Lawful Rent Increases Aren’t Evictions: In a Win for Costa-Hawkins, Court Strikes Pasadena Relocation Mandate

Meanwhile, a disastrous bill that would lower statewide rent caps and expose vast amounts of previously exempt properties to rent control has died on the vine. 

Court rules that Measure H’s tenant relocation assistance requirement is preempted by the state’s decades-old Costa-Hawkins Rental Act. Some background is in order. 

When a tenant is displaced through no fault of their own, the Tenant Protection Act of 2019 (AB-1482) gives a little bit of a financial cushion for the outgoing tenant in the form of relocation payments equal to one month’s rent, or a rent waiver for the last month of tenancy. Yet for many municipalities, this farewell gesture isn’t good enough. Housing providers in rent-controlled jurisdictions can expect to pay a pretty penny in relocation assistance when endeavoring to remove a tenant through a no-fault eviction.

Required payouts can reach thousands of dollars, especially when the property owner looks at the household composition and discovers that certain vulnerable individuals are housed in the unit, like school-aged children or school employees, people with disabilities, long-term tenants, etc. In some circumstances, the household cannot be evicted through a no-fault eviction at all – owners are advised to consult legal counsel whenever they are contemplating a change in the status quo, as no-fault evictions come with a host of procedural requirements.

What Pasadena did was something novel. It added a new no-fault “just cause” reason for eviction that entitled tenants to relocation payments if they were unable to pay for a rent increase that is otherwise lawful. 

Specifically, an inability to pay a rent increase in excess of 5% plus the most recently announced Annual General Adjustment (AGA) in any twelve-month period would necessitate lump sum payments payable to the displaced tenant.

That Pasadena figure is 2.25% for the period of October 1, 2025, to September 30, 2026 (down from the 3.0% AGA from the prior year). For example, if the rent is $1,600, it can only be raised to $1,160 (1,600 x 0.0725). Any rent increase beyond that would trigger relocation payments.

Ordinarily, if not subject to more protective local ordinances, a tenant facing a rent hike can either pay the rent increase or move out. But enter Measure H, a City Charter amendment passed in 2022 that established the Pasadena Rental Housing Board and implemented rent control and tenant protections, limiting rent increases to 75% of CPI, establishing a rental registry, and mandating relocation assistance for no-fault evictions, with the addition of unaffordable rent increases.

After this measure was challenged, the Court of Appeal’s Second District ruled that while cities may regulate rent increases during a tenancy, they may not impose financial penalties that effectively undermine the right to charge lawful rent.

In other words, a municipality cannot require relocation payments because a tenant cannot afford a lawful rent increase that crosses that line. In the above example, if the landlord properly raises the rent to, say, $2,000, and this is out of reach for the tenant, they will not be entitled to relocation assistance. The tenant could either spring for the higher rent or choose to vacate. The court kept other provisions of Measure H largely intact, but said to Pasadena lawmakers: You cannot indirectly do what you are prohibited from doing directly, as Costa-Hawkins reigns.

Some takeaways

Supporters of Pasadena’s voter-approved rent control law have asked the appellate court to reconsider its decision that invalidated the requirement of doling out relocation payments when the tenant doesn’t have the wherewithal to pay a higher rent, so this legal dustup may not be over just yet. It is good news, however, for housing providers throughout California that rely on common-sense limits to what rules cities can impose on landlords.

The Costa-Hawkins Rental Housing Act was enacted in 1995, an era when we had a balanced legislature that wasn’t beholden to militant tenant advocates. Fast forward to today, and make no mistake that with the enormous influence of those in the tenants’ rights camp, the law would not pass today. One thing we’ve learned about tenants’ advocates is that they are a resilient bunch and will not take no for an answer.

After voters have repeatedly voted against ballot measures that would repeal or significantly water down Costa-Hawkins, the strategy was to take the fight to the local level and chip away at it in a piecemeal fashion. If big, bold initiatives like Michael Weinstein 3.0 could not get rid of the pesky law, the rights of property owners could be melted away slowly like a candle.

Take, for instance, the growing number of jurisdictions that have adopted right-to-return policies aimed at preventing owners from using substantial renovations to create a vacancy and thereafter raise rents. If a tenant is evicted by way of a substantial remodel, they are increasingly allowed to return to the newly renovated unit at the same rent. This has increasingly rendered these types of evictions pointless.

Rent control bill fails to gain traction

On a more positive note, the reincarnated legislation of Assembly Bill 1157 has been stopped in its tracks as it remains held in the ash-heap of the Assembly Judiciary Committee, where it fell short of the seven votes needed to move forward. This ill-conceived piece of legislation would have lowered the statewide rent cap to 2% plus inflation, but never greater than 5%. It would also expand rent control to single-family homes, condos, accessory dwelling units, and townhomes owned by individuals.

Our community should be grateful to industry partners who have successfully opposed the bill at a time when the political rhetoric falls squarely on the side of tenants. Housing providers should also appreciate the role of California’s judiciary in interpreting the law. With a slew of new laws taking effect in 2026, many questions remain because these nascent laws have not worked their way through the courts.

For our part, Bornstein Law will vigorously represent rental property owners and provide a narrative through the lens of our clients as new rules go through the slog of judicial review.