Does a California landlord owe interest on the security deposit?

It depends on the state and the locality. Some California jurisdictions require landlords to pay interest on security deposits at a rate set by statute (typically 0.5 percent to 4 percent annually), with the interest paid annually, at lease renewal, or at move-out. Other California jurisdictions require interest only if the deposit is held longer than a defined period (often one year) or only on multi-unit buildings (5+ units in some statutes). The interest must be tracked in a separate accounting. Failure to pay required interest can compound the deposit-return penalty: the unpaid interest itself is owed, plus any state-specific damages. Up to twice the wrongfully withheld amount if the court finds bad faith. Attorney fees also recoverable. If your state requires interest, document it in the lease and the move-out itemized statement.

Source: Cal. Civ. Code 1950.5(h)(1)