Los Angeles doesn’t have a housing crisis—it has a decision-making crisis.
The city’s leadership continues to ignore fundamental economic realities, punishing developers with restrictive rent control, suffocating regulations, and a punitive tax structure that makes building here financially impossible. Families, too, are suffering under a system that fails to provide the resources they need.
Developers aren’t leaving because they don’t want to build.
They’re leaving because LA makes it a bad business decision.
And I don’t just say this as an industry insider—I say it as someone who left LA County when my family realized the system wasn’t built to support us.
Meanwhile, LA’s finances are collapsing. The city is facing a $400 million budget shortfall for the upcoming fiscal year, resulting from years of financial mismanagement and bad policy choices. When a city can’t balance its budget or fund essential services, how can it expect developers and investors to stay?
So, if LA wants to retain developers, attract investment, and create housing solutions, here’s what needs to change.
Yield on Cost: The Math LA Refuses to Get Right
Developers don’t build based on need; they build based on return.
Every project is evaluated by its Yield on Cost (YoC)—the expected return on total development cost—compared to the market cap rate, which reflects what investors are willing to pay for stabilized properties.
The formula takes the stabilized net operating income and divides it by the total project cost.
When YoC is significantly higher than the cap rate, a project makes sense.
When YoC and cap rate are too close (or upside-down), there’s no reason to build.
LA’s problem? The spread between YoC and cap rates has disappeared due to:
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High construction costs (labor, materials, regulations)
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Punitive taxation (Measure ULA’s “luxury tax” on projects over $5M)
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Rent control, which artificially caps revenue growth
When developers look at the numbers, they realize they can get better spreads in San Diego, Phoenix, Austin, or Nashville. So they go.
LA leadership either doesn’t understand this or doesn’t care—both are unacceptable.
I Left Too—And I’m Not a Developer
This isn’t just about real estate. It’s about how LA fails its people.
Los Angeles was my stomping ground. I grew up around the urban core, Echo Park, Silverlake, and the San Fernando Valley. In my bachelor days, I was the ‘Urban Man’ living downtown before it was cool. I was active in my communities, participating in neighborhood councils and supporting public efforts to improve access to housing and green spaces with my money and time. However, after I married and adopted my kids, we tried the suburbs but made the difficult decision to leave Los Angeles because we couldn’t access the basic resources our neurodivergent child needed.
The City and County shrugged their shoulders and offered no real solutions. Social services were impossible to navigate, leaving families like mine with no real options—like they were designed to fail.
Public schools were underfunded and unprepared to provide proper support.
Charter schools in lower-income areas promised better opportunities but lacked oversight and transparency, failing the students they were meant to serve.
The result? We left.
We moved to a more expensive County with much higher property taxes and fees, but at least the money is visible in well-funded schools, clean streets, responsive emergency services, and functional public services. I met face-to-face with the public school district superintendent, who showed me exactly why my kids would flourish if we moved there.
And just like developers, we had to make a business decision about where to invest our time, money, and future.
The difference? Developers take their capital elsewhere. Families take their tax dollars and kids.
LA is losing both.
The Hard Truth: No One Cares About Excuses
I can already hear the counterarguments:
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“Developers are just greedy!”
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No. They’re rational. Why invest in LA when they can make more money and face fewer headaches elsewhere?
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“Housing is a human right!”
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Absolutely, in principle. But housing doesn’t build itself. Without incentives, there is no supply.
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“The rich should pay their fair share!”
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Great. Agreed. But when you tax new development out of existence, the rich don’t pay anything because nothing gets built.
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It seems that Los Angeles leaders continue to ignore economic reality, and their policies fail the people they claim to protect.
Tough Love Solutions: Here’s How LA Fixes Itself
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Rethink the “Luxury” Tax That’s Killing Middle-Class Housing
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Raise the Measure ULA threshold from $5M to $50M for multifamily housing.
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Offer exemptions for workforce, student, and affordable housing projects.
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Remove the tax on new construction sales, stopping the double penalty.
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Stop Acting Like Rent Control is a Solution
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Create limited rent control exemptions for new construction to encourage more building.
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Tie rent increases to actual inflation so landlords don’t lose money over time.
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Offer property tax incentives for landlords who reinvest in aging buildings.
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Cut the Red Tape That Chokes New Development
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Reduce entitlement delays—approvals shouldn’t take 18+ months.
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Create pre-approved zoning overlays for high-demand housing areas.
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Fast-track permitting for fire-damaged areas and vacant commercial spaces.
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Incentivize Smart Growth
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Follow San Diego’s example—fast-track projects that include affordable housing.
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Reward developers who build within existing urban infrastructure.
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Partner with private developers on public land redevelopment.
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LA Needs Developers More Than Developers Need LA
Los Angeles is not entitled to investment, business, or housing.
Developers—and families—have choices.
Will LA keep pushing them away?
Or will it finally wake up and fix the policies strangling its future?
Until then, people like me will keep leaving. And so will the developers.
Your Turn
Are you an investor, developer, or someone who left LA because of its broken system?
Drop your thoughts below. Because if we don’t start this conversation, nothing will change.
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