Los Angeles Rents Are Falling. Here’s Why.

In July, it was reported that rents in Los Angeles County had fallen to a four-year low. While rents remained high compared to much of the nation, with a reported median price of $2,603 per month, the decline offers a glimpse of what can happen when governments liberalize housing restrictions and allow developers to build.

California’s housing crisis is largely self-inflicted, caused by decades of zoning restrictions and other regulations that have prevented developers from producing enough housing to meet market demand. Laws like the California Environmental Quality Act (CEQA) are often weaponized to delay or block new development, imposing significant costs and delays on infill housing projects across the Golden State.

While California still has a long way to go in terms of regulatory reform, recent declines in rental prices can be attributed, at least in part, to long-overdue policy changes. It was reported that the falling rents reflect “additional housing options provided by new multifamily development and accessory dwelling unit (ADU) construction,” in addition to post-COVID-19 market stabilization.

ADUs are secondary housing units located on residential properties, such as garages converted into living spaces or small detached homes. For decades, California heavily regulated ADU construction, restricting property owners’ ability to use their land productively and limiting the housing supply.

In recent years, however, the state has enacted reforms to make ADUs easier and less costly to build, allowing property owners to bring much-needed housing to the market. In fact, as of 2024, ADUs accounted for over 26 percent of all homes permitted statewide. In Los Angeles County, the housing type amounted for 37 percent of all new housing units certified for occupancy in 2025. All in all, the total number of ADUs permitted in California increased by 15,334 percent between 2016 and 2022.

Despite these improvements, housing prices in California remain exorbitantly high.

To put the affordability crisis into perspective, the average home in Utah costs approximately $533,000. Meanwhile, the median household income in the Beehive State is approximately $97,000. The numbers for California, on the other hand, are approximately $762,000 and $100,000, respectively. That means that just two states over, incomes are approximately the same, taxes are lower, and homes cost roughly 30 percent less.

The situation is even worse in California’s urban centers. Based on median home prices and household incomes, the monthly mortgage payment on a typical home in Los Angeles would consume more than 90 percent of a median-income household’s take-home pay, assuming that the household files taxes as married filing jointly. This means that if such a household were to purchase a typical home in Los Angeles, it would have barely any money left over for essential expenses.

While there are certainly many reasons to move out of California, especially taxes, residents should have the option to stay if they want to. For many, however, the numbers simply don’t add up.

The only way out of this crisis is to build, build, build.

There is so much demand for affordable housing in California that if more development were permitted, developers would respond by building units as quickly as possible. Instead, governments throughout the state continue to protect the interests of incumbent property owners and NIMBYs (not-in-my-backyard opponents), keeping prices artificially high.

If the Golden State is to once again become a land of opportunity, it needs to remove the regulatory barriers that have made housing so prohibitively expensive. The increase in ADU construction shows what can happen when markets are allowed to do their job.