On January 8, 2024, California Attorney General Rob Bonta announced a $3.7 million settlement with Invitation Homes - the nation’s largest owner of single-family rental homes - to “resolve allegations that the company violated the California Tenant Protection Act (TPA) and California’s price-gouging law by unlawfully increasing rents on approximately 1,900 California homes.” Invitation Homes is a Maryland corporation with headquarters in Dallas, Texas, and “owns and manages approximately 12,000 rent homes across California.”
The complaint filed by the California Attorney General details the extent and scope of the alleged violations which date back to October 2019 and extend through December 2022. Invitation Homes is said to have discovered many of the issues with the overcharges through its internal investigation before learning about the California Attorney General’s investigation of the matter. According to the proposed settlement, the company will pay $2.04 million in civil penalties and will refund or credit over $1.68 million back to residents for rent they paid in excess of the state’s rent cap plus 5% interest.
The California TPA (also known as AB 1482) was enacted in 2019 and caps rent increases for most renters in California. Under the California TPA, housing providers cannot raise rent more than 10% total or 5% plus the percentage change in the cost of living – whichever is lower – over a 12-month period. Under California’s price-gouging law, housing providers cannot charge more rent than what is authorized by local rent-cap ordinances.
According to Attorney General’s press release, if approved by the court, the proposed settlement would require Invitation Homes to:
- Restore lawful rental rates for all its California tenants;
- Evaluate the compliance of any proposed rent increase or any new base rental rate with all state and local laws;
- Perform quarterly audits on all processes and systems designed to ensure that rental increases comply with state and local law;
- Monitor all California statewide and local states of emergencies weekly to ensure that base rental rates and rent increases do not violate state or local laws governing rent setting;
- Refrain from collecting, or claiming in a legal action, any rent not lawfully owed by a tenant;
- Ensure that any information it provides to credit reporting agencies on late rental payments or nonpayment by tenants is correct or corrected and
- Provide an annual compliance report to the Department of Justice (DOJ) for the next five years regarding rent increases, steps taken to ensure compliance with state and local laws, any potential violations and any remediation.
This landmark settlement should serve as a warning to California housing providers about their obligations to comply with California’s complicated state and local rent control regime. Housing providers across the country can expect to see increased scrutiny of fees and housing costs as the White House and state attorneys general continue to focus on price transparency and "junk fees" in consumer transactions, including in the rental housing industry. Housing providers should continue to educate themselves as to their compliance responsibilities and frequently review their policies and procedures to ensure compliance with state and local laws.
Lawmakers across the country have been increasingly willing to regulate the amount in rent that private rental housing providers can charge for their units. With the current housing supply crunch, elevated inflation and mortgage rates and ongoing labor shortages, the cost of operating rental housing is outpacing the rent increase caps in many states like California. In California, 93 cents of every dollar of rent are spent to cover necessary operational expenses, such as property maintenance, insurance, staffing and property taxes, which in turn go back to the local community.
The National Apartment Association is committed to working with its affiliate partners to promote sustainable policy solutions that support renter financial instability in the short-term and incentivize housing construction to make up for a current shortage and account for demand and affordability in the long-term.