LA’s RSO Just Changed for the First Time in 40 Years: What Landlords Need to Know

By Nathan Sewell | LA Building Inspections & Compliance

On November 12, 2025, the Los Angeles City Council voted 12-2 to overhaul the Rent Stabilization Ordinance (RSO) for the first time since the 1980s. On December 12, 2025, they gave final approval.

If you own rent-controlled property in Los Angeles, your annual rent increase calculations are about to change significantly.

What Happened

The City Council approved a new formula for calculating allowable annual rent increases on RSO-covered units. This affects approximately 650,000 rental units in the City of Los Angeles—roughly 74% of the city’s multifamily rental housing stock.

The changes will take effect after Mayor Karen Bass signs the ordinance, expected in early 2026.

The Four Key Changes

1. New 1%–4% Annual Cap

The old system allowed rent increases between 3% and 8% annually. The new formula sets a floor of 1% and a ceiling of 4%, tied to 90% of the Consumer Price Index (CPI).

This means annual rent increases will now be more predictable and generally lower than before.

2. Utility Add-Ons Eliminated

Under the old rules, landlords who paid for gas or electricity could add 1%–2% on top of the base rent increase. That’s gone. No more utility pass-throughs.

If you’ve been relying on these add-ons, factor that into your projections.

3. Dependent Surcharges Eliminated

The RSO previously allowed landlords to charge additional rent for tenants with extra dependents—children, elderly parents, or family members with disabilities. That surcharge is now prohibited.

4. New CPI Formula

The rent increase calculation is now based on 90% of the Consumer Price Index, with the 1%–4% boundaries. The Housing Committee initially recommended 60% of CPI with a 3% cap, but the full Council amended it upward.

Old Rules vs. New Rules

Old RSO Rules	New RSO Rules
3%–8% annual cap	1%–4% annual cap
1%–2% utility add-on allowed	No utility add-ons
Dependent surcharges allowed	No dependent surcharges
Up to 10% total increase possible	4% maximum, no exceptions
Based on 100% CPI	Based on 90% CPI

Who Is Affected

This applies to approximately 650,000 rental units in the City of Los Angeles—buildings with two or more units built before October 1, 1978.

It does NOT apply to:

• Unincorporated LA County (those fall under RHHP, not LA City RSO)
• Properties built after October 1, 1978
• Single-family homes (unless owned by a corporation or REIT)
• Properties in other cities like Pasadena, Glendale, or Santa Monica (they have their own rent control)

Small Landlord Exemption (Pending)

Council members John Lee and Monica Rodriguez have proposed allowing landlords with 10 or fewer units an additional 1% annual increase. This proposal was sent back to the Housing and Homelessness Committee for further discussion.

It’s not law yet, but worth watching if you own a smaller property.

What Happens Next

The ordinance now goes to Mayor Karen Bass for signature. A signature is expected, and the changes would take effect in early 2026.

The Council has also directed staff to identify funding for repairs and rehabilitation programs to help smaller landlords, with money coming from Measure ULA and the LA County Affordable Housing Solutions Agency.

What Landlords Should Do Now

• Recalculate your projections—if you’ve been budgeting for 5%+ annual increases, that’s no longer realistic
• Review your utility billing—if you’ve been passing through utility costs as rent add-ons, plan for that revenue to disappear
• Address deferred maintenance now—with lower allowable increases, catching up on repairs becomes harder over time
• Stay current on compliance—RHHP, SCEP, and habitability standards aren’t going anywhere
• Monitor the small landlord exemption proposal

About LA Building Inspections & Compliance

We help LA landlords navigate compliance requirements including RHHP inspections, SB-721 balcony inspections, and habitability assessments. Questions? Contact us at (626) 214-5929 or nathan@larentalinspections.com.