Los Angeles RSO Rent Increase: What the 90% CPI Cap Changes for Owners

Los Angeles has permanently revised how annual increases are calculated under the Rent Stabilization Ordinance. Beginning in 2026, the Los Angeles RSO rent increase will be tied to 90% of the Consumer Price Index, with a 1% floor and a 4% ceiling.

The prior framework allowed increases up to 8% and used 100% of CPI as its benchmark. The revised structure narrows that range and removes several supplemental adjustments that previously provided additional flexibility.

For owners of pre-October 1978 multifamily assets, this is not a cosmetic revision. It changes how revenue growth behaves over time.

A Narrower Range of Allowable Growth

Under the updated Los Angeles RSO rent increase structure, annual adjustments are compressed into a tighter band. During higher inflation cycles, the 4% cap limits upside. During lower inflation periods, the 1% floor prevents full stagnation, but it does little to offset rising operating costs.

The framework introduces predictability. It reduces volatility. It also reduces flexibility.

Over longer hold periods, that distinction matters.

The Removal of Supplemental Adjustments

The elimination of the prior utility pass-through for master-metered properties and the removal of the dependent occupant adjustment further narrow operating flexibility. Individually, neither provision materially transforms a property’s performance. Collectively, they reduce the margin for incremental revenue adjustments when expenses shift.

This change is less about any single rent cycle and more about structural compression over time.

Why the 90% CPI Cap Matters in Underwriting

Allowable rent growth is a core assumption in multifamily underwriting. When the Los Angeles RSO rent increase is capped at 90% of CPI with a 4% ceiling, revenue growth may lag expense growth during certain cycles.

Insurance, property taxes, payroll, utilities, and materials do not always track neatly with CPI. When increases are limited below real-world operating pressures, margin compression can accumulate gradually.

The revised framework does not eliminate annual increases. It limits their amplitude.

What This Signals for Long-Term Ownership

This revision does not represent a sudden shock to the system. It reflects a broader regulatory posture that favors stability over variability. For owners, the implications are straightforward: disciplined expense management, capital planning, and realistic rent modeling matter more than incremental annual adjustments.

The current 3% allowable increase remains in place through the present cycle. The structural adjustment begins in 2026.

As with other regulatory shifts, the long-term impact will depend less on any single year’s percentage and more on how the Los Angeles RSO rent increase formula interacts with expense growth over time.