LA Housing and Rents.

André Bueno
Aug 23, 2017 · 2 min read

The policies that keep getting put into place worry me as both a developer and a citizen.

Today the City of LA voted unanimously to levy a charge of $5 PSF on commercial developments and $12 PSF on market rate projects.

This is no bueno.

This fee is supposed to incentivize the construction of affordable housing.

With construction costs going through the roof and prevailing wages being dragged into the conversation (i.e. Union labor)- it has made new developments harder to pencil out.

How does this affect us?

The economic implications will. systematically affect all parties involved:

Implementing policies to disincentivize market rate development will result in construction costs.

This increase will be off set by higher rents.

As rents are upwardly adjusted, older inventory will close the gap or it will be demolished to build the same (depending on lending requirements and other factors).

In sum, I don’t feel like these policies are solving the issue we have at hand:

We have too much demand relative to the available supply.

If we don’t enable developers to build to the moon- then we should expect rent prices to continue climbing upwards.

And for that reason I feel we need to allow the market to regulate itself.

What do you all think?

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André Bueno

Written by

@Forbes Contributor | Former I-Banker at Goldman Sachs and Morgan Stanley | Impact Investment Expert

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