Housing Construction in LA Falls 57% So Far in 2025

Introduction to the Crisis

Housing construction in Los Angeles turned sharply negative in the first quarter of 2025. Officials issued only 1,325 housing permits in the quarter — a 57 percent drop compared to the same period in 2024, according to a Los Angeles Times article based on a report by Hilgard Analytics. An analysis by Hilgard found the downturn resulted from multiple challenges facing developers, including high interest rates, economic uncertainty, new tariffs and the city’s controversial Measure ULA, a tax on large property sales.

Causes of the Decline

The January wildfires, which caused widespread disruptions, were also cited as a contributing factor, though their impact is likely temporary. The decline was widespread, but most pronounced in the west and northeast San Fernando Valley and south Los Angeles. Notably, this trend predates the wildfires, as housing permits had already fallen 23 percent in 2024 compared to 2023. Hilgard’s data, drawn from the Los Angeles Department of Building & Safety, covers new single-family and multifamily units but excludes accessory dwelling units, or ADUs.

Impact on Housing Affordability

The continued drop in housing development could worsen Los Angeles’ already critical housing affordability crisis. Economists stress that building more homes is essential to curbing rising prices and rents. “If we aren’t building now, from a long-run perspective, that says higher prices and higher rents at some point in time in the future,” Christopher Thornberg, founding partner of research data firm Beacon Economics, told the Times.

Effect on City Budget

Reduced construction also affects the city’s budget, as development typically increases tax revenues. This comes at a time when the city is grappling with a nearly $1 billion deficit. A separate report this month indicated permitting for new multifamily projects in the city fell 18 percent in the first year since Measure ULA was enacted two years ago, resulting in 1,910 fewer apartments in projects of 20 or more units.

Related Reports and Analysis

And, another report found sales of apartment buildings, office towers and industrial properties across the city of Los Angeles declined by as much as 50 percent since the tax, but that sales in neighboring cities remained relatively stable.

Read more

LA multifamily permitting falls 18% after Measure ULA
Bass says she wants to pause Measure ULA. Is she allowed?
Measure ULA suppresses sales, costs LA $25M in tax revenue

Conclusion

The significant drop in housing construction in Los Angeles in the first quarter of 2025, attributed to various challenges including Measure ULA, high interest rates, and economic uncertainty, poses a serious threat to the city’s efforts to address its housing affordability crisis. The decline in construction not only affects the availability of housing units but also has implications for the city’s budget and economic growth. It is essential for policymakers to address these challenges and find ways to stimulate housing development to prevent further exacerbation of the housing crisis.

FAQs

• Q: What was the percentage drop in housing permits issued in Los Angeles in the first quarter of 2025 compared to the same period in 2024?
  A: 57 percent
• Q: What are some of the challenges facing developers that contributed to the downturn in housing construction?
  A: High interest rates, economic uncertainty, new tariffs, and the city’s controversial Measure ULA.
• Q: How does the decline in housing construction affect the city’s budget?
  A: Reduced construction affects the city’s budget as development typically increases tax revenues, exacerbating the city’s nearly $1 billion deficit.
• Q: What is Measure ULA and how has it impacted housing development?
  A: Measure ULA is a tax on large property sales. It has been associated with a decline in multifamily permitting and sales of apartment buildings, office towers, and industrial properties in Los Angeles.