Price-Gouging Warnings Fly

Local real estate prices are going up, whatever your needs might be, due to displacement from the L.A. County fires.

Early Tuesday, here on the blog, we referenced the limitations that "price gouging" laws impose on rental property rates, even as rates are going higher – and for-sale listing prices seem to be going higher still. In general, rental property owners are asking for trouble if they list for, or accept, more than 10% above a rental rate they had actively listed prior to January 7.

Throughout the day Tuesday, our inbox was bombarded with official warnings to real estate brokers and rental property owners regarding the price-gouging rules now in effect under the wildfire-related state of emergency. (See the emergency declaration here.)

The warnings must reflect some nasty behavior out there. (See much more below about each of the warnings.) People listing properties may not realize they're risking jail time and heavy fines.

The newsletter Popular Information published an article early Tuesday titled, "Landlords gouge victims of LA fires," in which the authors perused properties for lease on Zillow, and said, "A review of rental listings revealed dozens of properties where the landlords have sharply increased their prices since the fires began on January 7."

They pointed to one property specifically in Manhattan Beach that first listed on Dec. 31, 2024, for $8,750, but on Monday this week hiked the rent to $19,750, an increase of almost 126%.

We found the same listing online on Zillow, and watched them drop the price later Tuesday to "just" $1,000 above the original asking price, after the article appeared.

That is a major correction, but it is unfortunately still 11.4% above the original price. Someone oughta tell them that their max, to be safe, is $9,625. (We're not naming the property or linking to it here, as we are not the cops.)

The Popular Information writers saw the same kinds of fixes on other inflated rental listings, saying:

Some landlords appear to be belatedly familiarizing themselves with the law. Popular Information identified several properties where the rental prices were increased well in excess of 10% after January 7 but then subsequently decreased to be at or just below the legal limit. These landlords are also exploiting the fires to increase their profits, but they are now doing so within the technical limits of the law."

As of Tuesday night, Manhattan Beach had 4 newer rental listings at $30K or higher – listings that had come to market within 4 days. (None had increased prices from previous listings. They're just expensive.) Offline, we're hearing about other rentals asking $60K-$100K.

Here's some of what we heard throughout the day Tuesday from the industry, and from the state of California.

Zillow Rentals Division

Tuesday morning, Zillow's rentals division sent out an email to anyone who had listed a rental property on the platform, titled, "A Reminder About Rent Increases During a State of Emergency."

Notably, Zillow says they might take down listings with price increases greater than 10% (and presumably at risk of being in violation of the price-gouging statute). Zillow said:

"If you have a rental property in an area that’s been affected by a disaster, you likely feel an increased responsibility to help those searching for a safe place to live. You may even be directly affected by the events yourself, and if so, there are resources available to help you. What you might not realize, however, is that there are also legal responsibilities to be aware of when setting rental prices during a declared state of emergency."

"The state of California declared a state of emergency in Los Angeles and Ventura Counties on January 7th, 2025 due to the Palisades Fire and windstorm conditions. Price gouging for goods and services (including rental housing) is prohibited during and shortly after the declared state of emergency. The law states that landlords generally cannot increase rent prices more than 10% above what they were charging or advertising before the state of emergency."

"Zillow takes the responsibility consumers place on us to promote fair renting practices seriously and even more so during times of crisis. We reserve the right to remove any listing with a rent increase greater than 10% from Zillow and its network sites."

California Association of Realtors

The state's trade group for real estate professionals said they'd seen some shady stuff, and warned Realtors that the authorities mean business. (Disclosure: Dave is a member of the Board of Directors of the California Association of Realtors.) CAR said:

"The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) has been made aware of some rental listings, both on and off the MLS, where lease prices have increased by 25 percent or more since the onset of the wildfires in Southern California. REALTORS® should be aware and advise their clients that raising the price of essential goods and services, including housing, by more than 10 percent during a state of emergency violates California’s anti-price gouging statute and is prohibited by law."

"Many evacuees and homeowners who have lost their properties are in urgent need of housing. In these circumstances, real estate professionals have a responsibility to ensure rental prices remain fair and compliant with California’s Penal Code 396(e), which prohibits increasing the rental price advertised, offered or charged for housing by more than 10 percent after a declaration of emergency..."

"The California Attorney General also issued a Consumer Alert on price gouging following a state of emergency declaration in Los Angeles County and an FAQ on price gouging."

"The Department of Real Estate has stated that it will diligently investigate complaints of unlawful price gouging related to rental housing by licensees and will take appropriate disciplinary action if the evidence warrants."

