October 4, 2024
California continues to face significant challenges in meeting its housing needs, even as the nation recently saw a surge in multifamily completions not experienced in 50 years. Over the past year, an annualized total of 740,000multifamily units were completed across the U.S., the highest figure since April 1974, according to a report from the U.S. Census Bureau and the Department of Housing and Urban Development.
California is part of the West region, where multifamily permitting dropped by 42%. Factors such as permitting backlogs, high construction costs, labor shortages, and regulatory barriers have continued to hinder development efforts, making it difficult for the state to keep pace with the broader national trend. Nationally, multifamily starts fell by more than 6% from July, with 333,000 units recorded, while permitting jumped 8.4% over the same period. However, national permitting remained down nearly 17% compared to last year, according to data cited by RealPage.
On the single-family side, construction activity saw a national uptick. Single-family starts were up 15.8% from July and 5.2% year-over-year. Specific data for California were not provided, but it remains uncertain how much the national rise in single-family starts will alleviate the state’s persistent housing shortages, given California’s regulatory complexities and high construction costs.
Among major metropolitan areas, Los Angeles ranked 10th for multifamily permitting, with 9,709 units permitted over the last year—a significant drop from the previous year. San Diego, however, showed a year-over-year increase of 1,098 units, indicating some positive movement in Southern California. Despite these gains, the broader regional decline in permits reflects the ongoing challenges facing the state.
These developments, as reported by RealPage, highlight broader national trends in multifamily construction. However, California continues to grapple with distinct issues that have slowed the pace of housing production. The state’s permitting backlogs and rising costs, coupled with labor shortages and regulatory delays, present ongoing hurdles for developers seeking to meet the rising demand for rental housing.
While national peaks in multifamily construction may have passed, California’s efforts to boost housing supply will require continued reforms to streamline approvals and reduce the barriers that have long hampered the state’s housing development. Without such changes, California may struggle to meet its housing goals in the years ahead.
Tom Bannon, chief executive officer of the California Apartment Association, highlighted the vicious cycle that stems from the state’s chronic housing shortfall.
“Without enough supply, groups and some elected leaders push to further regulate the existing rental housing stock,” Bannon said. “These onerous regulations, including expanded rent control, create conditions that prompt some rental housing providers to exit the market altogether, which makes the housing shortage even worse.”
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