News Summary
Los Angeles is experiencing a notable slowdown in housing development despite high demand for rental units. Key developers are pausing new projects due to rising costs and profitability concerns. With a significant drop in rental unit construction and high vacancy rates, affordability challenges persist. Factors such as investor wariness, regulatory changes, and increasing material costs contribute to the crisis. Historically, housing production has plummeted, raising alarms about the city’s ability to address its housing needs effectively.
Los Angeles is facing a significant slowdown in housing development, as key developers are pausing new projects due to profitability concerns, despite a strong demand for rental units. Developer Cliff Goldstein recently completed a luxury apartment complex on the Westside but has no immediate plans for further construction, emphasizing the difficulty of finding financially viable building opportunities, which he likened to searching for a “needle in a haystack.” Similarly, colleague Ari Kahan has not purchased a development site in over two years and remains uncertain about future projects in the city.
The supply of new rental units in Los Angeles is declining even as demand remains high. The city’s vacancy rate is among the lowest in the country, contributing to rental rates that rank among the highest nationwide. As a result, developers are compelled to charge between $4,000 to $5,000 per month for new apartment units, further complicating the affordability landscape. Data from CoStar reveals that the number of apartments currently under construction has seen a consistent quarterly decrease since early last year, with projections indicating a fall to a level not seen in over a decade. As of September, fewer than 19,000 apartments are reported to be under construction, reflecting a 30% drop compared to three years prior.
Financial challenges are exacerbating the situation for developers, as institutional investors remain hesitant to engage in the Los Angeles market. This reluctance is primarily due to unpredictable regulatory changes, prompting a shift in investment towards other cities. Many in the investment community view Los Angeles as “redlined,” further hindering new development projects. Additionally, fresh government policies and increased tariffs on essential construction materials, such as steel and copper, are driving development costs higher, making potential projects less appealing.
The labor market for construction also faces complexities, with approximately 61% of construction workers in California being immigrants and about 26% being undocumented. This situation further complicates labor availability, particularly during a time of decreased production.
Historically, housing production in Los Angeles County has seen a drastic decline over several decades. From producing over 70,000 new units annually in the 1950s, production has dropped to under 15,000 in the 2010s. In the past six years, around 152,000 new units were built in Los Angeles County, with most being rental units. However, only 10% of these units were deemed affordable for low-income households, highlighting a critical gap in housing availability.
The number of multifamily building permits issued in the Los Angeles-Long Beach-Anaheim area witnessed a staggering 68% drop in July compared to the same month in 2020. Investor concerns include new public policies, such as Measure ULA, which imposes transfer taxes on large real estate sales, and temporary eviction restrictions from the pandemic.
Local government officials are currently examining the potential implications of a proposed $32.35 per hour minimum wage for construction projects, which may add further challenges for developers operating in the area.
Despite these current hurdles, some developers remain optimistic and are preparing to seize future opportunities when market conditions improve. Strategies to alleviate the ongoing housing crisis are being evaluated, such as reducing regulatory burdens and expediting construction approvals. Initiatives taken after natural disasters, like wildfires, aim to accelerate housing recovery and may serve as a framework for streamlining processes for future development projects.
As demand for housing continues, projections indicate that people may be pushed to move further away from the city, leading to longer commutes. The ongoing challenges now paint a complex picture of Los Angeles’ housing market, with developers facing financial and regulatory obstacles at a time when the community desperately needs new housing options.
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Additional Resources
- Los Angeles Times: California’s Housing Shortage
- Wikipedia: Housing Crisis
- LAist: LA Housing Crisis Newsletter
- Google Search: Los Angeles housing market
- Smart Cities Dive: Solving LA’s Housing Crisis
- Google Scholar: Los Angeles housing crisis
- The New York Times: LA Fires & Housing Shortage
- Encyclopedia Britannica: Housing
- Boyle Heights Beat: Apartment Permits and the Housing Crisis
- Google News: Los Angeles housing development
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LOS ANGELES STAFF WRITER The LOS ANGELES STAFF WRITER represents the experienced team at HERELosAngeles.com, your go-to source for actionable local news and information in Los Angeles, Los Angeles County, and beyond, specializing in "news you can use" with coverage of product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise from years of dedicated reporting and strong community input, including local press releases and business updates, while delivering top reporting on high-value events like the Academy Awards, LA Auto Show, and Los Angeles Marathon, extending coverage to key organizations such as the Los Angeles Area Chamber of Commerce and the Los Angeles Tourism & Convention Board, plus leading businesses in entertainment and technology like Warner Bros. and SpaceX, and as part of the broader HERE network including HEREAnaheim.com , HERECostaMesa.com , HEREHuntingtonBeach.com , and HERESantaAna.com , providing comprehensive, credible insights into Southern California's dynamic landscape. HERE Anaheim HERE Beverly Hills HERE Coronado HERE Costa Mesa HERE Hollywood HERE Huntington Beach HERE Long Beach HERE Los Angeles HERE Mission Viejo HERE San Diego HERE Santa Ana
