Updated June 21, 2026
If you own an apartment building in Los Angeles, one 1995 state law explains more about your building's value than any market report: the Costa-Hawkins Rental Housing Act. It is the reason a 2001 building and a 1965 building on the same block trade at different prices for the same income — and the reason that gap keeps widening. This is a broker's plain-English explainer of what Costa-Hawkins does and why it sits underneath every LA multifamily valuation. It is not legal advice; for your building's specific status, confirm with a rent-control attorney.
The Costa-Hawkins Rental Housing Act, in effect since 1995, sets statewide limits on what local rent-control ordinances can reach. Two pieces matter most to an owner:
It also exempts "separately alienable" units — single-family homes and condominiums — from local rent control.
Costa-Hawkins splits LA multifamily into two asset classes. A pre-1978 LA City building falls under the RSO, where rent growth is capped (a 4% ceiling as of July 1, 2026). A post-February-1995 building is Costa-Hawkins-exempt, so its rents can move with the market. Same neighborhood, same NOI, very different income trajectory — and buyers pay for the trajectory. That is the entire engine behind the pre-1978 vs. post-1995 valuation gap, which has widened for years. The Sterman Transaction Index shows the per-unit numbers that gap produces.
Vacancy decontrol matters just as much. In a rent-stabilized building full of long-term tenants paying below market, the value of the upside is tied entirely to turnover — because that vacancy is the only legal moment the rent resets. This is why reading the lease start dates on a rent roll tells you more than the rents themselves.
Costa-Hawkins is permanently under political pressure. In November 2024, Proposition 33 asked California voters to repeal it and let cities impose stricter rent control, including on newer buildings and vacant units. It failed, 62% to 38% — the third statewide rent-control expansion voters rejected in recent cycles. For now, the post-1995 exemption and vacancy decontrol stand. But the recurring repeal attempts are exactly why the premium on Costa-Hawkins-exempt buildings carries a risk discount as well as a growth premium: buyers know the law that protects it has a target on it.
If you are selling a post-1995 building, Costa-Hawkins exemption is a feature to document and lead with — it is a large part of why your building commands a premium. If you are selling a pre-1978 building, understand that buyers are pricing the RSO cap, not the market rents you wish you could charge.
If you are buying, confirm the certificate-of-occupancy date before you underwrite anything. A building you assume is exempt but is not — or one you assume is capped but is exempt — is a building you have mispriced. It is the first thing to verify, not the last.
What is the Costa-Hawkins Rental Housing Act?
A 1995 California law that limits how far local rent control can reach. It exempts buildings with a certificate of occupancy after February 1, 1995, plus single-family homes and condos, and it guarantees vacancy decontrol — the right to reset rent to market when a unit becomes vacant.
Does Costa-Hawkins mean my building has no rent control?
Only if it qualifies for an exemption — generally a certificate of occupancy after February 1, 1995, or status as a single-family home or condo. Older multifamily buildings inside the City of LA are still subject to the RSO. Confirm your building's status with an attorney.
What is vacancy decontrol?
The right of an owner to reset a unit's rent to market when it becomes vacant, even in a rent-controlled building. Costa-Hawkins prohibits cities from locking rent to the unit permanently.
Was Costa-Hawkins repealed by Proposition 33?
No. Proposition 33, which would have allowed cities to repeal local exemptions, failed in November 2024 (62% to 38%). Costa-Hawkins remains in effect.
Costa-Hawkins is the quiet line running through every LA multifamily deal — the difference between income that can grow and income that is capped. Know which side of February 1, 1995 your building falls on before you price it. For an honest read on what that means for your building's value, request a conversation.
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