The Apartment Shortage in Los Angeles: A Growing Concern
Drive around Riverside County and signs for new apartment complexes are all over the 60, 15 and 215 freeways. However, the same cannot be said for Los Angeles, where the construction of new apartments has slowed down significantly. According to apartment search website Rentcafe.com, Riverside County has seen a 154.1% year-to-year growth in apartment completions, making it the third biggest in the nation.
What’s Happening with New Apartment Builds?
The supply of fresh rental units in Los Angeles is dwindling, despite the high demand. The vacancy rate is among the lowest in the country, while rental rates are among the highest. Data from real estate data provider CoStar shows that the number of new units under construction in Los Angeles has been falling each quarter since early last year and is set to dive to a 10-year low.
Fewer than 19,000 apartments were under construction in the three months through September, which is 30% fewer than three years earlier. This significant decline in new apartment construction has left many renters struggling to find affordable housing.
Less Profits Equals Less Building
Ari Kahan, a principal of California Landmark Group, used to have multiple projects with as many as 800 total units being built in Los Angeles at any given time. However, due to the uncertainty and instability of the market, his company has not bought a site with the intention to develop it in over two years. Kahan stated, “I don’t know when we will be building in L.A. next.”
Developers say they can’t raise the money to build because many of their biggest backers — pension funds, insurance companies, and other institutions looking for long-term investments — don’t want to park their money in L.A. due to the rapidly changing rules and regulations. Kahan added, “L.A. has been redlined by the majority of the investment community.”
Federal Policy Adds to the Headache
Higher tariffs have sparked rising prices in construction materials and equipment, while the crackdown on undocumented workers has thinned and spooked much of the international workforce the industry depends on. Anirban Basu, chief economist of trade group Associated Builders and Contractors, noted, “Prices rose at an especially rapid pace in some of the categories most affected by tariffs.”
California’s construction industry depends heavily on immigrant workers, with around 61% of construction workers in the state being immigrants. Of that group, 26% are undocumented, according to a June report from the Bay Area Council Economic Institute.
What Do the Numbers Say?
Housing production in Los Angeles County has slowed dramatically over the decades, dropping from more than 70,000 new units annually in the 1950s to roughly 30,000 in the 1970s and 1980s to fewer than 15,000 in the 2010s. This long-term slowdown in housing construction has left the region with an older, more strained housing stock and a deep shortfall in affordable options.
Solutions Can Be Found Outside of L.A.
The cost of building new apartments in Los Angeles is also hard on renters. At the current construction price, developers need to charge between $4,000 and $5,000 per month in rent, depending on the apartment size, making affordability an issue. Rentcafe suggests a renter will need to make about $13,400 in gross monthly income to afford $4,000 in monthly rent.
(Jane Rosenberg / Associated Press)
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