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The high cost of construction is exacerbating the housing crisis in California and other markets where there is a housing shortage. Last year, construction costs increased more than 5% in Los Angeles alone, and this year, many expect costs to continue to increase sharply as trade tensions rise. These costs are having a significant impact on new construction across asset classes, and particularly on multifamily and housing product.

“Rising construction costs are certainly curtailing multifamily development and keeping supply low in many markets,” Richard Lara, president and CEO of RAAM Construction, tells GlobeSt.com. “This is exacerbating the housing shortage in markets like California, where affordability continues to drop, increasing the need for workforce and affordable housing development even more.”

Of course, high construction costs aren’t the sole reason for the housing crisis, but they are certainly part of the equation. “Add in the regulations that developers face in this state, along with NIMBYism, and there are even more headwinds against development of much-needed affordable housing,” says Lara.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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