Is a new construction boom taking off in Los Angeles?

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Housing could arrive as permits for new buildings are on the rise

In August, the city of Los Angeles issued 17,008 building permits, the highest monthly total in three years. This was followed by another strong month in September, with 15,146.

The high number of permits issued by the city’s Building and Safety Department is a sign of a strong construction sector, an important source of employment in the region. It may also signal an increase in the construction of single-family homes and apartments, which are sorely needed to address the region’s chronic housing shortage.

Prior to the pandemic, Los Angeles had experienced a construction boom, which included everything from downtown skyscrapers to apartment buildings in Sherman Oaks. But when COVID-19 hit in March 2020, the number of permits dropped sharply. In April, only 2,150 were issued, the lowest amount for any month on record.

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Since then, the city has made a slow but steady climb back to pre-pandemic levels. In the last quarter, which ended in late September, Los Angeles issued 46,668 permits, according to publicly available data. This is the highest number since the 49,319 issued in the third quarter of 2019.

Building permits are roughly at their pre-pandemic levels

The city requires a permit for any type of major construction work. This covers everything from rewiring an electrical system to creating an addition or opening a new home. A permit does not guarantee the effective completion of a project and a new building permit does not automatically correspond to an equivalent number of units created. A single permit could cover an apartment complex with hundreds of residences.

Labor and materials

The region’s construction sector continues to face headwinds, such as fluctuating lumber prices and, in some cases, labor shortages. In addition, rising interest rates make it more expensive to finance new projects. But the high numbers also mean the region could avoid a recession, at least for now.

William Yu, specialist in the Californian economy at UCLA Anderson Forecastsaid construction workers had no trouble finding work.

“What we’re seeing right now is the opposite,” he said, noting that tight labor supply could prevent the market from growing even faster. “I don’t think we’re in a recession, but that doesn’t mean that in the future we won’t see one.”

Yu also remains hopeful that the strong pace of construction could lead to more housing supply.

“A major problem with the Californian economy for the working class or the middle class is that the cost of housing or rent is so high,” Yu said. “We could use lower housing costs.”

August was the largest month on record for new building permits.

Indeed, perhaps the most encouraging sign is the number of permits for new buildings, the type most likely to lead to more housing. August produced 483 permits, the highest number for any month in at least a decade. During the third quarter of 2022, 1,284 new permits were issued, an increase of 37% compared to the 934 permits issued during the same period last year.

Number of new accessory accommodationor ADU (like the conversion of a garage into a studio), has also increased.

For project manager Andy Wickman of Goldenline Construction, Inc., the struggle has been keeping up with all the incoming work. His business is struggling to meet labor demands, he said, and its order book is growing.

“We outsource our work, so we’ve had some experience with our contractors being very thorough,” Wickman said. “It was a little more difficult to plan in terms of the end of the works.

He added that ongoing supply chain shortages for materials such as lumber are holding the sector back.

The labor shortage is part of a longstanding issue affecting many California industries due to an increase in young professionals and retirees abandoning the state for cheaper options, Yu said. The nearly 35,000 COVID-19 deaths in Los Angeles County alone also contributed to the situation, he added.

“We have seen emigration with Californians leaving California over the past two or three years,” Yu added. “Over the past two or three years, we have seen people retire and they never come back in the labor market.

how we did it: We have examined publicly available data of the City Construction and Safety Department from January 1, 2013 to September. 30, 2022.

Do you have questions or want to know more about our data? Email us at [email protected]

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