News Alert: L.A. City Passes Severely Reduced RSO Formula Ordinance
News Alert
L.A. City Passes Severely Reduced RSO Formula Ordinance
By Janet M. Gagnon, Chief Corporate Affairs Officer & SVP, Government Affairs
On December 12th, the Los Angeles City Council held the second and final vote to finally approve an ordinance containing the reduced RSO formula that passed 12-to-2 with only Council Members John Lee and Monica Rodriguez voting against it. The ordinance is effective immediately and the new RSO formula calculation will be implemented July 1, 2026. The following are the key provisions of the new ordinance:
- Allowable annual maximum rent increase is 3% for the period from June 1, 2025 through June 30, 2026 for increases that were not previously noticed and served.
- Starting July 1, 2026, the annual allowable rent increase will be calculated on the basis of 90% of the Consumer Price Index (CPI) for “All Items” (down from the current 100% of CPI).
- Maximum allowed increase (a/k/a, “ceiling”) will be reduced to 4% (down from existing 8%) and the minimum allowable increase (a/k/a, “floor”) will be reduced to 1% (down from the existing 3%).
- Immediate elimination of the additional 1% increase previously permitted for housing providers who pay for gas and/or electricity on behalf of renters living in master metered properties.
- Immediate elimination of the existing 10% increase previously permitted for additional occupants who are deemed dependents of the existing renter.
- Starting July 1, 2026, relocation fee amounts will be increased each year according to the new RSO formula calculation, except they will be based on 100% of CPI.
Also, there is a change to the average CPI calculation. However, it appears that the additional language was created by the City Attorney’s Office without the knowledge of the City Council members, since it was never mentioned during multiple City Council meetings. We are obtaining clarification on the new language and will share additional information as it becomes available. Fortunately, it will not have an impact until the new formula is implemented on July 1, 2026.
AAGLA continues to advocate for Council Member John Lee’s amendment that would provide an additional 1% increase for small owners with 10 or fewer units. Council Member Adrin Nazarian has also offered an amendment that would use criteria from Internal Revenue Service to define dependents. Both amendments were referred to the Housing and Homelessness Committee chaired by Council Member Nithya Raman. These amendments will not be discussed by the committee until January at the earliest due to the winter recess.
This article is for informational purposes only. If you have any questions regarding your property or specific leasing issues and the requirements of any legal changes described herein, please consult with an attorney.