If you own an apartment building in LA and you've been assuming you get 3% plus 1% for gas plus 1% for electric — stop. The City Council eliminated the utility adders on February 2, 2026. You're at 3% flat now. I'm still hearing from property owners who haven't updated their rent notices, and some of those notices are technically over the legal cap as of right now.
Here's the straight math on what LA City and LA County actually allow as of April 2026, what changed on February 2nd, and what's coming July 1, 2026 that you should already be planning for.
The LA City Rent Stabilization Ordinance (RSO) covers most apartment buildings built before October 1, 1978. That's the bulk of the multifamily inventory in Hollywood, Koreatown, Mid-Wilshire, Silver Lake, Echo Park, Palms, and Mar Vista — plus most of the older rental stock across the city.
For the period July 1, 2025 through June 30, 2026, the allowable annual rent increase is 3% flat. That's the only number. No additions.
On February 2, 2026, three things got eliminated:
The ordinance passed on December 12, 2025 by a 12-2 Council vote and took effect February 2, 2026. Enforcement is through the Los Angeles Housing Department (LAHD).
You still have to give proper written notice — 30 days for increases of 10% or less over 12 months, 90 days for anything more. RSO buildings still require just-cause eviction and, for no-fault terminations, relocation assistance. None of that changed. The big change was the number you can charge.
Here's what I'm seeing on the ground: every landlord I talk to who still thinks they get the utility adder is running on outdated info. The old formula was in place for years. Property managers built it into their rent-notice templates. Rental software has the adder baked in as a default. And tenants often don't push back on a 4% notice because they don't know the rules changed.
If you issued any rent increase notices after February 2, 2026 that included the +1% gas adder, the +1% electric adder, or the +10% dependent adder — you're over the legal cap. Even if your tenant signed the notice and agreed. Tenant agreement doesn't override the ordinance.
Three things to do this month:
Why this matters beyond the immediate compliance question: when you eventually sell your building, a buyer's lawyer will pull your rent roll history and compare it to the allowable increases for each year. I've had three deals in the last 12 months where escrow stalled because the seller was over the cap somewhere in the rent history. On a 12-unit, even a small overcharge can become a $50K-$100K price adjustment at close if it's caught in diligence.
The LA County Rent Stabilization and Tenant Protections Ordinance (RSTPO) only covers unincorporated areas. East LA, Altadena, Ladera Heights, Marina Del Rey, Hacienda Heights — those are County-governed. Incorporated cities like Santa Monica, Long Beach, Pasadena, or Beverly Hills have their own rules and aren't under the County ordinance.
The County uses a CPI-linked formula. For July 1, 2025 through June 30, 2026:
The February 2026 LA City ordinance did not touch the County rules. RSTPO still has its adders. But if you want the small-property-landlord bump, you have to self-certify annually with the Department of Consumer and Business Affairs (DCBA). Miss the window and you're stuck at 1.93%.
The biggest error I see: landlords who own buildings in both jurisdictions apply the City cap to their County properties (or vice versa). Last year I worked with a seller who owned a 12-unit in Koreatown and a 6-unit in unincorporated East LA. He'd been issuing 3% increases on both for two years. The East LA property was over the legal cap by more than a percentage point every year. When we went to market, a sophisticated buyer caught it in underwriting, and we had to adjust the sale price by $180K to account for the overcharge exposure.
The rule is simple: jurisdiction is determined by the building's physical address, not by your office or your management company's location. Pull the APN, check the address against the LA City boundary map, and if it sits in unincorporated County territory, you're under RSTPO — not RSO.
If you own in multiple jurisdictions, you need separate compliance processes for each. Same property manager can handle them, but the rent notice templates have to be different.
Same ordinance that eliminated the adders also replaces the flat 3% cap with a new formula starting July 1, 2026. The new rules:
What this means practically: if CPI runs 2.5%, your allowable increase is 2.25%. If CPI runs 5%, you're capped at 4%. Don't plan rent bumps assuming the 3% you've been getting will still be there after June 30, 2026. Start modeling tighter scenarios now — especially if you're holding through 2026-2027 and relying on rent growth to hit NOI targets.
Buyers are already adjusting. I've had two offers in the last 60 days that explicitly priced in the new formula, modeling a long-run 2-2.5% rent growth assumption instead of the flat 3% they used to use. That changes pricing today, not just at the next sale.
Here's what most rent-controlled landlords miss: the cap is only painful if you're stuck at it. The real money in RSO buildings isn't the annual cap — it's the turnover. Costa-Hawkins lets you reset rent to market when a tenant voluntarily leaves. That's where buyers underwrite their value-add assumption.
On a 12-unit building in Koreatown where half the tenants are 8+ years in place, you might have $500-$900 in rent-to-market gap per unit. That compounds fast. If two units turn per year at $600/month gap, that's $14,400 in year-one income upside. At a 5% cap rate, that's around $288K in incremental value. Your 3% annual cap is a minor speed bump. Your turnover velocity is the whole game.
Three things buyers look at on RSO and RSTPO buildings:
Loss-to-lease. Current rents vs. market. This is the value-add story — or the lack of one. Buildings with big loss-to-lease trade at lower cap rates because of the upside. Buildings already at market trade at higher caps.
Compliance history. Sophisticated buyers pull rent roll history and check it against the allowable increases for each year. If you've been over the cap, that's a liability that either kills the deal or costs you at closing. This is exactly where the Feb 2026 changes will trip up sellers starting a year from now.
Measure ULA exposure. If your building is likely to sell above $5 million, Measure ULA adds 4-5.5% transfer tax on top of everything else. That's a bigger number than most people realize. I wrote a full breakdown of how Measure ULA hits apartment sellers if you want the dollar impact modeled out.
For the full picture on how cap rates, RSO status, and underwriting interact, see my guide to valuing an LA apartment building.
Quick checklist:
If you want me to look at your building and give you a straight read on what it would actually sell for — including how the Feb 2026 changes affect your NOI projection and where the turnover upside sits — reach out. I don't do volume pitches. I'll run the numbers and tell you what the right move is.
Taylor Avakian
Apartment Building Broker, The Group CRE
1880 Century Park E Suite 800, Los Angeles, CA 90067
Phone: 916-996-4421 | Email: taylor@lyonstahl.com
If your building is in the City of Los Angeles and covered by the RSO (most buildings built before October 1, 1978), you can raise rent 3% between July 1, 2025 and June 30, 2026. That's it — the 1% utility adders for gas and electric were eliminated on February 2, 2026, and the 10% dependent adder is gone too. In unincorporated LA County under the RSTPO, the cap is 1.93% for fully covered units, 2.93% if you've self-certified as a small property landlord, and 3.93% for luxury units.
Yes. The LA City Council passed an ordinance on December 12, 2025 that eliminated the 1% gas utility adder, the 1% electric utility adder, and the 10% dependent adder. It took effect February 2, 2026. If you issued rent increase notices after that date that still included those adders, you're over the legal cap — even if your tenant signed off on it. Re-issue clean notices and don't collect the overcharge, or you'll create compliance exposure that shows up in every buyer's due diligence if you ever sell.
