The Pasadena Rental Housing Board during their Wednesday meeting approved a resolution requiring landlords to pay interest annually on rental security deposits held for at least once a year.
Board members unanimously voted to set the interest rate for the year 2024 at 0.41 percent.
In setting the interest rate, the Board surveyed the interest rates paid on savings accounts by eight banks with branches in Pasadena that are insured by the Federal Deposit Insurance Corporation (FDIC) as of October 2022.
The original proposal was to set the interest rate for 2024 at .64 percent, the average of the five banks with highest interest rates that was surveyed but the Board disagreed with this and decided to get the average of all eight banks instead.
Board member Emanuel Najera argued that the Measure H charter amendment did not provide that the security deposit interest rate is to be the average of five banks with highest interest rates but of at least five FDIC-insured banks.
“The charter says just get five interest rates, not five with highest ones,” Najera said.
The interest rates will go into effect by January 2024, according to Karen Tiedemann, General Counsel to the PRHB.
Tiedemann said landlords are required to pay their tenants the security deposit interest for the prior year no later than January 31. The first payment would be required in January 31, 2025,
Landlords could pay the interest either by check or as a rent credit.
“By January 31st, 2025, tenants would have to either receive a check or rent credit from their landlords for that interest and the landlord would also be required under the regulations to provide a notice of how the interest was calculated,” Tiedemann said.
If a tenant moves out of the rental unit before the payment of the interest, any accrued interest is to be paid when the security deposit is required to be returned to the tenant under State law, which requires landlords to return security deposits along with an itemized statement of any deductions within 21 days of the tenant vacating the rental unit.
As per the charter, the interest rate to be paid on security deposits is to be set by the Board every October.