Administrative Notice No. 25-06: Rent Increase Limit Policy and Waiver (Assembly Bill 846)

Administrative Notice No. 25-06 (Notice) sets forth and establishes the California Department of Housing and Community Development's (HCD) Rent Increase Limit Waiver Policy applicable to rental housing developments based on Health and Safety Code Rents.

This Notice provides guidance to Sponsors, Borrowers, and Management Agents on a) new rent standards for certain developments currently utilizing the rent calculation methodology in Health and Safety Code section 50053; b) the rent increase limits; and c) the process to request rent increase limit waivers, including submission requirements and evaluation criteria.

New Affordable Rent Limits: AB 846 amends Health and Safety Code section 50053 to establish a new “affordable rent” limit applicable to rental housing developments that meet specified conditions. For qualifying rental housing developments which currently utilize the HSC rents, annual rent increases will now be limited in accordance with the published CTCAC rent limits instead of the previously utilized methodology specified in HSC 50053.

Rent Increase Limits: AB 846 adds Health and Safety Code section 50199.25 to impose a rent increase limit for Low-Income Housing Tax Credit projects awarded before April 3, 2024, pursuant to CTCAC adopted regulations. (See Section 10336 of Title 4, Division 17, Chapter 1 of the California Code of Regulations.)
Such limits would also be applicable to certain HCD projects required to operate under CTCAC rent limits, regardless of whether CTCAC credits are applicable, such as projects utilizing HCD’s MHP Guidelines as a basis for their regulation.

Projects funded by HCD legacy programs without a CTCAC regulatory agreement are not subject to the policies outlined in this Administrative Notice, unless otherwise specified in the applicable HCD Regulatory Agreement.

Under the new rent increase limits, projects may increase gross rent for a low-income household provided that in any 12-month period the increase does not exceed the lesser of five (5) percent plus the percentage increase in the cost of living or ten (10) percent of the lowest rental rate charged for that household at any time during the twelve (12) months prior to the effective date of the increase.

Rent Increase Limit Waiver Requests: Rent increase limit waivers may be granted to maintain the project’s financial feasibility, support property rehabilitation or capital improvements, adjust to changes in funding structures, and/or align with other regulatory requirements. If a rent increase limit waiver request is submitted to CTCAC for a development funded by both CTCAC and HCD, a separate waiver request to HCD is not required. HCD will defer to CTCAC’s determination. If approved by CTCAC, the written waiver approval from CTCAC along with the SRI must be submitted to HCD.

HCD’s Schedule of Rental Income (SRI) form has been recently updated to calculate the rent increase limits in accordance with this Notice.

For questions related to the applicability of rent caps for your project, please submit any inquiries to your assigned AMC Occupancy Representative and/or the AMC Branch general inbox at AMCBranch@hcd.ca.gov.