LA's 3% RSO Rent Cap: What Multifamily Investors Need to Know

What happened: The City of Los Angeles has set the allowable rent increase for properties under the Rent Stabilization Ordinance (RSO) at 3% for any adjustments effective between July 1, 2026, and June 30, 2027. This rate is based on a new formula established by a February 2026 city ordinance.

On September 23, 2026, multifamily investors and agents in Los Angeles are grappling with the city's newly confirmed rent cap. This 3% ceiling on rent hikes for thousands of RSO units directly impacts the financial underwriting, valuation, and disclosure process for apartment buildings within city limits, especially older stock common in Westside neighborhoods.

What changed

The new Los Angeles RSO allowable rent increase is the result of an ordinance reportedly passed on February 2, 2026, that fundamentally altered the calculation. The annual adjustment is now tied to 90% of the applicable Consumer Price Index (CPI), with a floor of 1% and a ceiling of 4%. For the current period—July 1, 2026, through June 30, 2027—this formula yields a 3% maximum increase.

Critically, the ordinance also reportedly eliminated certain landlord rights, including:

• Passing through certain utility costs to tenants.
• Applying a 10% rent surcharge for additional tenants or dependents.

These changes mean that pro forma income projections for RSO properties must be revised downward not just for the base rent increase but also for expense recovery that may have been previously budgeted. The official ordinance number and a detailed bulletin from the Los Angeles Housing Department (LAHD) are still pending formal, widespread publication, creating some uncertainty.

When does it take effect?

The 3% allowable rent increase applies to a specific 12-month period based on an ordinance passed earlier in the year. The timeline is firm for any rent increase notices issued for RSO units.

What this means in the South Bay and on the Westside

The impact of the Los Angeles RSO 3 percent allowable rent increase is geographically specific. It applies only to rent-stabilized properties within the City of Los Angeles limits.

This is a crucial distinction for agents and investors active across the region. For example:

• Properties likely affected: Multifamily buildings constructed on or before October 1, 1978, in neighborhoods like Venice (90291), Playa Vista (90094), and Westchester (90045) fall under the city's jurisdiction and its RSO.
• Properties NOT affected: The separately incorporated cities of Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance, El Segundo, Culver City, and Santa Monica have their own governance. They are not subject to the City of LA's RSO cap, though they may have their own local rent control ordinances or be subject to statewide rules like AB 1482.

For a duplex in Venice, this 3% cap is the law. For a similar building a few miles away in Culver City, a different set of rules applies. Misclassifying a property can lead to significant errors in valuation and legal liability during a transaction. We always verify jurisdiction early in any multifamily deal.

What agents and homeowners should do now

For anyone owning, buying, or selling a multifamily property in the City of Los Angeles, immediate action is required to ensure compliance and accurate financial analysis. For specific strategies on these properties, see our resources for multifamily investors.

1. Verify RSO Status: Use the city's Zone Information and Map Access System (ZIMAS) to confirm if a specific parcel is within LA city limits and subject to the RSO. Do not rely on the mailing address or neighborhood name.
2. Audit Rent Rolls and Leases: Review current rent rolls, tenant ledgers, and existing leases. Ensure that no rent increases effective after July 1, 2026, have exceeded the 3% cap. Document the date of the last increase for every unit.
3. Update Pro Forma Financials: If you are underwriting a potential acquisition, adjust your projected income immediately. Cap rent growth for RSO units at 3% for the next 12 months and remove any income from now-prohibited utility pass-throughs.
4. Prepare Escrow Disclosures: For sellers, it is vital to accurately disclose the property's RSO status and provide the buyer with all relevant documentation, including tenant estoppel certificates that confirm current rent levels.
5. Consult Legal Counsel: Given the changes to pass-throughs and surcharges, seek advice from a qualified landlord-tenant attorney before issuing new rent increase notices or altering billing practices.

Open questions

While the 3% cap is the operative number, several details remain unconfirmed by official city publications as of September 23, 2026.

• What is the specific ordinance number for the February 2026 law that changed the RSO formula?
• When will the LAHD publish its official annual rent increase bulletin confirming the 3% figure and the underlying CPI data?
• What is the definitive list of utility charges that can no longer be passed through to tenants?
• Will the state's AB 1482 cap (reportedly 8.7%, though this must be verified) be a factor for any properties if the RSO is found not to apply?

We are watching for the LAHD's official bulletin to clarify these points.

Sources

• Los Angeles Housing Department (LAHD)
• California Office of the Attorney General - Landlord-Tenant Issues
• California Legislative Information - AB 1482

FAQ

Is my apartment in Venice covered by the 3% rent cap?

Your apartment in Venice is very likely covered by the 3% rent increase cap if it is in a building constructed on or before October 1, 1978. Venice is within the City of Los Angeles, which is the jurisdiction for the Rent Stabilization Ordinance (RSO).

Does the 3% rent cap apply in Torrance or Redondo Beach?

No, the City of Los Angeles's 3% RSO rent cap does not apply in Torrance or Redondo Beach. Those are legally separate cities with their own municipal codes. Properties there may be subject to California's statewide Tenant Protection Act (AB 1482) or other local rules, but not the LA City RSO.

What is the difference between the LA RSO and AB 1482?

The LA RSO is a local ordinance that generally applies to multifamily properties built before October 1978 within LA city limits, and it currently caps rent increases at 3%. AB 1482 is a statewide law (the Tenant Protection Act of 2019) that caps rent increases at 5% plus local CPI (currently a reported 8.7% total in LA County, though this varies) for eligible properties that are not covered by a stricter local ordinance like the RSO. If a property is subject to the RSO, the RSO's lower cap applies.

Can my landlord still charge me for gas or water?

According to reports on the new ordinance, landlords of RSO units can no longer pass through certain utility costs that may have been allowed previously. You should review your lease agreement and consult the official LAHD guidelines or a tenant rights organization to understand how this applies to your specific situation.

This new cap creates immediate financial and legal questions for multifamily property owners. For help analyzing a rent roll or checking title on an apartment building deal in Los Angeles, contact us. We're Matt Goeglein and Xavier de la Piedra IV at Fidelity National Title, and we specialize in closing complex transactions, including 1031 exchanges, apartment buildings, and properties held in LLCs.