The Los Angeles beachfront neighborhood of Venice may be one of the most in-demand areas in the nation—but it hasn’t gained a single housing unit in the last 15 years.
Venice was ranked as the country’s toughest place to build new homes, according to an analysis by contractor website BuildZoom.com. In fact, the neighborhood had about 700 fewer housing units in 2015 than it did in 2000. Apartment development has come to a standstill there, and wealthy owners have purchased adjacent projects and leveled them,
The Wall Street Journal reports.
Home prices in Venice have more than tripled in that time period, skyrocketing 246 percent. The national average for price appreciation during the same period is 52 percent.
It’s one example of what is occurring in wealthy urban areas across the country that have been resistant to new housing developments, BuildZoom reports. Issi Romem, the site’s chief economist, says the toughest places for home builders are not downtown areas but inner suburbs. “Because the inner suburbs have been around longer than more distant suburbs, the inner suburbs are more likely to have depleted their supply of vacant lots, leaving no room for acceptable new construction,” Romem says.
The three areas in the U.S. BuildZoom identified as the toughest for builders are Venice Beach in Southern California (ZIP code 90291); Prospect-Lefferts Gardens in Brooklyn, N.Y. (11225); and the Fishtown section of Philadelphia (19125).
BuildZoom researchers note that gentrifying neighborhoods present the most challenges for home builders. “While the process of gentrification is in progress, neighborhoods experience sharp housing price appreciation,” Romem says. “However, because gentrification is often closely tied to the neighborhood’s physical charm, housing price appreciation is rarely met by equally large increases in the rate of new construction. As a result, gentrifying neighborhoods often elicit an increasing willingness to pay for housing while failing to get more housing built.”
BuildZoom analysts also note that areas where it’s hard to build often are exclusive and wealthy low-density places. Builders can find vacant land difficult to come by in these locales, so metro areas then expand outward, and gentrification becomes less common. The highest price appreciation often occurs in these exclusive, wealthy areas, such as The Villages in Houston (77024) and Brookhaven in Atlanta (30319), according to BuildZoom.
Source: “The Toughest Places to Build: Behind the Scenes of a Wall Street Journal Analysis,” BuildZoom (July 20, 2017) and “Venice Beach Is a Hot Place to Live, So Why is its Housing Supply Shrinking?” The Wall Street Journal (July 16, 2017) [Log-in required.]
