Demand returns for LA building permits after near collapse
After nearly seizing up during the COVID-19 shutdown, the pace of new construction in Los Angeles – a key driver of the local economy – has risen steadily over the past few months.
Mayor Eric Garcetti ordered the closure of restaurants, bars, theaters and many other other businesses on March 15. The effects were instantaneous: April marked the lowest point for building permits issued by the City of Los Angeles in at least a decade, when the region was still mired in the depths of the Great Recession.
Total number of building permits by month Jan. 2015 – July 2020
That month, the city issued 6,644 building permits, a drop of 57% from just three months earlier, according to data from the city’s Department of Building and Safety. The 129 permits for new buildings and homes in April was down 67% from the level in January.
Though the volume of permits has picked up considerably since the spring, it remains stuck below pre-pandemic levels. In July, there were 11,460 permits issued, or 27% below the January total, according to the LADBS. (Full data from August is not yet available.)
Permits for new buildings by month Jan. 2015 – July 2020
The buoyant construction sector has been one of the consistent bright spots in the Southern California economy, helping to drive down unemployment and raise wages. The industry employs between 100,000 and 150,000 people across the county, according to the Los Angeles Economic Development Corporation. Any slowdown in building also threatens to dent efforts to address the region’s chronic housing shortage – which has fueled rising unaffordability and homelessness.
A coronavirus credit freeze
COVID-19 at first presented a triple threat to the sector: Banks cut back on loans, property owners concerned about spreading the virus held off on new projects, and the city’s building inspectors struggled to process permits that no longer could be requested in person.
“I had a couple of clients cancel jobs, one because she got COVID,” said Rigo Garcia, whose RG Construction specializes in pools and hot tubs. Business has come back, he said, but only to a degree. He now employs three people, down from 10 full-time workers before the pandemic.
“With every shock there is the tendency to pull back,” said Tyler Laferriere, an economist with the LAEDC who has been studying the construction sector. “There is also a credit problem because a lot of these developers are highly leveraged.”
Unlike in some other regions, construction workers in Los Angeles were deemed essential employees, allowing developers and contractors to skirt many of the lockdown restrictions that hit restaurant workers, gym trainers, barbers and others. Yet there was plenty of disruption. At first, there was little clarity on how crews could operate safely on a construction site or how real estate agents could show a property without incurring health risks.
Quarantine led to more building permits for remodels
But the protracted lockdown that forced many people to work from home while their kids attended school online has begun to fuel demand, said Laferriere. “In many cases, where you live is now where you work,” he said, which has led to a slew of requests for house remodels to create more space.
Mortgage rates have also fallen, making it easier to borrow. “The conditions are there for those who weathered the storm to heat up demand,” said Laferriere.
Still, many contractors complain that the city, which issues the permits needed for everything from adding a bathroom to starting a new home, has not been able to keep pace. “Business is now going good, but getting permits from the city is our biggest problem,” said Ajim Baksh, of Baksh Construction, Inc.
A permit that once took 20 minutes during an in-person visit to the Department of Building and Safety can now take up to three weeks, he said. Baksh said on several occasions he has had a crew ready to start a job, but had to keep them home for weeks while the permit was processed.
An official with the Department of Building and Safety acknowledged that precautions put in place to reduce the risk of exposure to COVID-19 have complicated the permitting process. Contractors who drop off their plans in person must place them in a bin, where they sit for a 24-hour decontamination period before they can be assigned to an inspector. If plans need an additional sign off from another city department, then they must undergo an additional 24-hour quarantine. Any alterations need to be handled over email, which can also slow the pace, the official said.
Maroam Cohen, who coordinates construction projects for several contractors, said that obtaining all the necessary permits to build a pool can now drag on for six months, up from four before the pandemic. But demand, he said, has been on a tear. “I have never seen it this busy.”
How we did it: We examined publicly available data on permits issued by the Los Angeles Department of Building and Safety for the past five years.
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