Tenants across California are set for a financial breather come July 1, with the statewide shake-up of security deposit laws. A new mandate, known as AB 12, signed last year by Governor Newsom, caps the maximum security deposit to one month's rent for both furnished and unfurnished dwelling units.

This change, according to a San Francisco government announcement, is set to significantly lower the cost barrier for renters entering new leases. Currently, landlords in the Golden State can demand up to two months’ rent for unfurnished residences and up to three months’ rent if the place comes with furnishings. With housing affordability being the hot button issue, AB 12 appears as a legislative attempt to ease the burden on California's renters.

However, the bill includes exceptions for certain smaller property owners. If the landlord is either a natural person, or a limited liability corporation with all members being natural persons, and owns no more than two residential rental properties -- comprising no more than four dwelling units -- the permissible security deposit can go up to two months’ rent.

These new rules only apply to security deposits collected from July 1, 2024, onwards, giving landlords and tenants time to adjust. There's a clear divide on this issue, with some property owners worried about the potential financial risks, particularly in property damage or unpaid rent. For prospective tenants, on the other hand, this is a welcome change that eases one of the many financial hurdles of securing housing.