misdemeanor line. We'll keep watching how this one plays out.