New deadline for phaseout of gas water heaters gives Bay Area homeowners one more year 

In summary

Up to half of Bay Area households can skip electric water heaters under an updated rule by air regulators. Residents not exempt have one more year to comply.

Bay Area air regulators voted 16-1 Wednesday to delay the state’s first phaseout of gas water heaters by a year and let up to half of property owners who replace one skip the switch to electric heat pumps. 

The rule, adopted in 2023, does not require anyone to replace a working water heater. But starting in January 2028, a year later than planned, most Bay Area property owners replacing a gas water heater will have to install a model that emits no nitrogen oxides, typically an electric heat pump.

Low-income owners, those who spend heavily on housing, and homes with tight spaces or outdated electrical systems can apply for exemptions.

The vote is the latest sign that California is easing off on its push to cut pollution from home appliances, one of the largest sources of smog-forming emissions. 

Last year, Southern California air regulators rejected a plan to phase out gas water heaters and furnaces, and the California Air Resources Board has backed away from requiring all new space and water heaters sold to be zero-emission by 2030.

Supporters say the Bay Area is different. Regulators built in years to review the rules before they took effect, and SPUR, a Bay Area urban policy nonprofit, says the exemptions largely match what environmental groups asked for to address property owners’ concerns, even if they go further than advocates would have liked. 

In an email, an air district spokesperson said the just-passed water heater rule would prevent up to 16 premature deaths and 21 new asthma cases annually, and avoid $90 million in healthcare costs. But staff also estimate the exemptions could put roughly half of the rule’s originally projected pollution cuts out of reach.

A heat pump water heater costs about $3,500 more to install than a gas model, according to the air district. Heat pump water heaters use roughly a third to a quarter as much energy as standard gas models, but because electricity often costs more than gas in California, savings on utility bills are smaller. 

Property owner groups say the rules will become a financial burden to many residents. 

“The proposed mandate really doesn’t take into account all the nuances that have to be factored in when you look at many of the multi-unit buildings in the Bay Area that were built in the ’60s and ’70s, and even much earlier,” said Joshua Howard, executive vice president of local public affairs for the California Apartment Association.

Some board members agreed. Ray Mueller, a San Mateo County supervisor, said he wished the board could repeal the rule entirely. Shamann Walton, a San Francisco County supervisor, voted no after speaking about affordability concerns. Benicia Mayor Steve Young abstained. 

But board member John Gioia, a Contra Costa County supervisor who voted to delay the rule, said the amendments address affordability concerns. 

“We need to do this in a way that respects that lower-income residents may not be able to afford it. We need to figure out how to help them,” Gioia said. “And let’s face it, the exemptions are big enough to drive a truck through.” 

Who’s exempt

Under the amended rule, people with incomes at or below 80% of the area median, or who are enrolled in programs such as Medi-Cal or CalFresh, can avoid installing an electric water heater and instead install a gas one. So can people whose mortgage and property tax payments add up to at least 28% of their gross income. The air district estimates about 20% of Bay Area households qualify.

Homes with physical barriers, such as a cramped closet, a low ceiling or an electrical panel too small to handle a heat pump, get a one-time exemption, covering an estimated 20% of installations. People can continue to buy water heaters 30 gallons or smaller, about 10% of sales, because no zero-emission models of that size are available in the U.S.

Larger water heaters, common in apartment buildings and businesses, now have until 2033 instead of 2031. 

Statewide efforts

The state Air Resources Board, which once aimed for all new space and water heaters sold in California to be zero-emission by 2030, has scaled back its plans. 

At a December 2025 workshop, air board staff proposed instead capping sales of gas models and creating a credit system that would let manufacturers switch to zero-emission equipment more slowly. 

The air board is “continuing to meet with interested parties to understand their feedback and evaluating potential revisions,” to the rules, said spokesperson Lindsay Buckley. 

Still, the state backed the Bay Area’s rule. In a letter to the board, an agency official said the rule “contributes to California’s broader strategy to reduce building-sector emissions while delivering public health, clean air, environmental justice, and climate benefits.” 

In Southern California, the South Coast Air Quality Management District proposed rules last year that would have set rising targets for manufacturers to sell more zero-emission appliances, with fees on gas models. It backed down under pressure from the Trump administration. 

Advocates say that makes the Bay Area’s rule, even scaled back, a rare step forward.

“The state and the Bay Area are doing a great job of trying to push things forward in a more challenging environment,” said Tony Sirna, deputy policy director of environmental group Evergreen Action. “We’re pedaling just as hard, but we’re facing headwinds, and so we are making slower progress than we would have otherwise.” 

The cost of switching 

The air district estimates up to 120,000 Bay Area households replace a water heater each year. 

A consultant for the district estimated the amended rules will cost those households about $372.8 million a year, after accounting for about $60.8 million in energy bill savings. Howard, of the apartment association, said the district “needs to recognize the true cost of the mandate.”

Adam Pearce, president of the California Rental Housing Association, said the newly-passed rule does not  fix property owners’ concerns, and just “kicks the issue down the road.” 

“We’re not against clean air and healthy living. Certainly providing quality housing coincides with all of that,” he said. But forcing change isn’t the answer, Pearce added. “They would get a lot more buy-in over time if it was incentive-based.”

Advocates say incentives can help close the gap. The Bay Area will receive about $55 million a year in heat pump incentive funds over the next few years, according to SPUR estimates, said Sam Fishman, a policy manager for the group.

“These rules are a really big deal,” Fishman said. “They are a strong market signal that can ramp up demand for heat pumps in California, show that they work, and build demand both from consumers, from contractors, from manufacturers at every level of the supply chain.”