"Additionally, violators of the price gouging statute are subject to criminal prosecution that can result in a one-year imprisonment in county jail and/or a fine of up to $10,000. Violators are also subject to civil enforcement actions including civil penalties of up to $2,500 per violation, injunctive relief, and mandatory restitution. The Attorney General and local district attorneys can enforce the statute."

"Anyone who feels they are experiencing price gouging following a wildfire can file a complaint with the Attorney General’s office by calling 1-800-952-5225. Referrals to a lawyer also can be made by contacting the California State Bar at 866-442-2529 or visiting calbar.ca.gov."

Department of Real Estate

Late in the day Tuesday, the state agency that regulates all licensed real estate professionals, the Department of Real Estate, issued a "Licensee Advisory: DRE Warns Against Price Gouging in Wildfire Areas."

The notice talks about consequences, but also encourages licensees to focus on "helping, rather than taking advantage of wildfire survivors."

The meat of the notice is below:

"[T]he California Department of Real Estate (DRE) reminds licensees and consumers that price gouging is a criminal offense in counties where a state of emergency has been declared."

"The anti-price gouging law is triggered when the emergency declaration is issued and applies to rental housing, including hotels and motels, as well as consumer food items and other goods and services and continues for 30 days from the date of that declaration, unless it is extended."

"To protect California consumers affected by wildfires, DRE will diligently investigate complaints of unlawful price gouging related to rental housing by licensees and will take appropriate disciplinary action if the evidence warrants. The law (Penal Code section 396) is intended to protect victims of disasters from being further harmed."

"Price gouging is punishable by a fine of up to $10,000 and/or imprisonment for up to one year. Charges of unlawful business practices can also be brought against licensees who violate anti-price gouging laws."

"DRE encourages all licensees to share in the commitment to helping, rather than taking advantage of wildfire survivors."

"If you are a consumer who believes they may be a victim of price gouging as it relates to real estate transactions and rental housing, complaints can be submitted to DRE at: https://dre.ca.gov/Consumers/FileComplaint.html."

Attorney General's Office

As noted above, the state attorney general has issued a consumer alert and FAQ about price gouging. 

Below, we excerpt the specific Q&A regarding rental properties.

"How does the statute affect rental housing?"

"As with all other covered goods and services, following a declaration of emergency, the statute generally prohibits landlords from increasing the price of rental housing by more than 10% of the previously charged or advertised price. For rental housing that was not rented or advertised for rent prior to a declaration of emergency, the price cannot exceed 160% of the fair market value of the rental housing as established by the U.S. Department of Housing and Urban Development."

"For rental housing advertised or rented on a daily basis, such as an AirBnB or VRBO listing, the daily price may not be increased by more than 10% following a declaration of emergency. For rental housing advertised or rented on a daily basis prior to a declaration of emergency but offered on a full-time or monthly basis following a declaration of emergency, the price may not exceed 160% of the fair market value of the rental housing as established by the U.S. Department of Housing and Urban Development."

"A landlord may not justify an otherwise unlawful price increase by providing additional services such as gardening, cleaning, or utilities, or because they are now offering a shorter lease term. Similarly, a landlord may not charge more than the allowable price because an insurance company offered to pay a higher price."

"Finally, the statute also makes it a separate misdemeanor for a landlord to evict a tenant and then re-rent the property at a rate that the landlord would have been prohibited from charging the evicted tenant under the price gouging statute."

"Landlords should be aware that in addition to statewide price gouging emergencies, their properties may also be subject to protections as a result of local emergency proclamations or under city or county price gouging ordinances. Likewise, in addition to price gouging protections and statutory statewide rental protections, many cities and counties have enacted additional local rental protections, including rent stabilization and just cause eviction ordinances. Landlords should remain aware of the state and local legal requirements applicable to the cities or counties where their rental properties are located."

California Regional MLS

UPDATE: On Wednesday, after this article was first published, the local MLS service, CRMLS, issued a warning to Realtors using the MLS system:

Price Gouging Will Not Be Tolerated

During this ongoing wildfire situation, we would like to remind you that California Penal Code section 396 (PEN 396) prevents rental prices from being increased by more than 10% during a state of emergency declaration.

Failure to follow PEN 396 is considered price gouging and CRMLS does not support any instances of it.

Please note that this goes beyond usual MLS rules and policies; price gouging is illegal under state law. CRMLS is unapologetic in our support of this law designed to protect members of our community affected by disaster.

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SEE MBC'S OTHER ARTICLES RELATING TO THE FIRES' IMPACT ON REAL ESTATE:

"How the Tragic L.A. Fires Might Impact Manhattan Beach" (Jan. 9)

"Pricing Expectations Rising on Leases and Sales" (Jan. 13)