Los Angeles has finalized a significant update to its Rent Stabilization Ordinance (RSO), introducing a new inflation-based formula for annual rent increases while also eliminating several long-standing surcharges used by housing providers. While the transition to a CPI-based system is the headline change, portions of the ordinance include retroactive provisions that could affect rent increases landlords expected under previous rules.
For owners of rent-controlled multi-family properties, the changes represent another adjustment to LA’s regulatory landscape—one that tightens allowable rent growth while altering how certain increases can be implemented.
A New CPI-Based Rent Increase Formula
At the center of the ordinance is a revised formula that ties allowable rent increases to inflation. Under the new system, annual increases will be calculated at 90% of the Consumer Price Index (CPI) with a maximum cap of 4% and a minimum floor of 1%.
This replaces the previous structure that allowed annual rent increases ranging from 3% to 8% depending on the year.
Although the ordinance has already taken effect, the new CPI-based formula will begin applying to rent increases starting July 1, 2026.
For investors and property owners, the shift introduces a more predictable mechanism tied to inflation but also establishes a tighter ceiling on rent growth.
Retroactive Provisions Could Affect Planned Increases
One of the more debated aspects of the policy involves its retroactive impact on certain rent increases.
Under the updated rules, rent adjustments that were not previously noticed and served between June 1, 2025 and June 30, 2026 may be limited to a 3% base rate, rather than the higher increases that may have been permitted under the prior RSO structure.
For property owners who delayed issuing rent increase notices while awaiting regulatory clarity, this provision could alter projected rental income.
Utility and Occupant Surcharges Eliminated
The ordinance also removes several adjustments that were previously permitted within the RSO framework.
Key changes include:
Utility Surcharge Eliminated: The additional 1%–2% rent increase tied to gas and electricity costs is no longer allowed.
Additional Occupant Increase Eliminated: The 10% rent increase previously permitted when tenants added dependents or additional occupants has been removed.
These provisions took effect when the ordinance was finalized in early 2026.
For housing providers, the elimination of these surcharges further narrows the range of permissible rent adjustments available to offset rising operating expenses.
Other Changes to Rent Adjustment Rules
The ordinance also adjusts other components of the rent control system. Certain relocation fees are now tied to the 90% CPI formula, and in some cases the ability to apply a 10% rent increase when a new tenant moves into a unit may be restricted.
While these changes are still being analyzed across the housing industry, they signal continued tightening of rent adjustment mechanisms within LA’s rent-controlled housing stock.
What Multi-Family Investors Should Watch
For multi-family investors operating in LA, the updated ordinance reinforces a policy environment focused on limiting rent growth while linking annual increases more closely to inflation.
Although the CPI-based formula may create greater consistency year to year, the lower cap and removal of several adjustment tools mean operators will have fewer ways to increase revenue within RSO units.
As a result, investors evaluating LA properties may need to place greater emphasis on operational efficiency, long-term asset management, and strategic capital improvements to maintain property performance under the city’s evolving regulations.
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