Bay Area Air District Delays Gas Water Heater Rule to 2028 and Adds Exemptions

by Chris Renois

If you own a home in San Jose or anywhere else in the Bay Area and your gas water heater is getting old, you now have more time to plan. On November 4, 2026, the Bay Area Air District's Board of Directors voted to amend Rule 9-6, its water heater rule. The change pushes back the date when most replacement water heaters must emit zero nitrogen oxides (NOx), and it adds several exemptions.

What changed

The air district first set a zero-NOx standard for water heaters in 2023. Under that version, the requirement would have started in January 2027. According to the air district's announcement, the new amendments move the compliance date to January 2028. CalMatters reported that the board approved the change 16-1. San Francisco Supervisor Shamann Walton voted no, and Benicia Mayor Steve Young abstained.

The air district stresses that the rule only applies when a property owner replaces an existing water heater. Nobody has to remove a water heater that still works. The rule also doesn't cover gas stoves, dryers or fireplaces. Right now, a zero-NOx water heater in practice means an electric model, usually a heat pump water heater.

Who can still install a gas water heater

The air district lists these exemption categories in the amended rule:

Low-income property owners. This covers owners earning around 80% of Area Median Income or less, and people enrolled in programs such as Medi-Cal or CalFresh.
Housing-cost-burdened owners. This covers households whose mortgage and property tax payments take up about 28% or more of gross income. The air district's announcement and CalMatters word the exact cutoffs a little differently, so check the final rule text if you're close to either line.
Space-constrained homes. This means homes without enough room or ventilation for a compliant unit, such as a tight closet or a low ceiling.
Electrical limitations. The air district gives examples such as an electrical panel under 100 amps, a panel without enough spare capacity, or a need to run electrical lines more than 50 feet. CalMatters reports that this exemption, like the space exemption, can be used only once.

Water heaters of 30 gallons or less and mobile home water heaters don't have to meet the zero-NOx standard. The rule also allows temporary installations in emergencies. CalMatters, citing the air district, reports that about 20% of Bay Area households would qualify under the income or housing-cost exemptions. Space and electrical constraints would cover about another 20% of installations, and small water heaters make up about 10% of sales. Altogether, up to half of replacements could be exempt.

The rule proposal the air district published in October says owners would need an exemption certificate from the district before installing a gas unit. Check the air district's Building Appliances page for the final application steps.

What it means for small landlords

According to the air district, water heaters in multifamily buildings and deed-restricted affordable housing now have until January 1, 2033. That also applies to certain kinds of equipment, including hydronic units and large water heaters. The October proposal defined a multifamily building as a residential building with five or more units. If you own a duplex, triplex or fourplex, confirm with the air district or a licensed contractor which deadline applies to your building.

Costs and incentives

CalMatters reports the air district's estimate that a heat pump water heater costs about $3,500 more to install than a gas model. Heat pump models use much less energy. However, electricity often costs more than gas in California, so the savings on utility bills are smaller. The air district estimates that up to 120,000 Bay Area households replace a water heater each year.

The air district points homeowners to SwitchIsOn.org to look up incentives. CalMatters reports that the policy group SPUR expects the Bay Area to get about $55 million a year in heat pump incentive funding over the next few years.

What about furnaces?

This vote changed only Rule 9-6, the water heater rule. Furnaces are covered by a separate rule, Rule 9-4. In the air district's July 2026 fact sheet, the zero-NOx date for furnaces was 2029.

What Bay Area homeowners, buyers and sellers might do

Homeowners: Find out how old your water heater is. If it's getting close to the end of its life, consider getting quotes and an electrical panel check now, while you aren't dealing with an emergency. A licensed contractor can tell you whether your home might qualify for a space or electrical exemption.
Buyers: Look at what the inspection report says about the water heater's age and type and the size of the electrical panel. Both can affect what a replacement will cost later. If an upgrade affects your budget, talk with your lender.
Sellers: Keep permits and receipts for any water heater or panel work. Buyers are likely to ask about them.
Everyone: If you're counting on rebates or tax credits, ask a tax professional how they apply to you. If you aren't sure whether you qualify for an exemption, contact the air district directly.

We'll keep watching for the air district's final exemption process and share updates as they come out.

Sources

Thinking about buying or selling in the Bay Area? Chris Renois can walk you through how these changes affect your home and your plans. Call or text (650) 512-9817, email chrisrenois@therealexperts.com, or get a free home value estimate.

This article is general information for Bay Area homeowners and buyers, not legal, tax or financial advice. Laws, rates and deadlines change; please confirm details with the original sources linked above or a qualified professional. Chris Renois, California DRE #02030130.