California has enacted AB 2689, a significant policy change for owners and operators of certain Low-Income Housing Tax Credit (LIHTC) properties. The new law provides a limited pathway for the nonrenewal of leases when residents in 100% affordable developments experience sustained income growth and no longer meet the economic profile the housing was designed to serve.

For affordable housing providers, the legislation addresses a longstanding challenge: how to preserve deeply affordable units for households most in need while remaining compliant with federal LIHTC requirements. For residents and advocates, the bill raises important questions about housing stability and upward economic mobility.

What AB 2689 Does

AB 2689 adds a new provision to California law specifying that, in certain circumstances, a property owner may have “good cause” not to renew a lease at a qualifying LIHTC property. The authority applies only to developments where 100% of residential units (excluding manager units) are restricted to lower-income households.

Under the law, an owner may choose not to renew a lease if:

• The household’s income exceeds 140% of Area Median Income (AMI) for at least two consecutive years, and
• Thirty percent of the household’s monthly income exceeds the applicable fair market rent.

The legislation also establishes procedural safeguards. Owners must provide notice if a household exceeds the 140% AMI threshold during income recertification and must issue a formal notice of nonrenewal at least 90 days before the lease expiration date if they elect to exercise this authority.