The 2026 LA RSO rewrite is a substantial revision to the Los Angeles Rent Stabilization Ordinance — approved by LA City Council in December 2025 and effective July 1, 2026. The revision lowers the allowable annual rent increase cap, eliminates the historical utility and dependent-occupant bumps, and tightens the floor and ceiling on rent adjustments. It applies to pre-1978 LA City multifamily inventory covered by RSO. For sellers of affected inventory, the rewrite is the single largest underwriting event in LA multifamily in 2026.
The revised RSO formula lowers the base rent cap meaningfully below the pre-rewrite framework. The floor on allowable increases drops. The ceiling on allowable increases drops. The utility bump (historically added a percentage point to the allowable annual increase to compensate landlords for utility cost inflation) is eliminated. The dependent-occupant bump (historically added a percentage point when a qualifying occupant was added to the unit) is eliminated. The effect, layer by layer, is that the NOI growth trajectory for LA City pre-1978 inventory under the new formula is materially slower than under the pre-2026 framework.
Pre-1978 LA City multifamily of two or more units. Subject to RSO, covered by the rewrite.
Post-1995 LA City multifamily. Costa-Hawkins exempt from RSO. Not affected by the rewrite.
Buildings between 1978 and 1995. Most are exempt from LA City RSO but subject to AB 1482 as a statewide backstop. The rewrite does not directly affect them, though AB 1482 evolution is a separate ongoing story.
LA County unincorporated, or buildings in separate cities (Glendale, Burbank, Pasadena, Santa Monica, Culver City, West Hollywood). Not covered by LA City RSO, not affected by the rewrite. Each has its own regulatory framework.
For sellers of pre-1978 LA City inventory, the rewrite is repricing their buildings in real time. Buyers are pricing the new formula into offers for deals starting after December 2025. The magnitude of the repricing depends on the specific building's current in-place-to-market rent gap and the specific underwriting model the buyer is using. A seller transacting in Q2 2026 on a pre-listing process that started in early 2026 may close under pre-rewrite pricing. A seller starting the process in mid-to-late 2026 is pricing into post-rewrite underwriting. The repricing will largely complete by late 2026. Sellers who transact during the absorption window (roughly Q1-Q3 2026) are meeting stronger offers than sellers who wait for the absorption to complete.
For buyers, the rewrite creates a repricing opportunity. Inventory that was underwritten aggressively in 2022-2023 is now trading at different fundamentals. Disciplined buyers who can identify well-positioned pre-1978 assets at post-rewrite pricing are acquiring at structurally better basis than peak-cycle buyers did. For institutional capital specifically concentrated in post-1995 Costa-Hawkins exempt inventory, the rewrite is a reason to continue concentrating there. The relative attractiveness of post-1995 over pre-1978 widens.
It does not eliminate rent increases altogether — it constrains them by formula. It does not apply retroactively to reset in-place rents. It does not convert pre-1995 inventory into something it is not. It does not override Costa-Hawkins; post-1995 inventory remains exempt.
If you own pre-1978 LA City multifamily and are considering a sale in the next 12-24 months, the 2026 RSO rewrite belongs in every pricing and timing conversation. The repricing is being absorbed through 2026. Transacting during that absorption window produces different pricing than waiting. If you own post-1995 LA City multifamily, the rewrite does not apply. The institutional bidding environment for post-1995 Costa-Hawkins exempt inventory is among the strongest in three years.
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When does the 2026 RSO rewrite take effect?
July 1, 2026 is the effective date. The City Council approval vote was in December 2025.
Is my 1960s LA building covered by the rewrite?
If the building is in LA City and is pre-1978 multifamily with two or more units, yes. Most 1960s LA multifamily falls under RSO and is covered by the revised formula.
Can the rewrite be reversed or challenged?
As of publication, the ordinance is in effect and the City Council approval is durable. Legal challenges are possible but the ordinance is currently the law going forward.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap. This is informational, not legal advice — consult specialized counsel on specific RSO compliance questions.
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