If you own a rental in San Francisco, a rent-stabilized building in Los Angeles, Berkeley, or Pasadena, you probably owe your tenants interest on their deposits every year. Everywhere else in California, start by checking your city’s rent or housing department, because the state does not require it.
Civil Code § 1950.5 covers the cap, the deductions, and the 21-day return. It says nothing about interest. Where interest is owed, it comes from a city ordinance or charter, and each city writes its own rule.
The four cities, side by side
| City | Who is covered | Rate now | When it is paid |
|---|---|---|---|
| San Francisco | Residential rentals, deposits held over one year; not government-subsidized units | 4.2% for March 1, 2026 to February 28, 2027 | Every year, plus at move-out |
| Los Angeles | Units under the Rent Stabilization Ordinance, deposits held at least one year | 3.03% for calendar 2026 | Cash or rent credit during the tenancy, monthly or yearly; the rest at move-out |
| Berkeley | Units fully or partially covered by the Rent Ordinance | 0.9% for 2025 | December payment or a January rent credit |
| Pasadena | Deposits held at least one year on units covered by the charter’s rental rules | 0.12% for calendar 2026 | By January 31, 2027 for the 2026 year |
Every rate in the table was read from the city’s own site in October 2026. Each city resets its rate on its own schedule, so look up the year you are paying for, not last year’s number.
San Francisco
Chapter 49 of the Administrative Code requires interest on deposits held for more than a year, whatever the lease calls the deposit. The Rent Board sets the rate each March from a Federal Reserve commercial paper average. For March 1, 2026 through February 28, 2027 it is 4.2%.
Interest is paid each year on the anniversary of when you received the deposit. Units whose rent is subsidized by a government agency are outside the rule, and so is a deposit held for less than a year. The Rent Board’s security deposits page explains how to handle the move-out payment.
At 4.2%, a $3,000 deposit earns $126 in a year. That is real money to leave off a refund.
Los Angeles: RSO units only
The City of Los Angeles requires interest only on units covered by its Rent Stabilization Ordinance, which in general means buildings with a certificate of occupancy issued before October 1, 1978. A unit that is not under the RSO does not carry this rule. Mobile home parks are excluded.
The Rent Adjustment Commission sets a simple interest rate each year. LAHD’s bulletin lists 3.03% for 2026, down from 4.32% for 2025. You can pay the actual interest the account earned instead, as long as you give the tenant a copy of the bank statement showing it. If the deposit is not in an interest-bearing account, the commission rate applies.
During the tenancy, pick direct payment or a rent credit, tell the tenant in writing which one, and pay monthly or yearly. Unpaid interest goes back at move-out with the deposit, on the state timeline. The city does not investigate unpaid interest. The ordinance leaves the tenant a civil claim, including in small claims court.
Not sure the unit is under the RSO? The LA RSO vs AB 1482 post walks through it.
Berkeley
Units fully or partially covered by Berkeley’s Rent Ordinance owe interest at a rate the Rent Board sets from a local bank rate average. For 2025 it was 0.9%. The annual payment is due in December, or you can credit it against January rent.
Missing the deadline costs much more than the interest. If the December payment has not been made by January 31, the Rent Board says the tenant may recover interest at 10%. A tenant moving out mid-year is owed interest for the months since the last annual payment, at the move-out rate the board publishes each month.
Pasadena
Pasadena’s rent charter amendment, Article XVIII § 1806(f), requires annual interest on deposits held at least one year. For January 1 through December 31, 2026 the rate is 0.12%, and the payment is due by January 31, 2027. The city announces the next year’s rate each fall on its rent stabilization site.
Not every rent-controlled city requires it
Rent control and deposit interest do not travel together. Santa Monica’s Rent Control Board says plainly that its regulations do not require interest on a security deposit. Before you assume either way, search your city’s rent ordinance and its municipal code for the words “security deposit” and “interest”.
Keeping it straight
- Find out once whether your unit is covered, and write the answer in your property notes.
- Put the due date on a calendar: the anniversary in San Francisco, December in Berkeley, January 31 in Pasadena.
- Look up the new rate each year from the city, not from a blog or last year’s lease file.
- At move-out, add unpaid interest to the deposit before you subtract any deductions.
That last step is where most mistakes happen. Civil Code 1950.5 in plain English covers the itemized statement it goes on. Deposit tracking keeps the deposit date and amount on one record so the interest math has the right starting point, and the security deposit calculator checks the deposit against the state cap.
This is general information, not legal advice. Rules change and local ordinances vary. Confirm current requirements with your city, county, or an attorney before you act.