Housing construction in Los Angeles fell in the first quarter of 2025, a drop-off that could eventually worsen the city’s affordability crisis, according to a new report.
The developer canceled licences for 1,325 new homes in the city of Los Angeles in the first three months of 2025, down nearly 57% from the same period last year.
In a report released Tuesday, research firm Hilgard Analytics blamed the sharp drop on a variety of factors that made it harder for developers to transfer profits, including high interest rates, tariffs and economic uncertainty, and urban transfer tax measures ULA.
Hilgard principal Joshua Baum said January's wildfires could also play a role by causing widespread business disruptions.
Most of the city's areas reportedly fell in the first quarter, but the steepest decline was in the council areas covering the western and northeastern areas of the San Fernando Valley and South Los Angeles.
Although the fire impact may be temporary, housing construction has declined in January, with citywide permits in 2024 falling 23% from 2023, according to Hilgard.
The ongoing pullback in housing development could have a significant impact on the pain of urban affordability and budgetary crises.
Overall, economists say building more homes will reduce the pressure on rising prices and rents, and new developments tend to increase tax revenues.
On Monday, Los Angeles Mayor Karen Bass announced plans to cancel more than 2,700 city jobs to help close the close of nearly $100 million in budget loopholes.
“If we don't look at the long term now, it's higher prices and higher rents at some point in the future,” said Christopher Thornberg, founding partner at consulting firm BEACON ECONALICS.
The decline in development is not unique to cities.
Housing developers are starting fewer projects nationwide as they deal with high interest rates and the latest tariff phenomenon.
Some developers say the tax rate on large real estate sales by new Los Angeles cities in Los Angeles makes the environment worse and leads to more projects being killed compared to other areas of the county.
Hilgard Analytics does not examine housing construction outside the city of Los Angeles in its report.
However, recent analysis by UCLA and RAND researchers may be more estimated housing construction than elsewhere in Los Angeles County, citing developers’ tendency to build more real estate sales for multifamily homes.
