Landlords in San Francisco are required by law to pay tenants annual interest on their security deposits. This interest is calculated based on the prevailing passbook savings rate, which fluctuates over time. For example, if the rate is 2%, a tenant with a $3,000 security deposit would receive $60 in interest after one year. The specific calculation method involves multiplying the deposit amount by the current applicable interest rate.
This legal requirement safeguards tenants’ financial interests by ensuring their deposits retain value despite being held by the landlord. Historically, this protection arose from recognizing that security deposits represent substantial sums for tenants, and the accrued interest mitigates the impact of inflation and lost investment opportunities. Ensuring landlords adhere to these regulations helps maintain a fair and balanced rental market.
