Court of Appeal Strikes Down Los Angeles Relocation Assistance Ordinance Tied to Lawful Rent Increases on Costa-Hawkins Exempt Units

In a ruling announced on April 16, 2026, the California Court of Appeal has invalidated a City of Los Angeles ordinance requiring housing providers to pay relocation assistance to tenants who voluntarily vacate following a lawful rent increase on units exempt from local rent control under the Costa-Hawkins Rental Housing Act (Civ. Code § 1954.50 et seq.).

The decision came in Apartment Association of Greater Los Angeles County v. City of Los Angeles (likely docketed in the Second Appellate District), following supplemental briefing requested by the court in light of its prior holding in California Apartment Association v. City of Pasadena (2025) 117 Cal.App.5th 187.

The Los Angeles ordinance at issue imposed relocation payments-often calculated as a multiple of fair market rent or tied to tenancy duration and household circumstances-when tenants elected to terminate their tenancy rather than pay a market-rate rent adjustment on properties not subject to local rent stabilization.

Proponents framed the measure as a mitigation tool for displacement risks associated with significant rent hikes, consistent with broader just-cause eviction and tenant protection frameworks. Landlords and the Apartment Association of Greater Los Angeles (AAGLA) challenged it as an impermissible penalty on the exercise of rights expressly preserved by state law.

The court's reasoning mirrors its December 2025 analysis in the Pasadena case involving Measure H, a voter-approved charter amendment. In CAA v. Pasadena, the Second District largely upheld the measure's rent caps on covered multifamily properties, just-cause protections, and rental registry but struck down the relocation assistance provision as applied to exempt units (e.g., single-family homes, condominiums, and newer construction).

The court held that requiring payments when a tenant vacates in response to a lawful rent increase to market value "frustrates the purpose" of Costa-Hawkins, which preempts local rent regulation on those units and affirmatively authorizes landlords to set rents at market levels without local interference.

Key points from the Pasadena opinion, which the Los Angeles court appears to have adopted or extended:

Conflict Preemption: Conditioning a landlord's statutory right to impose a market rent increase on the payment of relocation benefits effectively burdens or penalizes that right, creating an impermissible conflict with Costa-Hawkins. The Act's savings clause for local just-cause eviction rules does not extend to this mechanism, as voluntary tenant departure after a lawful increase does not constitute a "displacement" or eviction triggering local mitigation authority in the same way as no-fault terminations (e.g., Ellis Act withdrawals or owner move-ins).

Distinction from Covered Units: The ruling applies specifically to Costa-Hawkins-exempt units. Local governments retain broader authority to regulate rents, just-cause evictions, and associated relocation on properties subject to local rent control, subject to other state law limits (e.g., the Tenant Protection Act of 2019).

No Field Preemption Finding: The court did not rely on field preemption but on direct conflict and frustration of legislative purpose.

The Los Angeles litigation followed a similar trajectory. An earlier superior court decision had mixed outcomes on AAGLA's challenge to the city's renter protections package, upholding core elements while the relocation provision for rent-increase-triggered vacancies remained in dispute. In January 2026, following the Pasadena decision, the Court of Appeal solicited supplemental briefing on its application to Los Angeles' ordinance, signaling likely alignment. Today's ruling confirms the preemption, providing clarity for owners of exempt properties statewide.

This outcome reinforces the Costa-Hawkins framework's limits on local attempts to indirectly regulate rents on exempt units through financial obligations tied to lawful increases. It does not disturb relocation requirements for true no-fault evictions or on rent-controlled stock, nor does it affect general just-cause or notice provisions where they align with state law (such as Code of Civil Procedure § 1161 et seq. for unlawful detainer).

Practitioners should note that the opinion may be unpublished or subject to further proceedings, though the Pasadena precedent (with petitions for review denied or left intact by the California Supreme Court in early 2026) carries significant persuasive weight. Landlords operating exempt units in Los Angeles and similar jurisdictions can now implement market rent adjustments without the overlay of mandatory relocation payments for voluntary tenant departures. Tenant-side counsel may explore remaining avenues, such as challenges based on local police power or habitability claims, but the state preemption line appears clearly drawn here.

The decision underscores ongoing tension between municipal tenant protections and statewide housing policy favoring market-rate flexibility on newer or specified housing stock. Counsel advising clients should review the specific language of the Los Angeles ordinance (and any implementing regulations from the Los Angeles Housing Department) against the appellate holdings for precise application to individual properties. Further appeals to the California Supreme Court remain possible but appear unlikely to alter the core preemption analysis given the court's recent handling of the Pasadena matter.