CA Apartment Construction Permits Drop to 10-Year Low

Construction permits for California multifamily fell 22% year-over-year in the first quarter to 8,972 units, reported the Southern California News Group, citing data compiled by the St. Louis Federal Reserve. The Q1 tally represented the slowest quarter for multifamily plans since the start of 2014. It also ran 32% below the pace seen from 2021 to 2023, during which 159,476 multifamily units were in the works. 

“California developers cooled their building plans as interest rates soared, the economy slowed and folks no longer felt the pandemic-fueled need for larger living spaces,” wrote SCNG’s Jonathan Lansner. “And let’s not forget that California rents have flattened as vacancies increased. No amount of legislation or nudging will get developers to build when economic conditions aren’t near-perfect.” 

Rents statewide declined by an annualized 1.4% in March after declining at a 0.8% pace during 2023, according to ApartmentList. These declines followed statewide increases of 11% in 2022 and 5.5% in 2021. Meanwhile, vacancies edged upward to an average 5.2% from 5% in the year-ago period. 

Join 500+ owners, investors, developers, brokers, financiers and more at Connect Los Angeles 2024 on May 1 at the InterContinental Los Angeles Downtown. Register now to catch insights and forecasts on today’s CRE markets from SoCal and National industry leaders.