Construction costs in the Los Angeles area spiked 6% in the first quarter of 2025, marking the steepest quarterly increase in 12 years, according to a new report by Verisk, an insurance data analytics firm.
The surge comes as wildfire-damaged regions face heightened demand for rebuilding, compounded by rising labor costs and the ongoing impact of federal tariffs on building materials. Among California’s 33 residential construction markets analyzed, Los Angeles posted the highest quarterly increase. On a year-over-year basis, costs were up 10.5%.
Greg Pyne, head of analytics at Verisk, attributed the sharp increase to a surge in post-fire reconstruction. “Construction activity has rapidly intensified in wildfire-affected zones,” he said. “Labor demand has outpaced supply, pushing up wages and, in turn, overall construction costs.”
Since January, labor costs in the Los Angeles region have risen 6.4%, contrasting with the national trend of slowing cost growth. During the pandemic, supply chain disruptions, labor shortages, and increased housing demand had driven building costs higher, but they have since stabilized across much of the U.S.
According to Verisk, the national average construction cost rose just 0.9% in Q1 2025, and 4% year-over-year. In California overall, costs increased by 1.1% quarterly and 3.8% annually, significantly lower than the 2019–2024 pandemic-era annual average of 7%.
In addition to wildfire recovery, federal tariffs and immigration enforcement are also contributing to construction inflation in Los Angeles.
The U.S. government has imposed up to 25% tariffs on construction materials imported from Mexico and Canada, while tariffs on Chinese products currently stand at 55%. Materials most affected include steel, concrete, gypsum, appliances, and lighting fixtures. Tariffs on imported steel and aluminum—critical for framing and roofing—have also been raised from 25% to 50%.
The National Association of Home Builders (NAHB) estimates these tariffs will add about $9,200 to the cost of a newly built home. Market research firm Zonda projects that total construction costs could rise by as much as 6%, increasing total project expenses by up to $20,000.
Labor shortages are further exacerbated by recent federal immigration enforcement targeting undocumented workers. Construction sites in the Los Angeles region are experiencing a worsening labor crunch, which experts warn could further delay project timelines and drive up costs.
Analysts see that labor shortages can further cause major scheduling delays and add significant expense to construction projects.
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
