AB 1482 and Costa-Hawkins: modeling rent caps and exemptions

Two state statutes form the floor of every California rent underwrite. AB 1482, the Tenant Protection Act of 2019 — codified at Civil Code § 1947.12 (rent cap) and § 1946.2 (just cause) — caps annual increases on covered occupied units at 5% plus regional CPI, never more than 10%, and requires just cause to terminate tenancies after 12 months.

The Costa-Hawkins Rental Housing Act (Civ. Code §§ 1954.50–1954.535) is the ceiling on local rent control: it exempts post-February 1995 construction (and separately alienable units) from local price caps and guarantees vacancy decontrol — the right to reset to market on qualifying turnover — statewide.

• Cap = 5% + April-over-April regional CPI, applied per 12-month period, hard ceiling 10%; no more than two increases in 12 months summing within the cap.
• Rent rollbacks aren't required on turnover — the cap governs sitting tenants; new tenancies start at market (Costa-Hawkins).
• Just cause after 12 months of occupancy: at-fault causes (nonpayment, breach, nuisance) and no-fault causes (owner move-in, withdrawal, substantial remodel) — no-fault termination owes one month's relocation assistance.
• "Substantial remodel" evictions were tightened by SB 567 (2024): permits in hand, genuine 30+ day untenantability, detailed notices — renovation-eviction strategies are now high-risk.
• Sunset: both sections expire January 1, 2030 unless extended. A 7–10 year hold should carry both a with-cap and post-sunset case.

New construction (rolling 15 years): a unit whose certificate of occupancy issued within the prior 15 years is exempt from AB 1482 — so a 2015 building becomes covered in 2030, unit by unit. Model the roll-in year explicitly on newer vintage acquisitions.

Separately alienable units: single-family homes and condos are exempt from the cap and just cause when owned by non-REIT/non-corporate owners and the exemption notice is served — but they remain subject to Costa-Hawkins' framework and to local just-cause ordinances, which AB 1482 does not preempt.

Deed-restricted affordable and dorms: exempt via their own regimes.

• Underwriting watch-outs:
• The exemption notice is a lease-language formality that buyers routinely inherit broken — missing notices mean the cap applies until cured prospectively.
• Local ordinances stricter than AB 1482 control where they lawfully apply (pre-1995 stock in rent-control cities); AB 1482 is a floor, not a shield.

Local rent control cannot apply price caps to units first occupied after February 1, 1995, to units already exempt under a pre-existing local new-construction cutoff (e.g., 1978/1979 in LA and SF), or to separately alienable units. And on a lawful vacancy, the owner sets the new initial rent — vacancy decontrol — after which any applicable local cap re-attaches to the new tenancy.

The Palmer/Sixth Street decision extended Costa-Hawkins to strike down forced below-market rents in inclusionary programs; the Legislature answered with Gov. Code § 65850(g) (AB 1505, 2017), restoring inclusionary rental ordinances. The result: inclusionary set-asides are enforceable, but ad-hoc rent-setting mandates outside that channel remain preempted.

• Underwriting watch-outs:
• Vacancy decontrol does not apply after certain no-fault displacement — local ordinances and § 1954.53 limit resets following owner-fault terminations.
• Agreed regulatory restrictions (density-bonus and LIHTC covenants) are outside Costa-Hawkins — § 1954.52(b). Your affordable units do not mark to market.
• For HUD-insured or HUD-owned assets, federal preemption of local rent control (24 C.F.R. Part 246) can supersede local regimes entirely — see the federal layer in this topic's second guide.