Developers say new multifamily projects don’t pencil out: falling multifamily values, higher interest rates, pandemic-era tenant protections and added taxes are squeezing returns. The slowdown is shrinking new supply even as the city seeks more housing.
Higher borrowing costs and persistent construction expenses mean many projects no longer generate acceptable returns, so developers are shifting to smaller projects like ADUs and townhouses.
Construction activity is declining: 2,376 apartment units completed in the first half of 2026 (down about 9% year-over-year) and 25,636 units under construction (about 15% fewer than last year).
City measures to speed approvals and fast-track affordable housing are underway, but developers say financial and regulatory headwinds continue to deter large-scale multifamily development.
# The basic story Los Angeles needs more homes, but many apartment developers have stopped building. Values for multifamily buildings have dropped sharply in recent years, borrowing costs are higher than they were earlier in the decade, and other policy and cost changes have reduced project returns. As a result, developers who once focused on dense, transit-friendly projects are pausing or switching to smaller, lower-risk work.
# What changed in the market
Pandemic-era policies also matter. Tenant protections, rent freezes and eviction moratoriums that were instituted during the pandemic lowered revenues for many buildings and created a backlog of eviction cases. Even after those protections ended, those effects linger while operating costs and development expenses remain high.
The story also points to tax and fee changes that reduce net returns on large sales, encouraging developers to scale down projects or avoid expensive transactions.
# How the slowdown shows up in construction data Construction has slowed across the county. In the first half of 2026, 2,376 new apartment units were completed in L.A. County, a nearly 9% drop compared with the same period the prior year. About 25,636 apartment units were under construction, roughly 15% fewer than the prior year. Developers and brokerage analysts describe an industry with many projects paused and fewer new groundbreakings.
# Where builders are redeploying capital Rather than large, dense apartment towers, many developers are focusing on smaller projects: accessory dwelling units (ADUs), townhouses and single-family projects. These deliver lower total returns but also lower financing and regulatory exposure, and they can avoid taxes or thresholds that apply to large transactions.
# City response Mayor Karen Bass has moved to shorten permitting timelines and fast-track affordable housing. The mayor's office says directives are expediting nearly 50,000 affordable units and easing bureaucratic delays for shelters and lower-cost housing. Those are aimed at lowering project timelines and costs, but developers maintain that financial fundamentals—rates, values and cumulative fees and taxes—remain the decisive hurdles.
# What this means for renters and housing supply The combination of slowed construction and long-standing underbuilding keeps supply tight in many neighborhoods. Rents eased earlier in 2026 to a multi-year low, but pent-up demand and years of limited production keep renting and buying unaffordable for many Angelenos. If developers remain sidelined, the slower pipeline will prolong supply constraints.
# Concrete takeaways for readers
The LA housing policies making developers turn away from the city Zachary Whalen Wed, 09/23/2026 - 08:00 Primary Image Primary Image Caption Developer Yoni Chriqui said L.A.’s “mansion tax,” which puts a 4% or 5.5% tax on L.A. property sales over $5.4 million, had led many developers to build smaller projects to avoid
New housing data reveals a market that is starved and saturated at the same time. The real problem may be what we’re building, where we’re building it, and what it costs to own.
SRO Housing Corp. in danger, Metro's Olympic bus plan in doubt, and more Steven Sharp Sat, 09/19/2026 - 06:15 Despite securing support in both chambers, a bill intended to kickstart California's sluggish market for condo construction died in the state legislature earlier this month as the clock ran out on the legislati
Constrained by geography and driven by global wealth, Miami has become Florida's sole failing housing market.
The Australian government is attempting to overcome a serious housing shortage by constructing 1.2 million new homes over five years. To be frank, the government won't be building any houses, yet the industry responsible for building them is losing companies at an alarming rate. The problem is particularly severe in Ne
An enormous 18,500 homes are proposed for Dunsink – and developers are unsure about the focus on high-rise apartments in the plans.
Loading more related stories...
Open the app view to save this story, compare related coverage, and continue from the same source.