(The Center Square) - After California Attorney General Rob Bonta issued warnings to landlords over anti-price-gouging laws during declared emergencies, Gov. Gavin Newsom’s office has provided clarifications on which rules are in effect and for how long. This clarity could bring relief to real estate professionals who have been wary of leasing homes to wildfire victims, especially after the attorney general’s broad warnings appeared inconsistent with the governor’s orders.

California Penal Code 396 automatically goes into effect for the 30 days after an emergency declaration, largely limiting price increases for materials, goods, services, hotels, and rent to no more than 10% above what prices were before the declaration, with the code in effect for services for 180 days after the declaration.

Violators of Code 396 can be subject to one-year imprisonment in county jail, a fine of up to $10,000, and civil enforcement actions that can include penalties of up to $5,000 per violation, injunctive relief, and mandatory restitution. An emergency declaration has been in effect for all of Los Angeles County since January 7, 2025.

Of specific concern to real estate professionals was subdivision (e), which Newsom’s office clarified only applies through March 8. Subdivision (e) says that properties that are already rented out or have been listed in the past year cannot have rents increase more than 10% and – more controversially – that homes that have not been listed in the past year cannot be listed for more than 160% of federally-set fair market value, which is only dependent on ZIP code and the number of bedrooms in a home.

As reported earlier by The Center Square, the provisions could make it financially infeasible for many owners to rent out their homes, especially in areas near the fire-demolished Pacific Palisades that was populated by large, affluent families.

In the neighboring 90402 zip code, 160% of HUD FMV for a single-family, three-bedroom home is $6,736. The cheapest three-bedroom house for sale in 90402 is priced at $2.85 million, with a $50,000 price cut one week before the fire as the property’s most recent price change, which means a buyer would pay a nearly $20,000 per month mortgage.

With house rentals in Los Angeles’s Westside listing before the fire for about half of mortgage costs, it is currently illegal to list a home for rent at pre-fire market rates, which in the case of the aforementioned home would be about $10,000 – well beyond the $6,736 maximum currently allowed.

“LA-area leasing agents & property managers: The correct response, if an owner asks you to price a vacancy in a way that violates the anti-gouging law, is ‘no,’” said apartment complex and property management service owner Moses Kagan on X. “You follow the law regarding pricing. And if that would mean taking a price that doesn't make sense, you hold the unit vacant (which is, of course, also legal).”

On Jan. 16, Bonta’s office sent more than 200 warning letters to hotels and motels for price-gouging, warning them they cannot raise prices more than 10% above what they charged prior to the emergency, and followed up the letters with a Jan. 17 news release.

“The Governor has declared a state of emergency that has triggered the price gouging protections of Penal Code section 396 for rental housing for one year, until January 7, 2026,” wrote Bonta’s office. “These protections generally prohibit raising the price of rental housing by more than 10 percent of the previously charged price after an emergency is declared. Where a home or unit was not rented prior to a declaration of emergency, the rental price cannot exceed 160 percent of the fair market value of rental housing as determined by the U.S. Department of Housing and Urban Development.”

The Center Square contacted the offices of both Newsom and Bonta over this apparent discrepancy, with Newsom’s office clarifying that subdivision (d), which targets hotel and motel rates, and that subdivision (e), which focuses on rents, and subdivision (f), which prevents eviction of tenants to re-lease the home at a higher price, are in effect until March 8, 2025, by executive order. Newsom’s office also said subdivisions (b) and (c), which target services, supplies, and materials, apply through Jan. 7, 2026. While the inclusion of “housing” in subdivision (b) has been a matter of concern, the governor’s office’s emphasis on subdivision (e), which explicitly covers housing, expiring on March 8 could allay concerns about rentals after then, until which the rental market for previously unlisted homes could remain tight and subject to bidding wars on the private, unlisted market.

“All the price controls in the world don’t address the fact that if ten families are fighting over one available home, it’s going to be ugly - and it is,” Mott Smith, a real estate development professor at the Sol Price School of Public Policy at the University of Southern California, told The Center Square. “Even if we tell landlords they can’t raise the price more than 10% on available units, or put new units on the market for prices that reflect current demand, we’re going to see bidding wars. In fact, we already are.”

Notably, Code 396 defines “housing” as “any rental housing with an initial lease term of no longer than one year, including, but not limited to, a space rented in a mobile home park or campground,” suggesting that much longer leases are not subject to the price controls. While this incentivizes leases to be offered for longer than one year during the emergency period, this could disadvantage renters who only need short-term housing options for one year or less, especially those whose homes are still standing but may need some time for cleaning and fire damage remediation.