- LA multifamily development has sharply declined, with fewer than 19K units under construction—a 30% drop in three years—despite high rents and low vacancy rates.
- Unpredictable local policies, especially Measure ULA, which adds steep transfer taxes on sales over $5M, have deterred lenders and developers from moving forward.
- New challenges, like a proposed minimum wage hike for construction workers, are adding further uncertainty and risk for investors and builders.
- Industry leaders say the city is being ‘redlined’ by investors, and many developers are taking their projects—and capital—elsewhere.
Demand, But No Development
Los Angeles continues to be one of the most expensive rental markets in the US, yet the pipeline of new apartment construction is drying up, reports TheRealDeal. According to CoStar, active apartment construction is at its lowest point in nearly a decade—down 30% from three years ago.
Despite demand, developers say they can’t make the numbers work. “It’s a needle in a haystack to find an opportunity that makes financial sense to build today,” said developer Cliff Goldstein. Without investor confidence, many projects have stalled or been shelved altogether.
Measure ULA: A Costly Barrier
A major obstacle has been Measure ULA, a voter-approved transfer tax that imposes an additional levy on real estate transactions over $5M. Developers argue it has made deals financially unviable and driven investors away.
“LA has been redlined by the majority of the investment community,” said Ari Kahan of California Landmark Group. His firm hasn’t bought a site to develop in over two years.
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More Policy Pressure Ahead
On top of Measure ULA, the city is now exploring a minimum wage increase for residential construction workers, which could further escalate building costs. Developers warn this added burden could push more projects out of the market or into other municipalities.
Investor Sentiment Sours
Real estate leaders at The Real Deal’s recent Building Back LA roundtable echoed widespread frustration with city policy. Christie’s International Real Estate CEO Aaron Kirman called Measure ULA “the crux of the issues today,” estimating it has halted half of current deals.
Cityview CEO Sean Burton said policymakers remain disconnected from the data. “They don’t believe that [ULA] is slowing housing,” he noted.
What’s Next?
Until the city addresses investor concerns, LA may continue to see a contraction in multifamily development—at a time when its housing crisis demands the opposite. As investors shift capital to other cities, experts warn that the fallout from these policies could reshape the local market for years to come.
