Closing the Year Informed: What LA’s RSO Changes Mean for Your Rental Property

As we approach the end of the year and begin planning for what’s next, it’s a great moment for Los Angeles housing providers and renters alike to pause and take stock of one of the most impactful policy changes passed in 2025: the overhaul of the City of Los Angeles Rent Stabilization Ordinance (RSO).

December is often a time for reflection, budgeting, and strategy especially in real estate. With inflation, operating costs, and housing affordability continuing to shape the local market, understanding how these RSO changes will affect 2026 and beyond is key to making smart, proactive decisions.

At Strategic Growth Real Estate, we believe informed owners and tenants create healthier, more sustainable rental communities. Here’s a clear, easy-to-read summary of what changed, why it matters, and how thoughtful property management can help navigate what’s ahead.

What Happened?

On December 12, the Los Angeles City Council approved a major revision to the Rent Stabilization Ordinance with a 12–2 vote. The ordinance is effective immediately, but the most significant changes to the rent increase formula will take effect on July 1, 2026.

This update reflects the City’s ongoing effort to balance tenant protections with long-term housing stability an especially important conversation as Los Angeles continues to face high housing demand, rising maintenance costs, and pressure on older rental housing stock.

Key RSO Changes You Should Know

Short-Term Adjustment (2025–2026)

• The maximum allowable rent increase is capped at 3% for the period from June 1, 2025 through June 30, 2026, only for increases that were not previously noticed and served.

Starting July 1, 2026: A New Formula

• Annual rent increases will be based on 90% of the Consumer Price Index (CPI) for All Items (previously 100% of CPI).

• The maximum allowable increase (ceiling) will be reduced to 4% (down from 8%).

• The minimum allowable increase (floor) will be reduced to 1% (down from 3%).

Eliminated Increases (Effective Immediately)

• The additional 1% increase for owners who pay gas and/or electricity in master-metered properties has been eliminated.

• The additional 10% increase previously allowed for added occupants deemed dependents is no longer permitted.

Relocation Fees

• Beginning July 1, 2026, relocation fees will increase annually based on the new RSO formula.

• Unlike rent increases, relocation fees will continue to be calculated using 100% of CPI.

  
  

Changes to CPI Language: What’s Still Unclear

The ordinance also includes revised language regarding how the average CPI is calculated. Notably, this language appears to have been added by the City Attorney’s Office and was not discussed during City Council meetings.

While this change will not take effect until July 1, 2026, industry groups are currently seeking clarification. We’ll continue monitoring updates closely, as transparency and accuracy are essential when planning future rent adjustments.

Why This Matters Now

As we head into the final months of the year, many Los Angeles property owners are already planning:

• 2026 operating budgets

• Capital improvements and renovations

• Long-term hold vs. sell strategies

• Tenant retention and lease structuring

With lower rent increase caps and reduced flexibility, proactive planning becomes more important than ever. The focus shifts from short-term adjustments to long-term value creation through efficient operations, strong tenant relationships, and well-maintained properties.

The Bigger LA Housing Picture

These RSO changes come at a time when Los Angeles continues to:

• Face a shortage of affordable rental housing

• See increased costs for insurance, utilities, and maintenance

• Encourage property preservation, especially for older RSO-covered buildings

For tenants, the updated ordinance provides greater predictability and protection. For owners, it underscores the importance of professional property management to ensure compliance, minimize risk, and optimize performance within tighter regulatory limits.

How Strategic Growth Real Estate Helps

At Strategic Growth Real Estate, we work with both housing providers and tenants to create stable, compliant, and well-managed rental properties. In light of these RSO updates, our team helps owners by:

• Ensuring full RSO compliance and accurate rent increase calculations

• Strategically timing notices and adjustments

• Advising on value-add improvements that enhance long-term returns

• Managing tenant communication with clarity and professionalism

• Staying ahead of regulatory changes so you don’t have to

As regulations evolve, thoughtful management isn’t just helpful it’s essential.

Looking Ahead

As Los Angeles closes out the year and looks toward 2026, this RSO overhaul serves as a reminder: success in today’s rental market is built on preparation, transparency, and adaptability.

Whether you’re reviewing your portfolio, planning improvements, or simply trying to understand how these changes affect your property, now is the right time to get informed and get strategic.

Sources

• Apartment Association of Greater Los Angeles (AAGLA): LA City Passes Severely Reduced RSO Formula Ordinance

• Los Angeles City Council – Rent Stabilization Ordinance Updates

  
  

Disclaimer: Each landlord is responsible for their own review and due diligence. This information is provided for general informational purposes only and does not constitute legal advice.