When Your Single-Family Home May Not Be Exempt from Local Rent Control

Many California cities (e.g., Los Angeles, Santa Monica, Oakland and San Francisco) have rent control laws that set limits on the amount of rent a landlord may charge a tenant. But not all rental properties are subject to these laws. The Costa-Hawkins Housing Act (Costa-Hawkins) exempts dwellings that are “alienable separate from the title to any other dwelling unit,” such as most single-family homes.

However, in a recent Court of Appeal decision, the Court held this exemption does not apply to all single-family homes in all cases.

In Owens v. City of Oakland Housing, Residential Rent and Relocation Board, the Court addressed the question of whether Costa-Hawkins exempts individual rooms in a single-family home that are rented to separate tenants. Owens owns and resides in a single-family home in Oakland. He rented individual rooms in the home to three unrelated tenants. One of the tenants filed a complaint against Owens pursuant to Oakland’s Rent Adjustment Program alleging her home became unsuitable due to disruptive and hazardous conditions, retaliation and other claims concerning the rental. Owens claimed his home was exempt from Oakland’s Rent Adjustment Ordinance as a single-family home, and thus Oakland’s Rent Board did not have jurisdiction to hear the dispute.

After the Rent Board ruled the home was not exempt, Owen appealed the decision to the superior court. The trial court agreed with the Rent Board finding: “The relevant dwelling unit in question is not Owen’s home but rather each of the rooms he rented to tenants. Those units are not exempt from rent control as a condominium or single family home.” Owen appealed the trial court’s ruling.

On appeal Owens argued Costa-Hawkins exempts the rooms he rents within his home from the rent ordinance “because the home, in its entirety, is a ‘dwelling or unit’ that is ‘alienable separate from the title to any other dwelling or unit.’ In other words, as long as the structure is a single family residence, and it is alienable apart from any other structure…no areas that are within that structure, even if they are separately rented to third parties, are subject to local rent control.”

The Court of Appeal disagreed with Owens, finding Costa-Hawkins focuses on the “dwelling” or “unit” in question, and whether the dwelling or unit is separately alienable from the title to any other dwelling or unit. Accordingly, the Court of Appeal found the rooms Owens rented to individual tenants are not exempt from rent control even though they are within a single-family home. 

While the Owens decision addresses the applicability of Costa-Hawkins to a single-family home where individual tenants rent separate rooms within the home, the Court declined to decide whether it would reach the same outcome if the individual tenants were renting and sharing the entire home.  

Nicholas Kanter is a Shareholder in our Business Litigation, Employment and Real Estate Practice Groups.