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Welcome to the latest installment of Abundant Housing LA’s Development Update!
We’ll dig into public City of Los Angeles data to figure out what’s really going on in our housing market. How much housing are we permitting and building? How many of our new homes are single-family, large apartment/condo buildings, or “missing middle” housing? And how are we doing on Mayor Garcetti’s goal of building 100,000 new homes in 8 years? Where is the market headed?
This is a special edition of the Development Update because we’ve expanded beyond looking only at the building permits issued by the City (which allow developers to start building), and will now also be tracking building openings as measured by Certificates of Occupancy. Because of the increase in data and charts, we’ll be reducing our commentary somewhat. And one last thing before we get to he data: We’ve changed the methodology for how we track building permits; the change is described at the bottom of this post.*
For this post we’re looking at numbers through September 30th, 2017, the latest full quarter for which data is available. First up is a snapshot of overall permitting activity through the first 9 months of the year. As you’ll see, permits are roughly on track to land somewhere around the last two years, between about 15,000 and 16,500 units:
And here are the numbers behind that chart:
We’re ahead of 2016’s pace, which is great news. We’re behind compared to 2015 though, which isn’t so great.
Next we break down the units per building, looking specifically at what share of total permits are for projects with at least 50 units. As with total unit counts, building sizes are similar to those of the last few years.
Last for the building permit data, we look at how we’re progressing toward the Mayor’s goal of 100,000 new homes by 2021. Note that the goal’s start date is July 1, 2013, and the end date is June 30, 2021.
Certificates of Occupancy
Now, building permit data is extremely useful, but it doesn’t exactly correspond to what Abundant Housing really wants: homes for people to live in. For that we need to look at Certificates of Occupancy (CoO), which track actual building openings. We’ve started doing exactly that, and you can see the results below.
First a disclaimer though: The City controls whether it grants building permits, and how difficult or easy it is to receive those permits, but they don’t actually build the housing. CoO’s are what the developer needs when they finish the building so that tenants can move in, so it’s a measure of what’s actually opening to new residents. And since it takes a few years to construct a building, we’d expect to see a lag of 2-3 years between Building Permit and Certificate of Occupancy for the same project.
We raise these points because we want to make it clear that having fewer CoOs than building permits (which is what we see below) is not a failure on the part of the City. It’s what we’d expect based on timing, and it’s mostly out of the City’s hands whether building permits lead to real, on-the-ground construction. They almost always do, of course, but it’s not a guarantee.
With that said, here’s the data:
Within this time frame 2015 had the most building permits, so we should expect to see many of those units coming online in 2017 and 2018. We’re behind what we might expect for Certificates of Occupancy in 2017, unfortunately, but we will need to wait until the first few quarters of 2018 to really know what’s come of that (relative) flurry of permitting in 2015.
Next is the data underlying the above chart. We would hope that the pace of openings would be greater than in 2016, but that’s not the case:
And last, we’ve repurposed our “progress” chart for Certificates of Occupancy rather than building permits, and our progress suddenly doesn’t look so impressive:
*Methodology note: We are now excluding any building additions or alterations that add less than 5 units, which is a way for us to avoid counting permits that may not actually be adding new units. We also don’t count condo conversion permits, but do count adaptive reuse projects that add 5 units or more. Previous years’ numbers have been updated based on this new methodology so the data is comparable across time.
This change resulted in about 150 fewer single family homes in our calculations in previous years, and approximately 1,000 fewer single family homes in 2017. The jump in 2017 appears to be a result of recent changes to state and City law that permit the construction and conversion of accessory dwelling units. Since most of these ADUs appear to be legalizations of existing structures, we believe it’s fairer to not count these as “new” housing.