RSO is LA City's local rent stabilization ordinance, applied to pre-1978 multifamily inventory within city limits. Costa-Hawkins is a 1995 state law that exempts post-1995 construction — and a few other categories — from local rent control across all of California. In plain terms: RSO controls what you can do with a pre-1978 LA City apartment building. Costa-Hawkins is the reason post-1995 LA multifamily is not covered by RSO. The two interact in a single structural way: Costa-Hawkins sets the ceiling on what LA City (or any California city) can regulate. RSO sits inside what Costa-Hawkins permits.
LA City's Rent Stabilization Ordinance applies to pre-1978 multifamily buildings of two or more units within LA City limits. It caps the allowable annual rent increase by formula, establishes just-cause eviction requirements, requires registration and ongoing compliance filings, and imposes tenant relocation obligations on no-fault terminations. The ordinance was significantly revised by LA City Council in December 2025, with the revised formula taking effect July 1, 2026. The revised rules are more restrictive than the pre-2026 framework: lower annual increase cap, eliminated utility and dependent-occupant bumps, tighter floor and ceiling on allowable adjustments.
The Costa-Hawkins Rental Housing Act (California Civil Code 1954.50 et seq., enacted 1995) establishes statewide limits on what municipal rent control ordinances can cover. Specifically:
It exempts post-1995 construction from local rent control. Buildings issued their certificate of occupancy after February 1, 1995 cannot be subject to local rent price controls, regardless of the city or county.
It exempts single-family homes and condominiums. Municipal rent control cannot cover these property types (with limited exceptions).
It requires vacancy decontrol. When a rent-controlled unit becomes vacant, the landlord may set the next rent at market, and the new tenant's rent is then subject to local rent control going forward (but starts at market).
A pre-1978 LA City apartment building is subject to RSO. Annual rent increases are capped by the RSO formula. Tenant protections apply. A post-1995 LA City apartment building is exempt from RSO under Costa-Hawkins. Annual rent adjustments are governed by the lease and California state law (including AB 1482 as a statewide backstop). Two buildings on the same block in LA City, one from 1965 and one from 2001, operate under entirely different regulatory regimes. That difference shows up in valuation, in buyer underwriting, and in long-term NOI trajectory.
Costa-Hawkins has faced three statewide ballot-initiative repeal attempts — Prop 10 in 2018, Prop 21 in 2020, Prop 33 in 2024. All three failed. A fourth attempt is likely within the next decade. A successful repeal would fundamentally change the LA multifamily landscape. The pricing premium that post-1995 LA inventory currently enjoys exists because of Costa-Hawkins. If the statute is repealed, that premium is at risk. For sellers, the risk is real but not immediate. Three prior repeal attempts have failed. Planning horizons of 2-to-5 years treat Costa-Hawkins as effectively permanent. Long-hold plans of 10+ years should factor the repeal risk.
If you own pre-1978 LA City multifamily, you own an RSO-covered asset. The December 2025 rewrite taking effect July 2026 is actively repricing this inventory. If you own post-1995 LA City multifamily, you own a Costa-Hawkins exempt asset. The RSO rewrite does not apply to you. Institutional capital is disproportionately interested in this inventory in 2026. If you own LA County unincorporated multifamily, the LA County RSTPO (tightened in early 2025) applies to pre-1995 inventory, and Costa-Hawkins exempts post-1995 inventory. Different regulatory regimes. Different pricing outcomes. Different buyer pools. Understanding which one applies to your specific building is the starting point for any sale conversation.
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Is my 1980 LA City building covered by RSO?
No — RSO covers pre-1978 LA City multifamily. A 1980 building is post-1978 but pre-1995, so it is generally exempt from RSO and exempt from local rent control, though AB 1482 may apply as a statewide backstop.
Does Costa-Hawkins apply in LA County unincorporated areas?
Yes. Costa-Hawkins is a California state law and applies across all municipalities and unincorporated areas in the state.
What happens if Costa-Hawkins is repealed?
A successful repeal would allow local jurisdictions to extend rent control to post-1995 construction and to other categories currently exempted. The specific consequences would depend on what replacement ordinances local jurisdictions then adopted.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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