A Historic Shift in Los Angeles Rent Control Policy

The Los Angeles City Council has taken a major step toward reshaping the Rent Stabilization Ordinance for the first time in more than forty years. In a 12 to 2 vote, the Council directed the City Attorney to draft formal language that would replace the long-standing 3% rent increase rule with a new formula tied to 90% of the Consumer Price Index.

This move represents the most significant update to Los Angeles multifamily CPI rent control since the RSO was created. If adopted, the formula will introduce new minimums, new caps, and the removal of utility add-ons that many owners have relied on.

Understanding the Proposed 90% of CPI Formula

The new system would adjust rent increases annually based on 90% of CPI and introduce both a floor and a ceiling.

Under the proposed rules:

• Annual rent increases would be based on 90% of CPI
• The minimum allowable increase would be 1%
• The maximum allowable increase would be 4%
• The current 1% to 2% utility add-on would be eliminated

This creates very different outcomes from the current flat 3%.

How This Compares to Existing RSO Rules

Current rules allow a 3% increase for most rent stabilized units, with an additional 1% or 2% when owners pay for gas or electricity.

Under the new system:

• Low inflation years could drop allowable adjustments to 1%
• High inflation years could raise allowable adjustments to as much as 4%
• Utility responsibilities would no longer influence allowable increases

Supporters argue that CPI ties rent growth to economic conditions.
Owners argue the opposite: expenses often rise faster than CPI.

A Politically Charged Debate Inside City Hall

The discussion inside City Hall was tense, symbolic, and divided.

Councilmember Nithya Raman argued that a CPI formula was necessary to prevent displacement. She stressed that Los Angeles must ensure residents can afford to stay.

Councilmember Monica Rodriguez acknowledged tenant pressures but warned that the change could significantly harm small owners whose costs have escalated far beyond CPI growth.

The 12 to 2 vote revealed strong momentum toward policies favoring tenants, setting the stage for a major shift in Los Angeles multifamily CPI rent control.

The Landlord Perspective Was Acknowledged but Overridden

Housing provider groups emphasized that rent adjustments below inflation do not reflect the true financial environment. Many owners reported sharp jumps in insurance, compliance obligations, utilities, and maintenance.

One owner quoted in LAist summarized the challenge:

“My insurance went up 80% this year. My rent increase will be 1%. How am I supposed to survive that?”

For many owners, the proposed change deepens an ongoing imbalance between revenue limits and rising operating expenses.

What Happens Next Before the New Formula Takes Effect

The process continues in several stages:

• The City Attorney will draft formal amendment language
• The Council will review and vote on the final version
• After adoption, the city will implement the new 90% of CPI system

Owners should expect additional hearings and advocacy from both tenant organizations and owner groups.

What Los Angeles Multifamily Owners Should Do Now

Owners should begin preparing immediately. Key steps include:

• Modeling future income under a 1% to 4% CPI-based range
• Removing utility add-ons from projected revenue
• Updating 2025 and 2026 operating budgets
• Reviewing reserves and cash flow for low CPI years
• Evaluating long-term RSO strategy and asset performance
• Following council updates closely as the amendment progresses

Understanding the financial implications of the new Los Angeles multifamily CPI rent control formula is essential.

Conclusion

Los Angeles is moving toward the most significant rent control reform in decades. The proposed shift to a 90% of CPI formula will change how owners model revenue, manage expenses, and plan long-term capital strategies. For some owners, the new range may offer slightly higher increases in high inflation years. For others, the minimum allowable increase of 1% may present a serious challenge.

Owners who analyze the impact early, budget accordingly, and adjust their long-term strategy will be in the strongest position as the city approaches a new era of rent regulation.