— By Kitty Wallace of Colliers —
The Los Angeles multifamily market is undergoing a short-term reset as a recent wave of deliveries has softened rents and modestly increased vacancy. However, this dislocation is proving transitory as development has slowed dramatically and the forward pipeline is effectively falling off a cliff beyond 2026, reinforcing what remains one of the most supply constrained and fundamentally durable markets in the country.
Since the onset of COVID, the Los Angeles market has contended with elevated legislative risk, homelessness and crime concerns, modest population fluctuations, rising operating expenses, and, most notably, increased insurance premiums and utility costs. Yet, with a vacancy in the mid-5 percent range, this multifamily market continues to outperform the national average of roughly 8 percent. Rents are now stabilizing and beginning to inflect upward as concessions burn off and demand normalizes.
Policy Headwinds, Construction Challenges, Emerging Tailwinds
The ULA tax, imposing a 5.5 percent levy on transactions above $10.6 million, has further constrained new construction. This has made it increasingly difficult for projects to pencil and has driven many sites toward lower-density uses or affordable housing backed by subsidized capital.
As a result, much of the current development activity is concentrated among groups with legacy entitlements or access to accretive funding. That said, policy shifts — including SB 70, which enables higher-density housing near transit — and meaningful CEQA reforms are expected to support more efficient long-term development.
A Compelling Entry Point as Yields Rise and Recovery Takes Shape
The current environment offers a compelling entry point: assets are trading at a meaningful discount to replacement cost, with attractive going-in yields, often a 5-plus cap rate in Los Angeles.
LA historically traded at a 25 to 75 basis point premium to Orange County and San Diego, reflecting its depth, liquidity and long-term growth profile. Today, that relationship has inverted, with Los Angeles offering comparable and, in many cases, higher going-in yields, creating an opportunity for immediate cash flow and embedded upside. History suggests many investors will wait for clear signs of recovery before reentering. The problem is they risk missing the window, as evidenced by San Francisco’s rapid rebound with more than 7 percent rent growth in a relatively short period.
Los Angeles now appears poised for a similar inflection. While tenant protections, including strict rent control and “just cause” eviction policies, continue to tilt near-term leverage toward renters, the broader setup is increasingly favorable for landlords as supply wanes, fundamentals tighten and rent growth resumes, positioning the market for a healthier and more sustained recovery over the next 12 to 24 months.
— By Kitty Wallace, Vice Chair of Colliers. This article was originally published in the April 2026 issue of Western Real Estate Business.