Los Angeles Aims to Increase Affordable Multifamily Housing

In November, residents of Los Angeles will vote on an ordinance that would require large developments to include a higher percentage of multifamily housing units, thereby making way for more affordable housing in the city. Developers building near public transportation hubs such as rail and bus stops also would receive incentives for increasing their low-income housing offerings.

The ordinance's requirements would not apply to downtown Los Angeles or industrial development within a short distance of major transit stops. Developers in eligible areas would have the option to contribute to the city’s Affordable Housing Trust Fund instead of building rent-controlled units.

More than a third of Los Angeles residents spend more than half of their income on housing, increase the occupancy of their unit, or move into distressed parts of town to afford living there, said Joan Ling, former treasurer of the Los Angeles Community Redevelopment Agency, in a press statement.

More multifamily housing, along with more land zoned for multifamily housing, will help alleviate some problems with affordable housing in the city, Ling said.

Five Key Metrics to Review for a Multifamily Investment Market

The specific real estate market in which one invests is an important determinant in one’s success as a multifamily real estate investor. The following five key metrics can inform the investment decision by providing important information about the health and status of such a market:

Population growth rate

Since more residents translates into a greater demand for housing, this is one of the most important metrics for predicting future market volatility. It’s not necessary to identify a market in the top 10 for population growth. As an investor, you’ll care more about steady, long-term growth. If growth in your prospective market is flat to negative, it may not be an ideal place to acquire multifamily assets.

Employment growth

As employment growth tends to drive population growth, you should develop an understanding of your market’s job creation trends. Check out whether the job market is steady, whether it fluctuates at a greater rate than that of the overall economy, for how long a period it has been stable, and what forces drive its ebbs and flows.

Components of employment growth

Merely looking at job numbers won’t give you the whole picture. You also need to understand from where those jobs are coming. Specifically, you want to research the stability of job sources (service and retail jobs can be very volatile), the types of job sources (and whether they are likely to attract white collar, blue collar, or minimum wage workers), and the age group from which the dominant job sources are drawing.

Unemployment

Understanding the components related to unemployment is different than for employment growth, so it’s important to look at this factor separately. In general, you want to look for a market with lower unemployment than the overall national market, which will make your market comparatively better for multifamily ownership.

Landlord/tenant law

A number of laws from different sources affect how you will operate your multifamily investment, so a thorough understanding of these is critical. It is particularly important to pay attention to how evictions are handled, as these can wind up being costly and damaging to landlords in some areas.