From August 1, 2026 through July 31, 2027, California's statewide cap allows rent increases of up to 8.2% in San Diego County. Over the past year, San Diego city rents rose 0.5%. When the market moves at a sixteenth of the legal ceiling, the cap is not what limits a typical renewal. The more useful question about a Normal Heights duplex is whether the cap and the city's just-cause rules apply to it at all. The answer comes from how the building sits on its lot, who lives in it, and whether it has an ADU. A sale can change the answer.
The ceiling is far above the market
The state formula is 5% plus the change in the regional consumer price index, with a 10% maximum. The San Diego Area uses March CPI data because no April figure is published for the region. Here is how the cap compares with the market over the last three cycles:
| Increase window | San Diego Area cap | CPI component |
|---|---|---|
| Aug 1, 2024 – Jul 31, 2025 | 8.6% | 3.6% |
| Aug 1, 2025 – Jul 31, 2026 | 8.8% | 3.8% |
| Aug 1, 2026 – Jul 31, 2027 | 8.2% | 3.2% |
The California Department of Justice publishes the cap figures for the last two windows. The 3.2% and 3.8% CPI figures are the published caps minus the 5% statutory base. The 2024 figures come from the California Apartment Association.
Now look at the market. Apartment List's October 2026 report puts the San Diego city median at $2,317 overall, $1,975 for a one-bedroom and $2,475 for a two-bedroom. Rents were up 0.5% year over year and 2.4% from January through September 2026. At the citywide two-bedroom median, an 8.2% increase works out to about $203 a month. The past year's market movement on that same unit is about $12.
So in this window, the cap's dollar effect on most renewals is small. What does change a deal is the set of rules attached to the tenancy itself: just-cause termination, relocation payments, and when rent can be reset. The Department of Justice notes that when tenants move out and new tenants move in, the landlord may set the initial rent. Whether a property is covered at all comes from statute text that many duplex listings in Normal Heights don't meet.
The sentence that decides a duplex
Civil Code Section 1947.12(d)(6) exempts this property type from the statewide cap:
"A property containing two separate dwelling units within a single structure in which the owner occupied one of the units as the owner's principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy, and neither unit is an accessory dwelling unit or a junior accessory dwelling unit."
San Diego's Tenant Protection Ordinance, which covers just-cause termination, has its own two-unit exemption in Section 98.0703(j), worded differently. It applies to two dwelling units "within a single structure" when the landlord occupies one as a principal residence at the beginning of the tenancy and continues to live there. The city text does not repeat the state's ADU and JADU exclusion. The ordinance text reviewed here is the March 2024 municipal code edition.
The state statute sets four conditions:
- Both units are in one structure.
- The owner lived there when the tenancy began.
- The owner still lives there.
- Neither unit is an ADU or JADU.
Each condition maps onto a different part of the Normal Heights housing stock.
How Normal Heights' lots line up against those conditions
The City's October 2025 public-review draft of the Mid-City historic survey describes two different areas. North of Adams Avenue, the neighborhood is mostly single-family, with small bungalows on the grid streets and larger homes along the mesa edge. South of Adams, densities vary more, with small apartments and extra units built on existing residential lots. According to the survey, the residential areas north of Adams historically stayed zoned for single-family and duplex homes, while multifamily and commercial zoning was concentrated to the south.
The survey also documents the Carteri Center on Adams Avenue, built between 1922 and 1945, as an unusual mix of commercial and multifamily buildings beside a single-family neighborhood. It includes a long, narrow bungalow court at 3316 Adams Avenue: one-story bungalows along a landscaped interior court, storefronts facing Adams, and a two-story multi-unit building at the back.
That stock produces at least four configurations that a listing might call a "duplex" or a "2-on-1." The statute treats them differently:
- An attached duplex with the owner in one unit since before the current tenancy began. This is the only configuration the (d)(6) text describes.
- Two detached houses on one lot. These are separate structures, so they fall outside the "single structure" language. The single-family exemption in (d)(5) asks whether a unit is "alienable separate from the title to any other dwelling unit." For two houses on one parcel, title work answers that question.
- A main house plus a rented ADU or JADU. The (d)(6) text excludes any pairing where either unit is an ADU or JADU.
- A bungalow court or small apartment building. With more than two units, the two-unit exemption does not apply.
