Concerns Over LA’s Housing Industry

In Los Angeles, Mayor Karen Bass’ ambitious initiative, LA4LA, aimed at purchasing apartments to house the city’s homeless population, is extremely concerning for LA’s apartment industry, especially against the backdrop of some of the nation’s most restrictive rent control laws. The potential for further government intervention could exacerbate challenges for housing providers.

Skyscraper Fiasco

If LA does buy apartments, what might we expect as the outcome given Mayor Karen Bass’ admission of a failed “crusade” to repurpose a downtown skyscraper for affordable housing, which became a national spectacle after it was tagged with graffiti on just about every floor? The estimated cost was $850 million and now it will likely need to be torn down. Against the backdrop of the ambitious LA4LA initiative, the city already has a poor track record in providing adequate housing solutions.

Rising Government Control

As the government contemplates buying apartments on such a massive scale, this will only create increased government control over rental properties. With LA’s rent control laws already placing significant burdens on housing providers, it puts into question what might be next in the city’s efforts to address housing affordability. Housing providers already struggle to navigate an increasingly regulated market, and the prospect of heightened government influence raises questions about the autonomy and viability of rental housing in the city.

Further Erosion of Property Rights

There are concerns about potential policies that could further erode property rights and deter future investment in rental housing. Will the government mandate that owners give them first right of refusal for purchasing rental properties, effectively edging out private investors and consolidating control over the rental market? If multifamily investors are sidelined in favor of government control, it could spell disaster for investor confidence and further exacerbate the housing crisis in the city.

Implications for Rental Housing

The implications of such interventions are profound. Not only would they undermine the financial viability of rental properties, but they could also have far-reaching consequences for the availability of rental housing in the city. If housing providers are forced to divest from rental properties or deterred from investing in new ones, it could exacerbate the shortage of housing options for residents at all income levels.

Impact On Property Values

The proposition of government acquisition of apartments for homeless housing raises questions regarding its potential impacts on neighboring property values and the long-term value of multifamily real estate. While the initiative aims to address homelessness and provide much-needed housing, concerns linger about its influence on surrounding property values.

Balancing Homelessness and Property Rights

As policymakers grapple with the complex issue of homelessness and housing affordability, it is important that they consider the unintended consequences of further government intervention in the rental housing market. While the goal of addressing homelessness is critical, it must not come at the expense of undermining property rights or deterring investment in rental housing.

Unanswered Questions

In light of these concerns, the question remains: What will be the next step in LA’s efforts to address housing affordability, and at what cost to housing providers and residents alike?

Written by Mercedes Shaffer, Realtor

If you have questions about buying, selling or strategies for cashing out and deferring taxes, CONTACT ME. I can be reached at 714.330.9999, InvestingInTheOC@gmail.com, or you can visit my website at InvestingInTheOC.com.  I’m Mercedes Shaffer, a multifamily real estate agent with Coldwell Banker, helping you build wealth one door at a time. DRE 02114448.