Interest on Security Deposit in Los Angeles: 2026 Rate and Rules

If you rent a unit covered by the Los Angeles Rent Stabilization Ordinance, your landlord must pay you interest on your security deposit every year, and for 2026 the rate is 3.03%. This rule on interest on a security deposit in Los Angeles applies only to RSO units, not to every rental in the city, and California state law does not require interest on deposits at all. If your landlord has never paid you interest, the Los Angeles Housing Department will not investigate — your remedy is small claims court.¹

Is Your Unit Covered

The interest obligation lives in Chapter XV of the Los Angeles Municipal Code, the city’s Rent Stabilization Ordinance.² It reaches rental properties that received their first certificate of occupancy on or before October 1, 1978. Covered property types include apartments, duplexes, condominiums, townhomes, two or more single-family homes on the same lot, accessory dwelling units, residential units attached to commercial buildings, and hotel or rooming house rooms occupied by the same tenant for 30 or more consecutive days.³

A standalone single-family home on its own lot is not covered. Buildings first occupied after October 1, 1978 are also outside the ordinance, along with government-operated housing, school-run student housing, and units in nonprofit stock cooperatives occupied by shareholder tenants.⁴ If you’re unsure about your building, the Los Angeles Housing Department maintains a searchable database on its website.

State Law Does Not Require Interest

Tenants in non-RSO units sometimes assume they’re entitled to interest too. They are not. California Civil Code Section 1950.5 governs security deposits statewide, and it contains no provision requiring landlords to pay interest.⁵ The state statute deals with how much a landlord can collect, what deductions are allowed, and the timeline for returning the deposit. Interest is not part of it. If your unit isn’t covered by the RSO, your landlord owes you no interest at all.

The 2026 Rate and Recent History

The Rent Adjustment Commission sets the rate each year by averaging the savings account rates offered on September 1 of the prior year by at least five FDIC-insured banks with branches in Los Angeles. The Commission adopts the rate by November 30, and it runs from January 1 through December 31 of the following year.⁶

Recent rates:

2022: 0.03%
2023: 0.04%
2024: 0.52%
2025: 4.32%
2026: 3.03%

The swings are large. Between 2022 and 2025 the rate jumped more than a hundredfold as bank savings rates climbed with broader interest-rate increases.¹ A landlord who let this obligation slide when rates were fractions of a percent now owes meaningfully more each year.

How to Calculate What You’re Owed

Interest under the RSO is simple interest, not compound, and it accrues monthly on the original deposit amount.⁶ Multiply the deposit by that year’s rate for the annual amount. For a deposit held across several years, apply each year’s rate separately and add the results.

Take a $2,000 deposit held throughout 2025 and 2026. The 2025 interest at 4.32% is $86.40. The 2026 interest at 3.03% is $60.60. Together that’s $147.00 for the two years. For a long tenancy stretching back into years when rates hovered near zero, the older years contribute almost nothing. The Los Angeles Housing Department publishes a full rate table going back to 1990 in its security deposit interest bulletin.¹

How Landlords Are Supposed to Pay It

The obligation kicks in once a deposit has been held for at least one year. The landlord can pay monthly or annually, but must tell the tenant in writing which method they’ve chosen.⁶

Two delivery methods satisfy the ordinance. The landlord can send direct payment by check or electronic transfer, or the landlord can apply the interest as a credit against your rent. The choice belongs to the landlord, not the tenant. If you’ve been in an RSO unit for more than a year and you’ve never seen either a payment or a rent credit, your landlord is likely behind.

Move-Out and Property Sale

When a tenancy ends, any unpaid accumulated interest must be returned along with the deposit itself, in the same manner and on the same timeline as the deposit under California Civil Code Section 1950.5.¹ Under state law, that gives the landlord 21 calendar days after you vacate to return the deposit and interest with an itemized statement of any deductions.⁵

Deductions for cleaning or damage beyond normal wear and tear come out of the deposit. The interest that accrued over the tenancy is still owed on top. Landlords often overlook the interest portion when processing move-out returns, so run the math yourself against the rate table before treating a final payment as complete.

Property sales are the other moment interest tends to disappear. When an RSO property changes hands, accumulated interest is handled the same way the deposit is under California Civil Code Sections 1950.5(g) and 1950.5(h).¹ The selling landlord either transfers the deposit and accumulated interest to the new owner or returns them to the tenant. If neither the outgoing nor the incoming owner tracks the interest, it can quietly vanish in the transaction. Keep your own running total and confirm with the new owner that they received both the deposit and the interest balance.

What to Do if Your Landlord Hasn’t Paid

The Los Angeles Housing Department does not investigate complaints about unpaid security deposit interest. The ordinance gives you only a civil remedy, meaning you have to bring your own lawsuit in a court of appropriate jurisdiction, including small claims court.¹ LAHD handles other RSO complaints, such as illegal rent increases, but for deposit interest specifically the city points tenants to the courts.⁷

Small claims court in California handles disputes up to $10,000 for individuals, with filing fees between $30 and $100 depending on the amount claimed.⁸ Deposit interest disputes sit comfortably inside that range. You don’t need a lawyer, and lawyers aren’t allowed to represent parties in small claims anyway.

Before filing, send your landlord a written demand. Include your calculation of the interest owed and attach the rate table from the Housing Department bulletin. Many landlords honestly don’t know about this obligation, and a clear letter with the math laid out often resolves the issue without a court date. If it doesn’t, that demand letter becomes evidence that you gave your landlord a chance to pay before suing.

1
Los Angeles Housing Department. Interest Payment on Security Deposit Bulletin
2
American Legal Publishing. Los Angeles Municipal Code Chapter XV – Rent Stabilization Ordinance
3
Los Angeles Housing Department. What Is Covered Under the RSO
4
American Legal Publishing. Los Angeles Municipal Code SEC. 151.02 – Definitions
5
California Legislative Information. California Civil Code Section 1950.5
6
American Legal Publishing. Los Angeles Municipal Code SEC. 151.06.02 – Payment of Interest on Security Deposits
7
Los Angeles Housing Department. File a Complaint
8
California Courts. Small Claims in California