\u201cFinding construction labor was hard before, and now it\u2019s even harder,\u201d economist Richard Green said.<\/p>\n
Los Angeles developer Cliff Goldstein just completed a plush new apartment complex on the Westside, but that\u2019s the last one he\u2019s going to build for the foreseeable future.<\/p>\n
Even though demand for housing in the region is red hot, many people who build apartments for a living have paused putting shovels in the ground because, they say, it\u2019s just too hard to turn a profit.<\/p>\n
\u201cIt\u2019s a needle in a haystack to find an opportunity that makes financial sense to build today,\u201d Goldstein said.<\/p>\n
Ari Kahan used to have multiple projects with as many as 800 total units being built in Los Angeles at any given time. No more, he says.<\/p>\n
\u201cWe haven\u2019t bought a site with the intention to develop it in over two years,\u201d he said. \u201cI don\u2019t know when we will be building in L.A next.\u201d<\/p>\n
The supply of fresh rental units, which make up the bulk of new housing in Los Angeles, is petering out despite robust demand. The vacancy rate is among the lowest in the country, while rental rates are among the highest nationwide. <\/p>\n
Still, 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 more than 10-year low, according to real estate data provider CoStar. <\/p>\n
Under 19,000 apartments were under construction in the three months through September. That\u2019s 30% fewer than three years earlier, according to CoStar\u2019s count.<\/p>\n
Developers say they can\u2019t raise the money they need to build as many of their biggest backers \u2014 think pension funds, insurance companies and other institutions looking for long-term investments \u2014 don\u2019t want to park their money in L.A. because the rapidly changing rules make it impossible to predict profits. <\/p>\n
The years since COVID-19 have demonstrated how tangled regulation of the industry can get in L.A., observers say, so investors are taking their money to other cities. <\/p>\n
\u201cL.A. has been redlined by the majority of the investment community,\u201d said Kahan, a principal of California Landmark Group.<\/p>\n
If the investors won\u2019t invest, builders can\u2019t build. <\/p>\n
\u201cA developer without investors would be like a king without clothes,\u201d said Goldstein. \u201cI am an optimistic developer who wants to develop, but the investment community won\u2019t participate.\u201d<\/p>\n
Recent policy out of Washington also hasn\u2019t helped. 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. <\/p>\n
\u201cPrices rose at an especially rapid pace in some of the categories most affected by tariffs,\u201d including iron and steel prices, which have risen 9% in the last year, and copper wire and cable prices, which have jumped 14%, said Anirban Basu, chief economist of trade group Associated Builders and Contractors. <\/p>\n
California\u2019s construction industry depends on immigrant workers. Around 61% of construction workers in the state are immigrants, and 26% of those are undocumented, according to a June report<\/a> from the Bay Area Council Economic Institute.<\/p>\n \u201cFinding construction labor was hard before, and now it\u2019s even harder,\u201d economist Richard Green said.<\/p>\n