Los Angeles Affording Housing Solutions with Hana Cha
The national housing crisis isn’t new news. The country has been discussing, debating, and trying to address this issue for years. In this episode of The Commercial Real Estate Report with Chris Berg, we discuss the Los Angeles Housing Crisis and its complex issues impacting everyone from local businesses to city residents, and the million+ anticipated tourists arriving in the city for the upcoming 2028 Olympic Games. We address the city’s growing homeless population, mounting regulatory challenges, and potential solutions to better support LA’s housing needs and the city’s overall vitality.
Watch the full episode with Hana Cha here. Read for more insight on this topic by Hana Cha.
The Intersection of Housing Affordability and Local Business
We’ve forgotten that housing affordability directly impacts our local business ecosystem. Contrary to popular belief, small businesses in Los Angeles relocate because employees cannot afford to live near their jobs—not because of higher taxes. Our local businesses rely on our local workforce, and the long-distance commutes with high rents force employees to find jobs outside the city. The ripple effect is significant—local shops close, service providers relocate, and the very essence of LA’s diverse neighborhoods erodes.
Regulatory Hurdles for Residential Developers
Residential development in Los Angeles is notorious for its complexities, largely due to cumbersome local housing policies and regulations. While it’s crucial that policymakers need to understand the local community and politics, a significant challenge stems from our same policymakers’ lack of understanding of the business intricacies of real estate development. For starters, the average all-in cost to build affordable housing units in this city is approximately $700,000 per door. High costs plus zoning restrictions, lengthy approval processes, and density limitations create the perfect spread of unfeasible residential projects.
In the latest RHNA report published by the California Department of Housing and Community Development, Los Angeles needs to plan for more than 456,643 new homes by 2029, of which approximately 185,000 designated as affordable housing units—five times the 83,865 homes built from 2010-2019 as reported by the LA Department of City Planning. Meeting these ambitious targets seems more daunting given only 57,000 homes are currently in various stages of construction.
Housing Facts by the Numbers
As of today, there are approximately 45,252 homeless individuals in Los Angeles, with 75,312 in LA County overall. These figures paint a grim picture and underscore the urgency for more affordable housing. While various initiatives like the Housing Element Rezoning Program and the Transit-Oriented Communities (TOC) program aim to incentivize affordable housing development, the impact remains limited. Developer incentives include density bonuses, parking requirement reductions, and expedited processes, aren’t sufficient to over the financial and logistical challenges.
The Potential of Adaptive Reuse Ordinance
An interesting and potentially promising avenue to address the housing crisis lies in the Adaptive Reuse Ordinance (ARO). Enacted in 1999, the ARO allows developers to convert underutilized commercial buildings into residential units, particularly in downtown LA and has now expanded throughout various parts of the city. The appeal lies in reusing existing structures, which often reduces costs, accelerates timelines, and preserves the character of historic buildings. Given today’s office vacancy rate of over 30% in DTLA as reported by CBRE, the city has the potential to quickly create an additional pipeline of 16,000 new housing units as covered in the CCA White Paper on Adaptive Reuse.
Advantages to Adaptive Reuse Opportunities
- Breathes new life into underused buildings to stimulate the local neighborhood’s economy
- Promotes mixed-use Developments by utilizing urban infrastructure to create more walkable neighborhoods
- Improves environmental sustainability with long-term use and residential permanency
Utilizing the ARO citywide means taking advantage of housing opportunities for transforming vacant offices, warehouses, and other commercial properties into much-needed housing. Given the current demand for affordable housing, encouraging adaptive reuse could be a key strategy in meeting the city’s housing needs without sprawling development—but the underlying challenges still need to be addressed.
Challenges Facing Residential Developers
Despite some available incentives, residential developers remain wary of building new homes in Los Angeles. The reasons are multifaceted:
- The real estate tax enforced by Measure ULA remains a disincentive for developers to transact on building purchases for office-to-residential conversion opportunities
- The high cost of land prices continues to make affordable projects difficult to pencil out
- The approval process for rezoning, entitles, and permits can take years of delays, leading to increased carrying costs
- Local residents and the NIMBY (Not In My Backyard) sentiment often blocks or delays new developments
- Affordable housing projects require significant subsidies, and the available funding and tax incentives are insufficient resulting in major financing gaps.
These challenges create a difficult environment for developers, discouraging them from building the housing LA so desperately needs.
The Impact of the 2028 Olympics on LA Housing
As Los Angeles prepares to host the 2028 Summer Olympics, the city faces both opportunities and challenges in addressing its housing crisis. On one hand, the international attention pressures local governance to accelerate development infrastructure. On the other hand, the city may lose sight of the long-term housing issue and be focused on the temporary accommodation needs. Historically, past Olympic host cities have seen significant displacement of low-income residents with post-Olympic retributions that resulted in a market saturated with transient housing which affects overall home and rental prices within the city.
A Call for Balance Solutions
Addressing Los Angeles’ housing needs require a multifaceted approach. Policymakers must consider the business realities of real estate development while ensuring that local regulations facilitate, rather than hinder, the creation of homes—whether market rate or affordable units. Expanding adaptive reuse efforts, refining incentive programs, and addressing financing gaps are essential steps. As the city looks toward the 2028 Olympics and beyond, it remains a key factor to prioritize housing as a critical foundation for Los Angeles’ future growth and resilience.
Solving this crisis is not just a matter of building more units but creating a sustainable, inclusive city where everyone—residents and businesses alike—can thrive.
Sources: USC Price Center for Social Innovation Report, HCD Regional Housing Needs Assessment, LAHSA Homeless Count 2023, City of Los Angeles Planning Department for the Housing Element Rezoning Program and TOC Program, City of Los Angeles Adaptive Reuse Ordinance, Los Angeles Business Council, Urban Land Institute, Brookings Institution Report on Olympics and Housing
