Los Angeles City Council passed a resolution this Wednesday (12th) to set the annual rent increase limit for rent-controlled apartments at 4%. This marks the first significant change to the Rent Stabilization Ordinance (RSO) in Los Angeles since 1985.
Under the updated plan approved by the City Council, the annual rent increase floor for rent-controlled apartments in LA is set at 1%, with a ceiling of 4%. Additionally, the City Council also recommended updating the rent-setting method to incorporate inflation factors, with the increase rate based on 90% of the Consumer Price Index (CPI). Currently, the annual rent increase for these rent-controlled apartments ranges from 3% to 8%; if landlords bear utilities such as water, electricity, and gas expenses, the increase can go up to 10%.
Specifically, the current regulations allow landlords who pay gas and electricity costs to separately increase the rent by 1%, which has been eliminated in the new rules. The new rules also prohibit landlords from raising rents due to tenants having multiple dependents.
As part of the plan, the City Council will also increase funding for repairing and rebuilding housing to assist small landlords owning 2 to 10 apartment units.
Rent-controlled apartments in Los Angeles (RSO Units) typically refer to apartments built before October 1, 1978. These apartments are subject to LA’s Rent Stabilization Ordinance, which limits annual rent increases for tenants and provides eviction protections.
According to statistics from the Los Angeles Housing Department, the city governs a total of 631,000 housing units under this ordinance, including apartments, cooperative units, rental properties, some hotels and motels, and mobile homes.
Nithya Raman, Chair of the Los Angeles Housing Commission and City Council Member, expressed concerns before the vote that the housing affordability crisis facing residents was weakening Los Angeles’ resilience, making it difficult for people to live there.
“Rising rents every year are pushing people out of this city,” she said. “When people leave, we lose the best parts of this city. We need to ensure that people can afford to live here.”
Monthly rent prices for rent-controlled apartments in Los Angeles generally exceed $1,800. If a tenant vacates, landlords can rent out the property at market rates for non-rent-controlled apartments and then increase the rent according to the rent control regulations. According to Apartment List data, the median rent in Los Angeles County is $1,869 for a one-bedroom apartment and $2,384 for a two-bedroom. After the January fire, many residents who lost their homes flooded the rental market, exacerbating rent increases.
According to Los Angeles Housing Department statistics, the average rent for non-rent-controlled apartments across the city is 25% higher than rent-controlled apartments. Rent control helps tenants save significant costs.
Combining data from the U.S. Department of Housing and Urban Development (HUD) and the Census Bureau, over 60% of Los Angeles residents rent their homes, and more than half of renters spend over 30% of their monthly income on rent. Approximately 20% of renters have household incomes below the federal poverty line; of those, 80% need over half their income to pay rent, and 10% must allocate 90% of their income to housing.
Landlords argue that this new plan does not consider their interests and will exacerbate the housing crisis for everyone. The rationale is that the updated rent increase formula raises the cost of housing provision, with public utility rates, garbage disposal fees, inspection fees, and minimum wage all rising in Los Angeles. Landlords’ insurance premiums and building maintenance costs are also increasing. Many express concerns that this policy amendment is overly stringent, fearing that the rent collected may not cover the various costs imposed by the city of Los Angeles.
Water and electricity costs in Los Angeles increased this year, with basic electricity costs rising by 11%, and sewage and garbage fees also on the rise. Residents saw a 54% increase in garbage collection fees for single-family residences in October.
While Councilwoman Monica Rodriguez supports the resolution to limit rent increases, she also criticizes the recent rise in various fees, which further burdens property owners. She believes that affected property owners who invest their life savings to provide housing opportunities for city families should not have their interests sacrificed by policies.
Two council members voted against the resolution, believing that it would send a message to the real estate market: “Do not build in Los Angeles, do not invest here.”