Does California's rent cap apply to your ADU? Most owners get this wrong

The statewide rent cap recalculated on August 1, and my inbox filled up with the same question in different words: how much can I raise the rent on my ADU this year? For most of the owners asking, the honest answer is that the cap doesn't apply to them at all. And for a handful, it does apply, only because of a piece of paperwork they skipped at lease signing.

I've managed ADUs across the South Bay for 12 years, 200-plus tenancies. This is the area where I see the most confident wrong answers, including from owners who read an article about the statewide cap and assumed it covered them. Here's how it actually works for an ADU.

The cap, in one paragraph

California's Tenant Protection Act, AB 1482, limits annual rent increases on covered units to 5% plus the regional change in the Consumer Price Index, with a hard ceiling of 10%, whichever comes out lower. The CPI piece is recalculated every year and the new figure takes effect August 1, which is why this lands in your inbox in August.

For the San Francisco-Oakland-Hayward CPI region, the figure in effect from August 1, 2026 through July 31, 2027 works out to 8.8%, from a 3.8% CPI plus the 5% base.

I'm deliberately not printing a single number for the whole South Bay, because the applicable CPI region varies by county and I've watched owners apply a Los Angeles or San Francisco figure to a Santa Clara County property. Look up your specific county on the California Apartment Association's regional CPI calculator before you send anything.

Most ADUs are exempt, on two separate grounds

Here's the part that surprises people. AB 1482 has exemptions, and a typical Bay Area ADU usually clears more than one of them.

The 15-year new construction exemption. Housing with a certificate of occupancy issued within the past 15 years is exempt from the rent cap. It's a rolling window, so for 2026 that means a certificate issued on or after January 1, 2011. Nearly every purpose-built ADU in my book falls inside that window, because the Bay Area ADU boom is a post-2017 phenomenon. If you built or legally converted in the last decade, this alone exempts you.

The owner-occupied exemption. A single-family property with no more than two units, where the owner occupies one of them as their principal residence, is also generally exempt. That describes the classic setup: you live in the main house, you rent the ADU in the backyard. This one exempts a large share of the owners I work with regardless of build date.

Clear either one and the 8.8% figure isn't your ceiling.

The catch that undoes it

The exemption isn't automatic in practice. To rely on it, the law requires you to give the tenant specific written notice that the property is exempt from the Tenant Protection Act. The statute prescribes the substance of that notice, and for tenancies that started or renewed after the law took effect it generally has to be in the lease itself.

Skip the notice and you can find yourself unable to rely on an exemption you legitimately qualify for. That's the whole ballgame for a lot of owners: they qualify, they just never papered it.

If you're self-managing and you've never heard of this notice, go read your lease today. If it isn't there, that's a conversation with a landlord-tenant attorney about how to correct it going forward, not something to quietly paper over at the next renewal.

The window rolls, so exemptions expire

The 15-year clock moves forward every year. An ADU that got its certificate of occupancy in 2010 was exempt last year on new-construction grounds and isn't this year. In 2027 the line moves to 2012, and so on.

If your ADU is approaching that boundary and you don't also qualify on owner-occupancy, your unit is about to become rent-capped and you should plan the transition rather than discover it. This is one of the few genuinely predictable regulatory events in this business: you know the exact year it happens.

Local ordinances can be stricter, and they win

State law is a floor, not a ceiling. Several South Bay and Peninsula cities have their own rent stabilization ordinances, and where a local rule is more protective of the tenant, the local rule controls. San Jose's apartment rent ordinance and Mountain View's stabilization program are the two that come up most in my work, though both are aimed primarily at older multi-family housing rather than backyard ADUs.

The practical instruction is the same either way: check your city's ordinance alongside the state rule before setting an increase. Don't assume the state figure is your answer just because you found it first.

What this means for setting rent

If you're exempt and papered correctly, you're not capped by AB 1482 at all, which means the number is a market decision rather than a legal one. That's more freedom than most ADU owners realize they have, and it's also more rope. The renewal math is unforgiving: on a $3,000 unit, a month of vacancy costs more than a year of the increase you were reaching for. A good tenant at a fair rent beats a maximized rent and a turnover, every time.

If you are covered, run the increase against your county's figure, honor the notice requirements (30 days for increases of 10% or less, 90 days above that), and document what you sent.

What to do this month

• Find your certificate of occupancy date and check it against January 1, 2011
• Confirm whether you occupy the primary residence as your principal home
• Read your lease for the exemption notice; if it isn't there, get advice before your next renewal
• Look up your county's CPI figure rather than borrowing one from another region
• Check your city's local ordinance, since it can be stricter than the state
• If your ADU is nearing the 15-year line, calendar it now

None of this is exotic, and it takes an afternoon. But the owners who get it wrong get it wrong in the expensive direction, either by capping themselves unnecessarily for years or by issuing an increase they can't legally support.

I'm a property manager, not an attorney. This is how the rules work as I apply them across a South Bay portfolio, and it is not legal advice for your specific property. If you're near a line, ask a landlord-tenant attorney.

Not sure whether your ADU is covered, or what it should rent for this year? Request a free ADU rental analysis and I'll walk through your specific situation. Or call me at (408) 813-8001.

Sources

• AB 1482 Tenant Protection Act of 2019 (full text) — California Legislative Information
• California Civil Code Section 1946.2 — California Legislative Information
• AB 1482 regional CPI figures for 2026 — California Apartment Association
• AB 1482 topic page and CPI calculator — California Apartment Association
• San Jose Apartment Rent Ordinance — City of San Jose
• California Department of Consumer Affairs — Landlord/Tenant — California Department of Consumer Affairs