Los Angeles Housing Affordability and Supply

In Los Angeles, the cost for renting and buying a home are difficult to afford. This is due to a slowdown in the construction of new housing units (supply), a limited supply of undeveloped land to built upon, the high cost of available land, and people’s strong demand to live in the region. Just as California has the second highest average rents in the nation paid by tenants,¹ Los Angeles similarly stands out nationally among metro areas with the most expensive rents.²  The region’s homeless crisis is a further indicator of rental housing cost and instability.  Given the situation, the Economic Roundtable is proposing to launch research on the following housing-related policy issue areas:

1. Effects of Expanding Rent Stabilization to All of LA’s Rental Housing: What would be the effect on residential rents citywide, if California’s Proposition 33 (“Justice for Renters Initiative,” fall 2024) passes and the City of Los Angeles expands rent stabilization to cover rental properties built after October 1, 1978? Using public and administrative data on rental housing, including rent levels, date of construction and occupants’ length of tenure, the Economic Roundtable will:

1. Model the effects on citywide rent levels for rental housing units built since the Rent Stabilization Ordinance (RSO) went into effect and that is not regulated by the ordinance.
2. Model the indirect effects on rent levels of current RSO units if the California Proposition 33 passes and the City of Los Angeles regulates post-1978 housing under expanded rent control.
3. Estimate the effects on owner investment and maintenance of residential rental properties, both for current RSO and non-RSO units, if rent stabilization is expanded.
4. Estimate changes in the length of tenancy for renters citywide and frequency of vacancy decontrol (turnover), if Proposition 33 passes and the City of Los Angeles regulates post-1978 housing under expanded rent control.
5. Based on length of tenure estimate, what percent of rent levels would be affected by expanded rent stabilization? How often would units be vacated by tenants, reverting to market-level rents? How would this be affected by when the unit was built?
6. Estimate what would future citywide rent levels be in 5, 10, 15 years, assuming the expansion of the RSO jurisdiction.
7. Estimate what the effects on rent levels and length of tenancy would be across Los Angeles County in surrounding cities and unincorporated areas.

2. Building more Rental Housing Units in Los Angeles: Building on the Roundtable paper, Places for Homes, which identifies opportunities for increasing housing density on rent stabilized properties in the City of Los Angeles, the Economic Roundtable will carry out research on the following policy questions:

1. RSO apartment building improvements vs. neglect: Which blocks and parcels have the most “building envelope” space for redevelopment? Analyze the age of RSO apartments, their value and amount – or lack of – investment. Compare with nearby ‘comps’ of major investments in RSO and non-RSO residential properties.
2. Micro-analysis of Los Angeles RSO Renters: What is the amount of rent paid per bedroom? Per occupant? Compare these indexed rent amounts in different geographic areas, taking into account population density per block, average incomes per census tract and share of residents who are working age.
3. Can renters realistically buy their apartment buildings in Los Angeles? Explore policies in other US cities (San Francisco, Washington, DC, and New York City) that support tenants in purchasing their apartments, directly or through a nonprofit organization. Is this a realistic strategy to slow down renter displacement in Los Angeles? This will provide policy-relevant information for the Tenant Opportunity to Purchase Act (TOPA) and Community Opportunity to Purchase Act (COPA) policies under consideration in Los Angeles and elsewhere.

3. Condominium Housing Analysis: What share of Los Angeles’ rental housing units are situated in condominium buildings, situated in commonly-owned Home Owners’ Association (HOA) properties, instead of apartment properties with a single owner or ownership entity? Number of Total Units per Building for RSO (and non-RSO) condominiums.

4. Hedge Fund Ownership of Rental Housing: In contrast to rental housing situated in multi-owner condominium properties, as well as rental housing owned by families and other small land owners, what share of Los Angeles’ rental housing units are owned by hedge funds? What share of these properties and housing units are found in single-family versus multi-family properties? What neighborhoods are these found in across the city, and why?

5. Splitting Parcels to Allow Separate ADU Ownership: Analyze the City of Los Angeles policy under consideration, allowing sale/ownership of ADUs separate from the main structure.

1. Would this splitting of single-family home parcels impede the conversation single-family properties into more dense multi-family properties, across the city?
2. How would this affect gentrification and renter displacement in the City of Los Angeles?

References:

1. “Average Rent by State” by Josh Patoka and Chris Jennings, Forbes, Nov 15, 2023.
2. “U.S. Cities With the Highest Rent Prices” by Jonathan Jones, Construction Coverage, November 20, 2023.