Navigating Rent Control in Bakersfield: An Investor's Insight

Marc A. Thurston
September 1, 2023
min read

Real estate investing is as much about understanding properties as it is about grasping the regulatory landscape. In cities across California, rent control has become a vital topic of discussion, with significant implications for multifamily real estate investors. Bakersfield is no exception. As an investor, it's crucial to navigate this terrain wisely. This article dives deep into rent control in Bakersfield, helping investors make informed decisions.

Understanding Rent Control

Before delving into Bakersfield specifics, let's get a grasp on rent control. At its core, rent control is a regulatory measure to limit how much landlords canincrease rent for existing tenants. Its primary goal is to ensure affordable housing and protect tenants from exorbitant rent hikes. However, it does have its share of supporters and critics.

Bakersfield and Rent Control: The Current Scenario

While California passed the Statewide Rent Control Law (AB 1482) in 2019, which caps annual rent increases to 5% plus inflation for most properties older than 15 years, Bakersfield does not have its local rent control ordinance as of the last update in 2023. However, investors need to be wary of the statewide regulations.

Implications for Multifamily Real Estate Investors

  1. Rental Caps: With AB 1482 in place, investors must be cautiousabout how they set and increase rents. It's no longer feasible to significantly bump up rents between lease renewals
  2. Property Values: Rent-controlled properties may see a differentappreciation trajectory compared to properties exempt from such regulations. Investors need to factor this into their long-term ROI calculations.
  3. Maintenance and Renovations: With limited rent increase capabilities, investors might feel the pinch when it comes to property upkeep and major renovations. Budgeting becomes even more critical
  4. Tenant Turnover: Rent control can potentially reduce tenant turnover, as tenants might be disincentivized to move out when they have a rate below market average. While this can mean steady rental income, it can also make it challenging for landlords to adjust to market rates rapidly.

Strategies for Navigating Rent Control in Bakersfield

  1. Stay Informed: Regulations can change. It's vital to stay updated on both state and potential local rent control measures. Joining local real estate associations or investor groups can help.
  2. Consider Newer Properties: Since AB 1482 mainly affects properties older than 15 years (with some exceptions), investors might consider newer builds to bypass rent control constraints.
  3. Factor in Inflation: The statewide rent control law allows for rent increases based on inflation. Keep an eye on these rates to maximize your rental income within legal limits.
  4. Focus on Value-add Opportunities: If raising rents becomes challenging, consider other ways to add value to your property.For instance, adding amenities or utilities can justify a rent increase or attract higher-quality tenants
  5. Rethink Lease Agreements: Structure lease agreements to your advantage. This might mean shorter lease terms to adjustrents more frequently or clauses that allow for specific increases based on property improvements.
  6. Prioritize Tenant Relationships: In a rent-controlled environment, fostering positive landlord-tenant relationships becomes paramount. Happy tenants are less likely to raise issues or demand rent reductions.
  7. Diversify Investment Portfolio: To hedge against potential risks associated with rent control, consider diversifying your real estate portfolio. This could mean investing in different propertytypes or even looking beyond Bakersfield.

Rent Control: A Double-Edged Sword

While rent control's intent is to protect tenants and ensure affordable housing, it brings along challenges for landlords and investors. On the upside, areas with rent control can often witness a more stable rental marketwith consistent demand. On the downside, it can limit profitability and flexibility for property owners.

In Conclusion: The Path Ahead for Bakersfield Investors

Bakersfield's multifamily real estate scene remains attractive, with or without rent control. The city's growth, combined with its unique amenities, makes it a sought-after rental market. As an investor, understanding and adapting to regulations like rent control is part of the journey.

Remember, real estate is as much about resilience and adaptation as it is about brick and mortar. By staying informed, strategizing wisely, and focusing on long-term goals, investors can navigate the waters of rent control effectively, ensuring their investments continue to thrive in Bakersfield's dynamic landscape.

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