Court of Appeal Rejects Costa-Hawkins Rent Control Exemption for Renovated Former Military Housing

The First District Court of Appeal held that a new certificate of occupancy and substantial property improvements do not exempt former military housing from local rent control under the Costa-Hawkins Rental Housing Act when those units were previously used for residential purposes. CP VI Admirals Cove, LLC v. City of Alameda, 113 Cal. App. 5th 1167 (2025).

The case concerned the applicability of the City of Alameda’s Rent Control Ordinance to a recently rehabilitated residential housing site. The Admirals Cove property comprises nearly 150 townhomes built in 1969 for Navy and Coast Guard families. Used for military housing until 2005, the property fell into disrepair and was acquired by a private developer in 2018. The developer invested approximately $48 million to bring the units up to market standard and received a new certificate of occupancy in December 2020.

Costa-Hawkins Section 1954.52(a)(1) exempts from local rent control residential units that have a “certificate of occupancy issued after February 1, 1995.” The developer argued that the units were exempt because its certificate of occupancy was issued after that date. The City of Alameda Rent Program denied the exemption, relying on a local regulation limiting the exemption if the property was used previously for “residential purposes.” The trial court granted the developer’s writ petition, holding the property exempt under a plain meaning interpretation of section 1954.52(a)(1) because the certificate of occupancy was issued after February 1, 1995. The City appealed.

In overturning the previous ruling, the court adopted and applied the interpretation articulated in two cases: Burien, LLC v. Wiley and NCR Properties, LLC v. City of Berkeley. Both cases held that Section 1954.52(a)(1) “refers to certificates of occupancy issued prior to residential use” of the affected property. Thus, a certificate of occupancy issued after February 1, 1995, does not trigger the exemption if there was prior residential use. 

The court rejected the developer’s arguments that extensive renovations, prolonged vacancy, federal ownership, or occupancy restricted to military families altered the analysis. As to renovations, the court declined a fact-intensive approach that would turn on the extent of rehabilitation, emphasizing the need for a “bright-line approach” centered on whether residential use preceded the certificate of occupancy. As to vacancy, the court noted that even a lengthy period of non-occupancy does not convert previously residential space into newly constructed stock for purposes of Costa-Hawkins. And the court confirmed that military housing is still “residential use”; it analogized that housing to other forms of status-restricted residential housing commonly present in local markets, such as senior, income-restricted, or preference-based housing.

This interpretation, the court explained, furthers Costa-Hawkins’s purpose: “to encourage[e] construction and conversion of building which add to the residential housing supply.” Ruling for the developer would lead to an interpretation that “perversely reward[s] landlords for allowing rental units to decay to the point the buildings need extensive rehabilitation.” 

The decision reinforces a bright-line rule for the Costa-Hawkins certificate-of-occupancy exemption. Where a property has any prior residential use, a post-1995 certificate of occupancy issued in connection with rehabilitation, reconfiguration, or a change in type of residential use will not trigger exemption under section 1954.52(a)(1).