LA Defies Critics With Wave Of New Apartment Construction

New apartment construction in greater Los Angeles is heating up — and bucking nationwide perceptions in the process. 

Developers started work on more than 4,000 units in the first quarter, the most construction starts in the area since the end of 2022, according to new Colliers data. The surge in SoCal reflects a departure from national trends, which show a pullback in new construction amid softening rent growth.

It also reveals the fact that although California, and particularly Los Angeles, has gained a reputation on the national stage for an unfriendly business climate, there are still developers ready and willing to invest in the area. 

“A lot of folks have kind of decided to not underwrite what they consider to be some political risk associated with the city of LA,” said Alex Valente, partner at High Street Residential, which has a 281-unit project underway in LA. “Those of us that know the city as well as we do and have as much confidence as we do in the city and the lifestyle here … I think we feel really good about it.” 

Like the rest of the country, Los Angeles was awash in new construction in 2024 and 2025, resulting in a construction pipeline of more than 26,000 units by the beginning of the latter year. That number ticked down to around 24,000, but while developers slowed their activity in other regions to allow the supply to be absorbed, they are gearing back up in LA.

The number of LA-area apartment starts in the first quarter was roughly twice what it was a year ago, by Colliers’ count, jumping from 2,000 units to 4,000. Nationwide, the number of starts was up just 20% annually in March, according to the Census Bureau.

Multifamily operators nationwide have slowed their pace after delivering an estimated 600,000 units in 2024. That supply glut, much of which was concentrated in the Sun Belt, collided with slowing job growth and macroeconomic strife.  

These factors have converged on the market to produce lower-than-expected rent growth over the last year. National average apartment rents fell annually in April by 1.7%, according to ApartmentList, the lowest growth rate since the organization began tracking in 2017 — including the worst days of the pandemic. 

Greater LA rents have similarly dropped, ticking down by 1.4% year-over-year in April. But compared to former hot spots like Austin and Phoenix, down 5.7% and 4.4%, respectively, LA looks like a safe haven for development dollars, despite the litany of issues the real estate industry says it has in the city.

“Anybody who's investing in or developing in LA who starts in the short term, the near term, now, will be rewarded, be delivering in a window two years from now when there is less new supply or competition,” Valente said. 

The regulatory environment in Southern California has long been a complaint among the business community, including commercial real estate. 

Some landlords are seeking to leave the state altogether. Camden Property Trust in January said it would sell its entire $1.5B portfolio in California and cease operations in the state. The company didn’t provide a reason for its departure, but in earnings calls, its executives have referenced the state’s regulatory environment as an impediment.

Similarly, in 2024, Wood Partners said it wouldn’t pursue new opportunities in California. Investment volume in Los Angeles-area apartments also dropped steeply after Measure ULA was passed, according to Colliers.

The implementation of Measure ULA, often called the “mansion tax,” in April 2023 touched off a fresh wave of consternation. The rule added a 4% levy on transactions of more than $5M and a 5.5% tax on transactions over $10M.

In the two years following Measure ULA’s effective date, commercial transactions in Los Angeles dropped between 30% and 50%, according to UCLA. Backers of the measure say the slowdown had more to do with the commercial real estate industry waiting to see if the measure would be overturned than a meaningful representation of a drop in interest.  

Los Angeles was also the last major city to lift its eviction moratorium in the wake of the pandemic and is known for its influence over rents. In November, the Los Angeles City Council voted to put a 4% ceiling on annual rent increases for rent-stabilized apartments in the city. The decision would affect roughly 651,000 units, or nearly 74% of the city's total.

But the stubborn imbalance of supply and demand in the LA-area housing market is bringing back local builders that saw their opportunity.

“It gives us even more confidence on the projects that we are able to start,” Valente said. “We're going to deliver into this window of not having too many other new, competing projects with new, top-of-the-market and top-line amenities.”

High Street and joint venture partner Haseko North America broke ground in the first quarter on the 281-unit Jules San Pedro.

San Pedro offers access to the South Bay where aerospace and defense companies are expanding, and San Pedro is poised to capture some of those potential residents. The neighborhood’s population grew by 2.4% from 2020 to 2024, according to the city of Los Angeles.

These trends highlight some of the migration patterns that developers look for when deciding where to build.

“We're kind of figuring out where that migration is. And I think with these new projects and as developers cater to the needs and wants of the young professionals and the young families, I think we'll start to see demand shift and see where the true migration is,” Colliers Senior Research Director Matt Nelson said. 

Despite the city’s history of undersupply and High Street’s track record, it can still take convincing to get investors on board when the larger narrative about Los Angeles is so fraught.

“It's a lot of making sure folks, including our investors, have confidence and conviction in what we're building, why we're building it and where we're building it,” Valente said. “It doesn't feel like a big stretch in my mind to kind of see why we think this will be successful.” 

Los Angeles’ position as an outlier to the national multifamily construction trend also means that would-be buyers coming to the market are disappointed by the property values they find in the area. 

There are lots of new entrants to the LA multifamily market, but those buyers aren’t necessarily submitting winning bids or even making offers, according to Newmark Vice Chair Dean Zander.

Investment volume in LA-area apartments was roughly flat at $8B for the last two years, compared to $12B in 2021 and 2022, according to Newmark.  

“Investors from other states are coming here to kick the tires and see where the values are, but they're generally not executing … because we just don't have those fire sale opportunities that other places might,” Zander said.