Following advocacy from the California Apartment Association, air quality regulators on Friday narrowly rejected a plan to phase out gas-powered furnaces and residential water heaters across much of Southern California—a proposal that would have directly affected rental housing providers, notably “mom and pop” landlords.

The South Coast Air Quality Management District’s 7-5 vote delays a final decision but leaves the door open for future action.

Victor Cao, the California Apartment Association’s senior vice president of local public affairs, submitted formal testimony and a letter opposing the proposed residential rules. He emphasized that the gas bans are preempted by federal law and would impose unjustifiable compliance costs on housing providers.

“This leaves property owners in the impossible position of being forced to make huge upfront investments – at a time when debt service costs are high – with little more than a hope of eventual modest cost savings,” Cao writes.

Cao also said the South Coast Air Quality Management District improperly advocated for tenant protection measures that would curtail property rights and impose additional financial burdens.

The staff report included recommendations for prohibiting evictions for government-mandated improvements, lowering rent control caps, and banning pass-through costs. “When furnaces or water heaters fail, repairs are urgent,” Cao explained. “Yet, the proposed restrictions severely limit a housing provider’s ability to make timely, code-compliant emergency repairs.” In his letter, Cao wrote that the South Coast Air Quality Management District “has neither the subject-matter expertise nor the legal authority to wade into this space.”

The proposed rules followed the South Coast Air Quality Management District’s 2024 mandate—commonly known as the “zero NOx” appliance rule—effectively banning many gas appliances, including instant water heaters, larger stored water heaters, and spa heaters commonly found in commercial and multifamily buildings across Los Angeles, Orange, Riverside and San Bernardino counties.

That policy remains in effect and is now the subject of a federal lawsuit. In his letter, Cao warns that adopting the proposal would “double down on an unlawful approach.” CAA and its coalition partners argue the rule is preempted by federal law because it overrides federal energy standards, making appliances unavailable to consumers.

The proposal drew significant public opposition, including an overflow crowd at the public hearing and more than 30,000 written comments submitted to the district. Opponents argued the rule would restrict consumer choice, increase housing and energy costs, and strain the state’s electrical grid, according to a CalMatters article.

The 12-member board was deeply divided along regional lines. All six representatives from Orange County and the Inland Empire voted against the rules, along with the representative for western Los Angeles County cities. Those in favor included representatives appointed by the state Senate and Assembly, the city of Los Angeles, and other parts of L.A. County.

The proposal also drew a warning from the U.S. Attorney for the Central District of California. In a June 5 letter to the board, Bill Essayli, the top federal prosecutor for the area and a former member of the state Assembly, said the proposed rules were preempted by federal law and threatened a civil lawsuit if they were adopted. He also posted on X, “California regulators are on notice: if you pass illegal bans or penalties on gas appliances, we’ll see you in court. The law is clear—feds set energy policy, not unelected climate bureaucrats.”

CAA also urged the board to remove the housing policy section from its staff report and reaffirm its commitment to air quality management without encroaching into areas governed by the Legislature and local elected bodies.

“Rent control and tenant protections are deeply complex, politically charged topics that affect the rights of both tenants and housing providers,” Cao writes, adding that such decisions belong with lawmakers, not air regulators.”

Postponement of the proposed ban represents a significant victory for small-scale housing providers who made their voices heard before the South Coast Air Quality Management District’s governing board. The district is expected to consider a modified version of the rules within the next year.