Housing construction in Los Angeles fell in the first quarter of 2025, which could 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 more difficult for developers to shift 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 regions of the San Fernando Valley and South Los Angeles.
Although the fire impact may be temporary, housing construction has declined before January, with data from the Los Angeles Department of Building and Safety analysing permits for new single and multifamily buildings including new single and multifamily buildings, but in 2024, the city’s extensive permits fell 23% in 2024.
The ongoing retreat in housing development could have a significant impact on a city in the pain of an affordable and budgetary crisis.
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, UCLA and Rand Corp.
