A rent increase is only a raise if the resident stays. In a San Diego market where citywide rents are flat year over year and vacancy is at a century high, a $150 bump that triggers a move out costs an owner roughly three years of that increase in vacancy, make ready, and placement, and the next lease may sign lower.
The conversation I have every renewal season
Every September a version of the same call comes in. An owner has a lease ending in the fall, a good resident who pays on the first and never calls, and a neighbor or a Zestimate telling them the house should be renting for $200 more than it is. They want to know what I think they can get, and the question I ask back is what it costs them if they get it and the resident leaves.
That is not a hypothetical this year. Apartment List’s September report puts the citywide median at $2,313, unchanged from a year ago, with the wider metro up a tenth of a percent, and county apartment vacancy hit 6.1 percent this summer, the highest reading this century, with the new buildings still leasing up on weeks of free rent. A resident who signed in 2022 or 2023 can find something comparable today for the same money or less, so the leverage at renewal has shifted in a way most owners have not priced in yet.
Run the number on a real house
Take a house renting for $3,400 a month. The owner wants $150 more, which is a 4.4 percent increase and well inside anything the law would question. If the resident accepts, the owner earns $1,800 more over the next twelve months. That is the whole upside.
Now run the other branch. The resident gives notice, the house turns over in October, and even a clean turnover in a soft fall market takes about three weeks to show, screen, and sign. Three weeks of vacancy on $3,400 is roughly $2,350. Paint, cleaning, carpet, and the small repairs that only show up when the furniture is gone run another $1,500 to $3,000 on a house that was well kept, and more when it was not. Add a placement fee, which is $850 for the homes I manage, and the turnover lands somewhere between $4,700 and $6,200 before the new resident pays a dollar.
Set the two branches side by side. The increase earns $1,800 a year. The turnover costs the equivalent of two and a half to three and a half years of that increase, and it costs it up front, in the fourth quarter, when the renter pool is at its thinnest. If the new lease signs at $3,400 because that is what the block supports right now, the increase never existed and the owner paid five thousand dollars to find that out.
The renewal that keeps a good resident at $3,400, or at $3,450, is not a concession. On the arithmetic it is the highest return decision available on that house this year, and the two percent that feels like giving something up is $600 a year against a five figure risk.
The notice rules that shape the timing
The law does not stop an owner from raising rent in this market, but it does set the clock, and the clock is where most renewal mistakes start. For a month to month tenancy, an increase of 10 percent or less across the prior twelve months requires 30 days’ written notice under Civil Code section 827, and an increase above 10 percent requires 90 days. If the notice goes by mail, add five days. A fixed term lease cannot be changed mid term unless the lease itself says so, which means the increase takes effect at renewal or not at all.
Whether there is a ceiling on the increase depends on the property. Apartments, and houses held in a corporate structure, sit under the state cap, which reset to 8.2 percent on August 1 for the San Diego region and holds through July 31, 2027, with no more than two increases in any twelve months. Most single family homes and condos owned by an individual sit outside the cap, but only when the lease carries the exemption notice, and a lease that skipped it is capped whether the owner knows it or not.
What the rules add up to is a calendar. A lease ending December 1 needs the increase notice served by the last week of October, which means the pricing decision has to be made in early October, which means the comps have to be pulled in September. I start the renewal conversation ninety days out for exactly that reason, because a resident who hears the number with three months to think about it renews, and a resident who gets a letter with thirty days left starts looking.
What the number should actually be
The right renewal rent is not the Zestimate and it is not last year’s rent plus a habit. It is what the three or four closest houses on similar streets signed for in the last ninety days, adjusted for condition, and then weighed against what this specific resident is worth to keep. Pulling those comps belongs at every renewal, because the answer changes every year and this year it changed direction.
For most of the homes I look at in Little Italy, North Park, and the neighborhoods around them, that work is landing at zero to two percent for a resident worth keeping, and at market for a home that was already under it by more than a few percent. The increase is still available on the second kind of house. On the first kind, the money is in the resident who stays, and the cheapest year an owner will ever have is the one where nobody moves.
Joe Wiseman is a licensed California broker (DRE #02043323) and owns Best Nest Property Management in San Diego.