Los Angeles Tightens Rent Rules, Capping Increases at 4% and Ending ‘Baby Penalty’ Surcharges

The email in Pride St. Clair’s inbox looked familiar: a notice that the rent on her Koreatown apartment was about to go up again.

For years, St. Clair said, those letters brought anxiety. Annual increases on her rent-stabilized unit regularly ran close to the legal maximum, and when she took in her mother, her landlord warned that adding another person to the household could trigger a sharp surcharge.

This winter, the message was different. The increase was capped at 4%, and there was no penalty for the extra family member.

“That’s a victory,” St. Clair said in an interview quoted by The Wall Street Journal, “but the fight is never done.”

Her smaller rent hike is an early sign of a sweeping change in how Los Angeles governs rents for the majority of its apartment stock—a change that supporters call overdue relief for tenants and critics warn will discourage investment in a city already short on housing.

First major overhaul in decades

In a pair of 12–2 votes in November and December, the Los Angeles City Council approved the first major tightening of the city’s Rent Stabilization Ordinance (RSO) in roughly four decades. Mayor Karen Bass signed the overhaul on Dec. 23.

The new rules cap most annual rent increases on covered units between 1% and 4%, tied to inflation, and prohibit rent hikes when tenants add children or dependent relatives to their households.

The ordinance affects about 650,000 rent-stabilized units, city officials say—roughly three-quarters of Los Angeles’ multifamily rental housing and home to an estimated 1.5 million people in the nation’s largest renter-majority city.

“This is the first major overhaul of our rent stabilization ordinance in more than four decades,” Bass said at a signing ceremony. “No parent should have to choose between buying groceries or paying the rent, or live in fear of eviction because they have welcomed a child into their family.”

What changes under the new ordinance

Under the old rules, landlords of rent-stabilized units—generally buildings built on or before Oct. 1, 1978, plus certain replacement units—could raise rents between 3% and 8% each year, depending on inflation. They were allowed to add another 1% or 2% if they paid for gas or electricity, and could seek increases of up to 10% or more when additional occupants moved in, including dependents such as children or elderly parents in some cases.

Tenant groups labeled those surcharges a “baby penalty” and argued that the core formula allowed rents to rise faster than incomes for years.

City analyses found allowable rent increases exceeded inflation in most of the past three decades, even as more than half of Los Angeles renters became “rent burdened,” spending at least 30% of their income on housing. About one in 10 tenant households spends 90% of income on rent, according to the city’s Housing Department.

New annual cap tied to inflation

The new ordinance links annual rent increases for rent-stabilized units to 90% of the consumer price index for the Los Angeles region, with a hard floor of 1% and a ceiling of 4%. The change eliminates the old utility add-ons.

Beginning July 1, 2026, any increase must fall within that 1% to 4% band.

Dependents protected from surcharges

Landlords are barred from raising rent when tenants add dependents under their care, including newborns, children, elderly parents and disabled relatives. Owners may still impose up to a 10% increase when nondependent adults, such as roommates, move in.

Interim cap

From June 1, 2025, through June 30, 2026, rent increases for RSO units that have not already received notices are capped at 3%, according to landlord advisories summarizing the law.

Political push—and industry pushback

Councilmember Nithya Raman, who chairs the council’s Housing and Homelessness Committee, began pushing to update the rent-stabilization formula in 2023. She has framed the change as one part of a larger response to a prolonged affordability crisis and a series of devastating wildfires that destroyed homes across Los Angeles County and heightened scrutiny of rent hikes.

“Only greater supply will sustainably reduce costs across L.A., but a change to our rent stabilization formula is long overdue,” Raman said when the council first advanced the proposal.

Councilmember Hugo Soto-Martínez, a former hotel worker and labor organizer who represents parts of central Los Angeles, called the council’s vote a break with decades of inaction.

“Being able to afford rent is not a luxury—it’s a basic necessity,” he said. “For the first time in 40 years, we are taking meaningful steps to ensure more Angelenos can afford to live where they work.”

The overhaul drew sharp opposition from landlord groups and two council members, who warned that stricter caps could backfire by discouraging maintenance of aging buildings and deterring new housing construction.

Councilmember John Lee, who represents a swath of the San Fernando Valley and ultimately voted no, said the message to owners and developers was clear: “Do not build here. Do not invest in Los Angeles. Do not keep your units on the market.”

The Apartment Association of Greater Los Angeles, which represents landlords, described the change as a “severely reduced RSO formula ordinance” in a bulletin to members. The group argued the new 4% cap and reliance on 90% of CPI will make it harder for owners to keep up with rising insurance premiums, property taxes and capital repair costs, especially in older rent-controlled buildings that already operate on thin margins.

Real estate brokers say investor appetite for Los Angeles multifamily properties had already cooled amid a broader shift toward heavily regulated coastal markets. Some warn this latest move could push more capital to Sun Belt cities such as Austin and Phoenix, where permitting is faster and rent controls are looser or nonexistent.

Why supporters say it matters

Supporters of the ordinance counter that keeping tenants in place and avoiding sharp rent spikes is a priority in a city where new construction has consistently lagged demand. In the first eight months of 2025, the Los Angeles metro area permitted slightly fewer new housing units than Austin, Texas, despite having roughly five times the population, according to federal data cited by housing analysts.

Tenant advocates also tie the reform to efforts to stem homelessness. Los Angeles has one of the largest unsheltered homeless populations in the country, and researchers have repeatedly linked rent increases and evictions to the number of people living on the streets.

“People are juggling wildfires, federal actions, budget cuts and skyrocketing rents,” said Kyle Nelson, research and policy director for the nonprofit Strategic Actions for a Just Economy, at the ordinance signing. “This gives tenants some certainty that they won’t see 8 or 10 percent increases year after year.”

The wildfires that tore through parts of Los Angeles County in recent years, destroying hundreds of multifamily units, added urgency. County supervisors separately approved fines of up to $50,000 per violation for landlords found to be gouging rents in fire-affected areas. City officials say stabilizing rents in the older stock that remains is one way to keep displaced and low-income tenants from being pushed out of the region entirely.

A national backdrop

The stakes are high nationally as well. Cities across the country are experimenting with or revisiting rent caps as they grapple with post-pandemic inflation and soaring housing costs. St. Paul, Minnesota, saw a sharp drop in multifamily building permits after voters approved one of the strictest rent-stabilization measures in the country in 2021, then moved to loosen the rules amid concerns from developers.

Los Angeles’ approach is less sweeping. The new cap applies only to RSO-covered units, not to newer buildings that fall under California’s statewide rent law, and landlords can still reset rents to market levels when tenants move out, a practice known as vacancy decontrol.

Housing economists say how the ordinance is implemented—and whether city leaders pair it with efforts to add more housing—will determine its long-term impact. Raman and others on the council have acknowledged that without significant new supply, even tightly regulated rents on existing apartments will not be enough to bring down overall housing costs.

For tenants like St. Clair, the change is nonetheless immediate. She still worries about her rent, she said, and about the likelihood of future increases as wages struggle to keep up with the cost of living. But for the first time in years, adding a family member no longer carries the threat of a sudden, double-digit hike.

“In this city, you always expect the rent to go up,” she said. “Now at least we know how much—and that feels different.”