From January 1, 2027, California's 10% emergency rent limit covers rentals of any lease length. Today it only reaches rentals with an initial lease term of one year or less.
The change comes from SB 1365 (Chapter 1028), approved by the Governor on September 30, 2026. It amends Penal Code 396, the state's price gouging law. The bill has no urgency clause, so under the California Constitution it takes effect on the January 1 after a 90-day period from enactment, which is January 1, 2027.
If you rent out a house in San Jose or Campbell on an 18 or 24 month lease, this is the part that changes for you. Below is how the limit works, what the current statewide emergency does and does not do, and a short checklist.
How the emergency rent limit works
What starts it. The limit starts when the President of the United States or the Governor proclaims a state of emergency. It also starts when a city, county, or city and county declares a local emergency through an official or body with the authority to do so.
How long it lasts. It runs for 30 days after the proclamation or declaration, or for any longer period that the emergency is extended.
What it limits. During that time it is unlawful to raise the rental price advertised, offered or charged for housing, to an existing or prospective tenant, by more than 10 percent. That covers a current tenant's renewal and a new tenant moving in.
What changes on January 1, 2027. Under current law, "housing" for this rule means rental housing with an initial lease term of no longer than one year. SB 1365 expands that to any rental housing, without regard to the length of the initial lease term.
The penalty. A violation is a misdemeanor, punishable by up to one year in county jail, a fine of up to $10,000, or both.
What the current El Niño emergency does
On September 21, 2026, the Governor proclaimed a statewide state of emergency for the developing 2026-2027 El Niño event. Paragraph 18 of that proclamation says the Penal Code 396 restrictions, which are normally triggered automatically by a proclamation, "are suspended, and no such restrictions are imposed, with respect to this El Niño event, at this time."
So the statewide El Niño proclamation does not cap rents on its own. Two words matter there: "at this time." The proclamation does not say anything about a separate local emergency, and Penal Code 396 lists a local emergency declared by a city or county as its own trigger. If your city or county declares one, check before you raise rent, and ask your attorney if you are unsure.
The two defenses in the law
Penal Code 396 gives two affirmative defenses to a charge of price gouging under the rent rule. A person has to prove one of them:
- The tenant agreed to it first. The increase was contractually agreed to by the tenant before the proclamation or declaration.
- It pays for real improvements. The increase was directly attributable to added costs for repairs or additions beyond normal maintenance, incurred within the year before the proclamation or declaration. On top of that, either the housing was rented, advertised for rent or offered for rent when the costs were incurred, or you can prove that, within that year, you already intended to offer it for rent within six months of the repair or addition.
Both defenses depend on records made before the emergency. That is why it makes sense to set things up now rather than after a declaration.
Owner checklist before January 1, 2027
- List each rental and its current lease term. From January 1, 2027, a longer lease no longer takes a home outside the emergency limit.
- Write down today's rent for each home, with the lease or ledger that shows it.
- If you plan a rent increase during a longer lease, put it in the signed lease, so it is agreed before any emergency.
- Keep dated invoices and receipts for repairs or additions beyond normal maintenance, and note whether the home was rented or listed at the time.
- If a home is vacant while you fix it up, keep a dated record of your plan to rent it, such as a listing date or a written plan.
- Watch for local emergency declarations by your city or by Santa Clara County, and check the rule before you raise rent or set a new asking rent during one.
Planning your 2027 rents
The rule is the same whether your rental is in Los Gatos, Saratoga or Santa Clara. If you would like a second look at your leases and rent plan for next year, contact Blake or request a free rental analysis.
This post is general information for owners, not legal advice.