Los Angeles Just Limited Rent Hikes — Here’s What Landlords Need to Know (2025 Update) Los Angeles Rent Control
- jaredlevine
- Dec 8, 2025
- 4 min read
Los Angeles has officially approved one of the most significant rent stabilization changes in more than 40 years—and it will reshape the landscape for multifamily owners across the city.
Beginning February 1, the city will cap annual rent increases for rent-controlled units at 4%, down from the long-standing 8% maximum. While tenant advocates are celebrating the predictability this brings for renters, many small and mid-sized landlords are sounding the alarm.
With roughly 650,000 units (62% of LA’s multifamily inventory) now affected, this policy shift will impact operational strategy, property valuations, long-term planning, and investor appetite for years to come.
Below is what landlords, investors, and property owners need to know.
What Changed? Understanding the New 4% Rent Cap
LA’s Rent Stabilization Ordinance (RSO), which applies to buildings built before October 1978, has been revised for the first time in decades. The new rules:
Annual Rent Increase = 90% of CPI
With:
A floor (minimum) of 1%
A ceiling (maximum) of 4%
Example: If CPI = 4%, allowable increase = 3.6% (rounded to 4% depending on implementation).If CPI = 0.2%, allowable increase = 1% because of the floor.If CPI = 7%, allowable increase = capped at 4%.
This is the formula that will change every year based on inflation.
Additionally, 1%-to-2% rent increases allowable under the current rules for landlords who cover gas or electricity will be eliminated. The changes will also prohibit additional rent hikes for renters with extra dependents.
Why This Matters to Property Owners
For many LA landlords—especially small, family-owned operators—the new restrictions come at a challenging time. Costs for:
Insurance
Utilities
Repairs & maintenance
Capital improvements
Compliance (SB 721, 9A, fire safety, seismic, etc.)
Property management
…have increased substantially since the pandemic.
At the same time, LA froze rent increases for four years (2020–2024), leaving many owners with suppressed rent rolls and rising expenses.
A further reduction in the allowable increase—from 8% to 4%—creates immediate and long-term consequences:
1. Lower Operating Income & Compressed NOI
This affects everything from refinancing to valuations to debt coverage.
2. Slower Rent Growth = Lower Future Resale Value
Buyers underwrite NOI growth. When growth is capped, values naturally adjust.
3. Reduced Incentive for Renovations & Capital Projects
Owners may defer improvements when returns are capped.
4. Potential Shift in Investment Strategy
Some investors may avoid RSO-heavy neighborhoods, accelerating a trend already underway.
How This Change Impacts LA’s Housing Market
Los Angeles already suffers from a severe housing shortage—estimated at 800,000 units. A restrictive rent environment doesn’t encourage new development, especially when:
Construction costs are high
Permitting is slow
Regulations are increasing
Political pressure favors tenant protections
History offers a warning: San Francisco expanded rent control in the 1990s and later saw thousands of units removed from the market and new construction nearly grind to a halt. It eventually reversed course.
Los Angeles may be on a similar trajectory unless balanced reforms emerge.
Why Smaller Landlords Are Most Affected
According to CoStar, about 80% of pre-1978 units are owned by private landlords or family ownership groups — not large institutional investors.
These owners typically:
Operate on tighter margins
Carry older buildings needing more maintenance
Have more difficulty absorbing cost increases
Are still recovering from unpaid COVID rent and rent freezes
A strict cap on rent growth places even more pressure on them to balance operating needs with regulatory requirements.
Will Tenants Benefit? Short Term Yes. Long Term Unclear.
Tenant advocates say the new 4% cap provides predictability and stability in one of the most expensive markets in the country.
But long term, even officials acknowledge risks:
Reduced unit turnover
Lower reinvestment in older buildings
Fewer new projects in LA
Potential deterioration of existing housing stock
What Should Landlords Do Now?
1. Evaluate Your True Market Rent
Even with a 4% cap on renewals, owners still have full flexibility when units turn.
2. Conduct a Property Valuation (BOV)
With policy changes affecting underwriting, now is a smart time to reassess value.
(I can provide a complimentary valuation—details below.)
3. Strengthen Your Expense Strategy
This includes insurance shopping, contract renegotiation, and long-term budgeting.
4. Identify Opportunities for ADUs, redevelopment, or strategic repositioning
Even under RSO, upside still exists—especially in Studio City, Sherman Oaks, Hollywood, and Westside pockets.
5. Monitor Market Behavior Over the Next 6–12 Months
Sales comps, cap rates, and rent rollover data will adjust quickly to this new environment.
What This Means for Multifamily Investors in 2025 and Beyond
LA remains one of the strongest rental markets in the United States—with high demand, low vacancy, limited construction, and world-class employment drivers.
But policy-driven restrictions will increasingly differentiate:
High-quality buyers
Well-capitalized operators
Submarkets with stronger fundamentals
Buildings with ADU or redevelopment upside
Non-RSO inventory
Expect to see pricing spread widen between RSO and non-RSO product, as we’ve already seen in Toluca Lake, Studio City, and Sherman Oaks.
Thinking About Selling or Curious How This Policy Impacts Your Value?
With over $579M sold, 2,900+ units, and deep expertise in LA’s RSO markets, I can help you understand exactly how this new 4% cap affects:
Your property value
Your NOI and projections
Buyer demand
Cap rates and GRM
Your long-term investment strategy
1031 exchange options
Exit timing
You can request a complimentary property valuation here:
📞 (818) 305-9135
No pressure. No obligation. Just data-driven analysis from someone who lives and breathes the LA multifamily market.
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