The Los Angeles housing market is facing a deepening crisis. Over the past three months, the number of apartments under construction in LA has plummeted to fewer than 19,000 units, a third of what it was three years ago. High taxes, complex regulations, soaring construction costs due to tariffs, and labor shortages caused by immigration crackdowns have created a perfect storm, prompting major investors to turn away.

According to the Los Angeles Times on October 1, 2025, developer Cliff Goldstein, who recently completed a luxury apartment complex on the Westside, shook his head, saying, “I don’t know if I’ll be able to build another apartment complex.” He added, “A developer without investors is like an emperor with no clothes.” Ari Kahan, who once managed projects for 800-unit developments, revealed he hasn’t purchased land in over two years, effectively halting development.

Real estate data firm CoStar reports that LA’s new apartment construction has been declining every quarter since early last year, hitting a 10-year low. In July, permits for multifamily housing construction totaled just 556, a staggering 68% drop compared to the same month in 2020, marking the second-largest decline among major U.S. cities, behind only San Jose. The drying up of LA’s new housing supply is evident in long-term data. In the 1950s, LA recorded over 70,000 new housing units annually, but since the 2010s, the figure has fallen short of 15,000. Of the 152,000 new homes built over the past six years, the vast majority were rental apartments, yet only 10% were affordable for low-income households. As new supply dwindles, rents have skyrocketed, with new apartment rents ranging from $4,000 to $5,000 per month—an amount requiring an annual income of at least $120,000 to afford. One of the primary reasons for the stalled housing supply is the withdrawal of major investors.

Large institutional investors like pension funds and insurance companies, which seek stable long-term returns, are pulling out, describing LA as a “red-lined” region. Constantly changing regulations and unpredictable policies have eroded profit prospects. Recently, the LA City Council proposed mandating a $32.35 per hour minimum wage for multifamily construction projects under 85 feet (24.6 meters). Combined with mandatory healthcare benefits, this significantly increases the burden on construction firms.

The Trump administration’s tariff policies are another headwind. Steel prices rose 9% last year, while copper wire and cables surged 14%. Anirban Basu, chief economist at the Associated Builders and Contractors, noted, “The impact of tariffs is directly hitting construction material prices.” Additionally, immigration crackdowns have led to a sharp decline in foreign labor, exacerbating the labor shortage. In California, 61% of construction workers are immigrants, with 26% being undocumented, and their exodus is paralyzing the industry.

Developers warn that if the supply shortage persists, “tenants will be pushed further out, and commute times will increase.” The USC Center for Real Estate has analyzed that LA’s housing stock is suffering from aging and shortages, with affordable housing supply virtually nonexistent. However, some investors are eyeing a rebound. Jordan Lang, CEO of McCourt Partners, has begun acquiring land, stating, “With competition reduced, now is the time to prepare for the next cycle.” He anticipates capital will flow back within six months to three years and is preparing to break ground accordingly.

Reporter: Park Hong-yong