Surprised by the south Valley

Was looking at a deal in the Valley yesterday, was surprised by the rents, and came to a realization about apartment supply.

The reason that I was surprised by the rents is that I’m used to thinking of the Valley as having considerably more supply than the city. There’s physically just a ton of land there.

So I was shocked to see 1/1s going for upwards of $2000 in the south Valley… that’s like Silver Lake.

Here is what I think is going on:

1. While there is a lot of land in the south Valley, almost all of it is zoned R1
2. The main places where density is permitted is along the main commercial commercial drags (Riverside, Laurel Canyon, Cahuenga, etc.)
3. Those streets were mostly built-out in the 1960s, so the buildings are rent-controlled
4. If you want to rip down an existing RSO building to build a new one, the new building will be rent controlled

The net result of all of this is that supply is actually highly constrained in the south Valley.

Who knew?