The (d)(5) exemption has its own conditions. The owner cannot be a real estate investment trust, a corporation, or an LLC with a corporate member. Tenants must also receive a specific written statement, and that statement must be in the rental agreement for tenancies that began or renewed on or after July 1, 2020. San Diego's ordinance has a separate notice for its just-cause exemption. For tenancies that began or renewed on or after January 1, 2024, that notice must be in the lease. A seller who has the city notice but not the state notice, or the reverse, may be relying on an exemption the paperwork doesn't support.
The exemption is tied to the owner's occupancy, so a sale can end it
For a deal, the most important part of the duplex sentence is "so long as the owner continues in occupancy." The exemption depends on how the property is occupied, not on the property itself. When a qualifying owner-occupied duplex sells to an investor who will not live there, the condition is no longer met, and the property falls under whatever rent-cap and just-cause rules otherwise apply.
That creates a pricing gap. A seller who has lived in one half of an attached duplex for years may have operated the other half with no statewide cap and no city just-cause requirements. A buyer who plans to rent both halves will be working under the default rules from day one.
An owner-occupant buyer faces a related issue. The text also requires that the owner occupied a unit "at the beginning of the tenancy." A buyer who moves in after a tenant's lease started was not living there when that tenancy began. How that wording applies to a particular transfer is a question for counsel. It is worth raising before an offer is priced on the assumption that the seller's exemption comes with the sale.
New ADUs add a timing question
The statewide cap also excludes housing issued a certificate of occupancy within the previous 15 years. San Diego's ordinance has the same 15-year carve-out. The window rolls forward. Through 2026, certificates issued from 2012 onward fall inside it.
That carve-out matters here because Normal Heights has been adding units. The City's 2025 Annual Report on Homes counts 61 permitted ADU homes in Mid-City: Normal Heights in 2024, eight of them affordable. A public-records tracker that counts permit records, a different measure, shows 41 Normal Heights ADU permit records in 2025 and 22 in 2026 through October 5.
These lots will carry a 1920s house and a recently permitted ADU side by side, with certificates of occupancy issued roughly a century apart. The statute's text doesn't settle how the 15-year exclusion applies to one unit on a parcel when the other unit is decades older. Our sources don't resolve it either. Each property's certificate history and legal review will. The state text does settle one point: the ADU takes the property out of the state's owner-occupied duplex exemption.
The rules that apply to every configuration
Some obligations apply whichever way the exemption analysis comes out, and they belong in any operating budget.
Under the city ordinance, a no-fault termination requires relocation assistance equal to two months' actual rent, or three months for a senior or disabled tenant, regardless of the tenant's income or how long they have lived there. The landlord may instead waive an equivalent amount of rent, and a direct payment is due within 15 days of the notice. For leases entered into on or after June 24, 2023, an owner move-in termination requires the tenant's written agreement or a lease provision that allows it. The owner or relative moving in must then occupy the unit for at least 12 continuous months.
Two recent state laws also apply to small landlords. AB 628 requires a working stove and refrigerator for leases entered into, amended or extended on or after January 1, 2026. Tenants may supply their own refrigerator only under the conditions the statute sets. AB 414 generally requires security deposits to be returned electronically when the deposit or rent was received electronically. For an older Normal Heights unit without a refrigerator in the lease, AB 628 adds an appliance cost at the next renewal.
The statewide cap is currently set to be repealed January 1, 2030.
FAQ
Does the owner-occupied duplex exemption cover a house with a backyard ADU? The state exemption excludes any two-unit property where either unit is an ADU or JADU. The city's just-cause exemption is worded separately and does not include that exclusion in its text. Our ADU basics for Normal Heights covers the build side.
If rents are only up 0.5%, why does coverage matter? Coverage determines more than the size of an increase. It also determines whether just-cause rules and city relocation payments apply. Those costs come up at turnover, a change of plans, or a sale.
Does a house-hack buyer get the seller's exemption? The statute ties the exemption to occupancy at the beginning of the tenancy and continued occupancy. How it applies to an existing tenant after a sale should be reviewed for each property. Our house hacking guide for Normal Heights walks through the owner-occupant routes.
Before you write an offer on a Normal Heights "duplex," find out which rules the property will run under after it closes. The seller's experience with it may not carry over. Emerson Group underwrites 2–4 unit properties against their actual configuration, occupancy history and lease notices, and our property performance analysis prices in that coverage before you commit capital. Schedule a Wealth Call to work through the rent-cap and exemption picture on a property you own or are considering, including how it fits a 1031 replacement plan.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
