In a major policy shift to address Los Angeles County’s housing affordability crisis, the Board of Supervisors approved a 3% cap on annual rent increases for rent-controlled properties in unincorporated areas. Effective January 1, 2025, the measure is designed to slow displacement and stabilize housing costs for more than 50,000 units. However, it has also triggered strong opposition from property owners and developers, raising questions about the long-term impact on housing supply and investment.
Understanding the 3% Rent Cap Policy
The new regulation affects approximately 51,700 rent-controlled units built before 1995 in unincorporated areas like East LA, the San Gabriel Valley, and parts of South Central. These areas are outside of city jurisdiction but under the county’s governance. Under the updated Rent Stabilization and Tenant Protections Ordinance (RSTPO), rent increases are tied to the local Consumer Price Index (CPI) but capped at 3% per year.
The cap breaks down into the following tiers:
- Standard rent-controlled units: 3% max annual increase
- Small landlords (10 units or fewer): Up to 4%
- Luxury units ($4,000+/month in 2018): Up to 5%
The policy reflects the Board’s goal to reduce housing instability. “Many renters are still recovering financially from the pandemic and inflation,” said Supervisor Holly Mitchell, the ordinance’s chief sponsor. “This is about preventing displacement.”
Tenant Relief Amid Housing Pressures
More than 54% of Los Angeles County residents are renters, according to U.S. Census data. A 2024 Zillow report shows the median rent in LA County reached $2,910 per month—nearly a 29% increase from 2020. For tenants like Ana Martinez, who lives in East LA and earns under $50,000 annually, rent hikes in recent years have been unsustainable.
“My rent went up 9% last year, and that almost wiped out my savings,” she said. “The 3% cap helps, but I’m worried landlords will find loopholes.”
Groups like the Alliance of Californians for Community Empowerment (ACCE) and LA Tenants Union have praised the new measure. However, they caution that enforcement remains a challenge. “We need better tools for tenants to report illegal increases and retaliation,” said Jennifer Rojas, ACCE policy director.
Landlord Backlash and Market Exit Threats
Small landlords argue the cap is unrealistic. Bill Oswald, who owns eight rental units in Long Beach, said his insurance premiums jumped 63% since 2022. “We’re barely breaking even now. With a 3% cap, we’ll have no cushion to cover repairs or taxes,” Oswald said. “We’ve been approached by corporate buyers. I may have to sell.”
Data from the National Multifamily Housing Council shows property operating expenses increased 11.7% in 2023, led by surges in maintenance, insurance, and utilities. Yet the CPI in Southern California only rose 3.5% in 2024, creating a mismatch between cost growth and allowable rent adjustments.
The California Apartment Association (CAA) called the cap “economically reckless,” warning it could shrink the rental supply by forcing mom-and-pop landlords out. “These small owners often provide naturally affordable housing,” said CAA spokesperson Debra Carlton. “Driving them out will only accelerate corporate consolidation.”
Legal Ramifications and Enforcement Power
To support enforcement, LA County has increased penalties for price gouging. In February 2025, fines for illegal rent increases and exploitative practices during emergencies were raised to $50,000 per violation, especially after reports of gouging during the Palisades wildfires.
Additionally, the county is scrutinizing the use of rent-setting algorithms. Software providers like RealPage have come under national investigation for possible antitrust violations, and LA County is considering joining lawsuits challenging such practices.
“We’re committed to protecting renters from unfair pricing—whether it’s done manually or through data systems,” said County Counsel Marta Álvarez.
State-Level Support and Governor Newsom’s Executive Order
Governor Gavin Newsom signed an executive order in January 2025 extending rent increase limits in LA County’s fire-affected zones. His order prohibits rent hikes over 10% in designated areas and temporarily suspends no-fault evictions.
This aligns with LA County’s stricter 3% cap but also raises questions about coordination between local and state housing strategies. Tenant groups see it as reinforcement of their rights; landlords view it as overreach.
Comparative Policy Landscape
LA County’s approach mirrors recent efforts in other jurisdictions. In Maryland, both Montgomery and Prince George’s Counties passed rent stabilization laws in 2024 capping increases at 3% plus inflation or 6% maximum. Meanwhile, cities like Portland and Minneapolis are experimenting with tiered caps based on building age and occupancy status.
California itself has had statewide rent control since 2020 under AB 1482, which limits rent hikes to 5% plus local inflation (up to 10%). However, LA County’s move is even stricter, positioning it among the most aggressive rent control jurisdictions nationally.
Developer Concerns and Housing Supply Impact
Real estate developers have flagged the new cap as a red flag for long-term investment. “We’re recalibrating future projects in LA County,” said Javier Cortez, a partner at Bluebeam Developments. “The rental yield assumptions no longer hold, especially in working-class areas.”
According to the California Legislative Analyst’s Office, the county needs to build over 500,000 housing units by 2030 to meet demand. Yet permitting rates remain below 2018 levels, and developers warn that strict controls on future rent growth discourage private-sector participation.
A March 2025 Redfin report shows a 14% uptick in multifamily properties for sale in unincorporated LA compared to the same period in 2024, suggesting a shift among owners looking to exit the market.
Historical Context: Rent Control in California
Rent control in California dates back to the 1970s, with cities like Santa Monica and Berkeley enacting early ordinances. In 1995, the Costa-Hawkins Act restricted cities from expanding rent control to single-family homes and units built after that year. However, the 2019 passage of AB 1482 brought limited statewide rent control for units over 15 years old.
LA County’s 2025 cap builds on this legacy, but it also amplifies longstanding debates over market regulation versus affordability mandates. Historically, cities with strong rent control have also faced slower housing growth and elevated homelessness rates—a pattern some analysts worry could repeat.
Tenant Protections and Tools
To aid compliance and tenant awareness, LA County’s Department of Consumer and Business Affairs (DCBA) now provides: Online rent cap calculators, Eligibility checkers for rent stabilization, A 24/7 reporting hotline and complaint form.
DCBA has pledged to increase outreach through tenant clinics and landlord training programs. The agency reported over 3,200 rent complaints in the first quarter of 2025—more than double the prior year’s average.
Conclusion: Policy with High Stakes
Los Angeles County’s rent cap policy is among the most aggressive efforts nationally to protect tenants from economic displacement. For renters, it provides essential breathing room amid a broader affordability crisis. But for landlords and developers, especially smaller players, it introduces economic strain and regulatory uncertainty.
As California’s housing market continues to evolve, the balance between tenant protections and housing supply will be key. Policymakers, economists, and housing advocates alike must collaborate to ensure the rental ecosystem remains viable and equitable for all stakeholders.
Sources: Los Angeles Times, Zillow, Redfin, CAA, DCBA, USC Price School of Public Policy, California Legislative Analyst’s Office, National Multifamily Housing Council