Costa-Hawkins Threatened Again

The Costa-Hawkins Rental Housing Act is a California state law that restricts the scope of local rent control ordinances. One of its provisions is that it exempts certain types of residential rental properties from being subject to local rent control laws, such as single-family homes, condos, or properties constructed after 1995 or after a local rent stabilization law was enacted, whichever came first. Additionally, Costa-Hawkins mandates “vacancy de-control,” which allows rental property owners to establish the initial rental rate following a vacancy. This year, the state legislature is once again attempting to challenge Costa-Hawkins with Senate Bill 466.

What is Senate Bill 466?

Senator Wahab (D-Fremont)’s proposed state bill, Senate Bill 466, seeks to eliminate a safeguard provided by Costa-Hawkins that allows housing providers to set rental rates unless the property was granted a Certificate of Occupancy within the last 15 years. This means that properties built after the enactment of a local rent stabilization law or after 1995, whichever came first, will no longer be exempt from complying with local rent control regulations.

Under Senate Bill 466, properties will only be excused from adhering to local rent regulations if they received a Certificate of Occupancy within the previous 15 years. For instance, the Rent Stabilization Ordinance of the City of Los Angeles applies to properties issued a Certificate of Occupancy on or before September 30, 1978, while those issued on or after October 1, 1978, are exempt from local rent control. If Senate Bill 466 is passed and Governor Newsom signs it into law, only properties granted a Certificate of Occupancy in the past 15 years will be exempt from the Rent Stabilization Ordinance of the City of Los Angeles.

In the event that the Legislature approves and Governor Newsom signs the proposed modification to Costa-Hawkins, it is highly probable that there will be additional efforts to amend or abolish Costa-Hawkins altogether. In the absence of Costa-Hawkins, local jurisdictions could enact regulations that eradicate “vacancy control,” which permits landlords to set rental rates at the market level when there is a vacancy.