Reported / Citable
Background
Penal Code section 396 prohibits price gouging during declared states of emergency, including a 10 percent cap on increases in housing rental prices. For mobilehome spaces subject to a local rent control ordinance and already rented at the time of the declaration, the statute defines “rental price” as the amount authorized under the local rent control ordinance.
Sonoma County experienced a wildfire-related state of emergency that lasted for several years. Rincon Valley Mobilehome Park operates a 230-space park in Santa Rosa subject to the city’s mobilehome rent control ordinance, which authorizes annual rent increases on a defined formula. The Western Manufactured Housing Communities Association, on behalf of Rincon and other mobilehome park owners, challenged the City of Santa Rosa’s interpretation of section 396 as it applied to ongoing annual rent adjustments during the multi-year emergency.
Western argued that the statutory phrase “the amount authorized under the local rent control ordinance” means the amount authorized at any given time, so park owners could continue to impose annual increases authorized by Santa Rosa’s ordinance even during the emergency, regardless of the 10 percent cumulative cap. As an alternative, Western argued that once the emergency ended, owners could impose rents calculated from a baseline assuming all the annual increases that would have been allowed had section 396 not applied. The City interpreted section 396 to lock the rental price at what was authorized at the time of the emergency declaration, with the 10 percent cap applying to any increase from that baseline. The trial court ruled for the City. Western appealed.
The Court’s Holding
The First District Court of Appeal, Division Four, affirmed. The court held that Penal Code section 396, as applied to mobilehome spaces subject to local rent control, locks the rental price at the amount authorized under the local ordinance at the time the state of emergency was declared. Increases above that locked baseline are limited to 10 percent during the emergency.
The court rejected Western’s reading that would have allowed continued annual rent increases under the local ordinance during the emergency. Such an interpretation would defeat the statute’s clear purpose: to protect tenants from rent increases that exceed the 10 percent cap during emergencies. If park owners could simply pile on annual ordinance-authorized increases throughout a multi-year emergency, the cumulative effect could easily exceed 10 percent and would gut the statute’s protective purpose.
The court also rejected Western’s alternative argument that, after the emergency ended, owners could impose rents calculated as if the prohibited increases had occurred. Section 396 does not provide for retroactive recovery of rent increases that the statute itself prohibited. Once the emergency ends, owners may resume normal local ordinance-based rent adjustments going forward, but they may not capture the increases that were forbidden during the emergency.
The court gave the statute the liberal construction that its express terms invite, ensuring that its beneficial purposes are served.
Key Takeaways
- Penal Code section 396’s 10 percent cap on housing rent increases during declared states of emergency applies to all rent increases, including those authorized by local rent control ordinances.
- For mobilehome spaces subject to local rent control, “rental price” under section 396 means the amount authorized at the time of the emergency declaration, not the amount authorized at any given time during the emergency.
- Annual rent increases under local rent control ordinances do not stack on top of each other during multi-year emergencies. The 10 percent cap is cumulative across the entire emergency period.
- After an emergency ends, mobilehome park owners may resume regular ordinance-based rent adjustments going forward, but may not retroactively recover increases that section 396 prohibited.
- Section 396 must be liberally construed to serve its protective purpose, and interpretations that would gut the cap’s effectiveness during long emergencies will be rejected.
Why It Matters
This decision has significant implications for California’s mobilehome parks and other rental housing during the increasingly long emergency declarations the state has experienced in recent years. Wildfire emergencies, COVID-19 emergencies, and similar declarations have stretched into multi-year periods, raising the cumulative impact of section 396’s 10 percent cap.
For mobilehome park owners and other landlords, the opinion confirms that long emergencies can severely constrain rent adjustment authority, even where local rent control ordinances would otherwise allow annual increases. Owners cannot simply impose ordinance-authorized increases as if section 396 did not apply. For tenant advocates and local governments, the decision strengthens the protections of section 396 and confirms that local rent control ordinances do not provide a workaround to the statutory cap. For practitioners, the case adds important interpretive guidance to a statute that has become increasingly significant in California’s emergency-prone era.