REAL ESTATE NEWS

The Los Angeles City Council has voted to reshape its rent control laws, marking a decisive shift in how annual hikes will be regulated across hundreds of thousands of apartments. By narrowing the allowable increase to 1%–4% annually based on inflation and removing additional surcharges, the city aims to address affordability pressures while sparking new debate among landlords and investors over the future of rental housing in the region.

After years of debate, Los Angeles leaders approved sweeping changes to the Rent Stabilization Ordinance. The new formula calculates increases at 90% of the Consumer Price Index and cuts longstanding add-ons for utilities and additional tenants, which previously pushed some annual hikes as high as 10%.

With the reforms, roughly three-quarters of the city’s rental units—about 650,000 apartments built before October 1978—fall under the revised caps, which also bar extra charges for dependents or roommates. The city council’s 12-2 vote came after heated deliberation and now heads to the City Attorney’s office for drafting before a final ratifying vote. If enacted on schedule, the new rules will apply before many tenants face their next possible increase.

The updated ordinance removes the previous 3% floor and 8% ceiling and replaces it with a more restrictive structure:

• Allowed increases will be determined by 1%–4% annually, pegged to inflation at 90% of the CPI.
• Utility surcharges (1%–2%) included under the old rules for gas or electricity will no longer be permitted.
• Additional rent for households with extra family members or roommates has been eliminated.
• The policy will also be paired with increased funding—sourced from measures like ULA and county housing programs—specifically to support repair and rehabilitation for small landlords with up to 10 units.?

Landlord Concerns

Landlords across Los Angeles voiced deep concern over the council’s decision. Many argue that with costs rising—including insurance, city-mandated fees, waste services and maintenance—the limits imposed by the new formula squeeze owners financially and risk destabilizing the city’s rental market.

One local property management executive, Chris Gray, told local outlet ABC7 that, “You cannot pay rent adjustments below inflation while costs—insurance, utilities, maintenance, and compliance—continue to rise.”

Small-scale landlords argued that the city demands compliance without allowing rents to keep pace with rising expenses, forcing some to consider selling their properties or leaving the business entirely.

“The city demands compliance with mandates while barring housing providers from raising rents accordingly. Who is supposed to pay for these city-imposed costs? The answer is increasingly becoming nobody, because property owners simply can't afford to stay in business,” said Irma Vargas, who works with mom-and-pop landlords.

Some council members supporting landlords emphasized that strict caps risk discouraging new development and redevelopment, particularly when older buildings become subject to tighter regulations. Developers have warned that the city’s policies will reduce investment appetite and potentially worsen the affordable housing shortage.

The rule changes are designed primarily to affect existing, older buildings—the majority of which were constructed before 1978. New construction that replaces rent-controlled units typically must comply with the same restrictions, a requirement that has already influenced plans for redevelopment projects. Some developers say they have abandoned projects over concerns that future buildings would be forced into the current rent stabilization regime.

The council also moved to study how the new rent caps and other regulations affect the volume and viability of new housing construction, with findings expected to inform subsequent debate.

Source: GlobeSt/ALM