Anyone in LA is aware of the contruction boom we have had going on in DTLA for some years now. And this boom creates yet another paradox in Los Angeles.
News articles are saying LA hasn’t seen such a building boom since the 1920’s. Over 37 large projects are under development, much of it luxury hotel rooms, condos, and residential units. In fact, over 7000 residential units are under construction.
And here we have our paradox. The market is showing signs of an oversupply of residential units. Yes, I said an oversupply. Leasing agents are starting to make lucrative offers to prospective renters such as 8 weeks free rent to get them to sign a lease.
Yet anyone who is looking for an apartment in LA isn’t finding anything that approximates relief on the rental front. The new units going up can’t exactly be called affordable housing, even in LA. So while the average working family in Los Angeles can’t find an affordable place to live and the tent cities are growing at the rate of over 30% per year, the leasing agents of these new high end luxury developments seem to be having trouble finding financially qualified new tenants. Go figure.
So we have an interesting situation playing out in the City of Angels. One one hand we have an oversupply of rental units, and on the other hand we have a scarcity. The annual income required to rent the cheapest studio apartment in one of the new DTLA developments is $85,000 per year. Yet the median income in LA is $55,000. Perhaps the developers failed to look at what is actually needed prior to drawing up their plans. And the city planners, who could simply refuse to grant building permits on the new unaffordable housing until the scarcity of affordable units has been remedied, have made it clear the needs of the people they work for do not matter.
The outcome of this remains to be seen, but my guess is we might be seeing a “market correction” in the LA housing market and I suggest that if you are thinking about leasing one of these new places, you might just want to wait until after the fallout and save the money for some nicer furnishing when you do move.