The Status of Affordable Housing in Los Angeles

We all know that the Los Angeles area is a desirable place to live. From folks pursuing Hollywood and tech start-up dreams, to those who simply want to bask in the sunny California lifestyle, people flock to LA every year, looking for a place to call their own.

This desirability, combined with the amount of people risking everything for their dreams, has contributed to what is called the “LA Housing Crisis.” There are a growing number of homeless people in LA, as well as people who struggle to make ends meet. Therefore, the need for affordable housing in LA becomes more dire each day.

Because of this, the construction industry is faced with a dilemma: How can construction firms respond to the growing need, while also turning a profit?

The State of Things

Single-family homes have skyrocketed in value, which means that the market in LA is in a crunch. It’s more and more difficult for people to invest in these houses, so they’re staying in multifamily buildings. Therefore, less options are opening up in these buildings.

Meanwhile, the rents are increasing exponentially. Los Angeles has an average monthly apartment rent of $2,461. It has the third fastest-growing rent prices in the country. LA reportedly has one of the most rent-burdened populations in the US, with a significant portion of residents contributing more than 30% of their income to paying the rent.

Resource Gaps

There is only so much land in Los Angeles, which means the price of that land is astronomical. The price of materials is also increasing, making the cost of building follow suit.

While physical resources are a financial burden, labor is an even larger problem. Since the Great Recession of 2008-2009 was sparked by a housing crisis, the construction market took one of the hardest hits. Many professionals had to pivot to other forms of business – remodeling, etc.

The market has slowly bounced back, with some professionals returning to work in construction. But new talent is trickling into this market, and there is certainly a feeling in the field that a mentality shift has taken place. The generational gap here is stark, as older, more experienced workers do not always feel that newcomers share their passion or expertise.

While that is a separate topic, it does help contribute to the conundrum at hand. With an opportunity to invest time and energy into high-income housing, as well as a shortage of physical resources and a small talent pool ripe with generational conflict, how do professionals justify an investment into affordable, low-yield housing?

Possible Solutions

One of the simplest ways to help get affordable housing built is through government incentives. While there are measures in place, tax credits and other government-level solutions are not in control of construction professionals. While construction professionals can lobby, talk to politicians, and make sure their voices are heard, they can not pass bills into law. This is a good solution, but it’s not one that all professionals can act on effectively.

One possible solution is to invest in smaller multifamily projects. These projects use less labor and materials, and typically have a shorter turnaround time, which means that firms can focus on more than one project at once, pulling in income from multiple sources.

Many of these smaller buildings are created for co-living, which involves less private homes. In these cases, tenants get lower rents in exchange for a more open living arrangement. This is increasingly popular in LA. These projects, and similar ones, can be a good opportunity to create affordable living spaces for people, while allowing construction firms to maintain a healthy ROI.

Another opportunity that may present itself could be created by public transportation. While LA has never been known for this public service, there is an effort to change that. If public transport becomes a viable option in the area, some parking lots will be less necessary. Those lots can be turned into these smaller multifamily buildings.

While construction professionals cannot solve the affordable housing problem in Los Angeles by themselves, there are some actions to be taken. Making an investment in the greater good while also finding ways to earn the most profit is a good way to start.

To read more of our articles regarding the construction market, you can peruse our advice section. And, if you’re looking for talented professionals to join your team, you can contact one of our expert recruitment consultants or submit a job spec today.