Urban housing builds steam.

Skyrocketing home prices, a relentless population influx and bottle-neck traffic jams as workers commuted from longer and longer distances, all drove housing to the forefront of the economic, real estate development and political agenda in 2004.

As developers moved with alacrity to build market-price housing, government officials worked to garner consensus for an inclusionary housing ordinance that would pave the way for a stock of housing affordable to middle- and low-income residents.

As the year ended, more than 2,500 market-priced housing units were at some stage of development in the Warner Center area. Several hundred units of apartments got underway in other areas including Sherman Oaks and Encino. And more than 1,000 units of apartments are at varying stages of construction in North Hollywood.

Meanwhile, small, single-family home developers acquired what seemed like every available infill space to build small tracts of detached and attached homes.

"Any piece of vacant property that had an opportunity to go residential went residential," said David Mgrublian, managing director at Investment Development Services Inc. "It forced us to look at residential also."

IDs, with a portfolio of over 20 million square feet of commercial space including a number of properties in the Conejo Valley, opened a new unit, IDS Residential, to pursue housing and mixed use development, an area the company sees as more than a short-term fix for the slowing in the commercial real estate market that also marked 2004.

"I don't think the trend to mixed use is a fad," Mgrublian said. "If you look at the West Coast and the urbanization of the West Coast--it happened on the East Coast a long time ago--mixed use projects are viable and people like them. Those are good, long term trends and we are long term players."

Many believe that 2004 was a turning point for the San Fernando Valley, long a bastion of sprawling communities of single-family homes. In past years developers went farther and farther out from L.A.'s most famous suburb, building large tracts of homes in Conejo Valley, the Inland Empire and the Antelope Valley.

But by last year it was becoming increasingly clear that neither the outlying land nor the freeway infrastructure could continue to support such outward expansion, and developers turned closer to the city's core for.

"People believe inherently that development is bad because it causes traffic, when in fact you can argue that it improves traffic because it brings housing back toward the center city where people work and shop rather than continuing to go further out," said Clifford Goldstein, senior partner at JH Snyder Co., which is building the NoHo Commons complex.

Urban problems

The move to urban redevelopment caused problems of its own. Land prices, which have been gradually increasing in recent years, jumped even higher in the past year, an increase that will be passed along to consumers in the form of higher rentals and home prices.

But perhaps more worrisome is the effect these increases will have on the development of affordable housing, even as the city moves to mandate these units.

"One of the challenging things has been that the land costs have been blowing them (developers of affordable housing) out of the water," said Neelura Bell, Los Angeles program director for the Local Initiative Support Corp., a non-profit that helps developers of affordable housing obtain financing. "Prices have been gradually going up, but we got to the point where the projects are reaching $300,000-plus per unit, and the subsidies haven't quite caught up with the increasing costs."

Bell said that agencies such as the Los Angeles Housing Department have become much more efficient at moving affordable housing projects through the pipeline, but the state and federal funding available to subsidize these projects has remained static while land costs and the cost of construction has been rising.

Into this landscape comes a city effort to require developers to include a number of affordable units into new housing developments. Work on the ordinance, which has been underway for more than a year, is expected to result in a proposal to city officials early next year. And while the drafters of the proposal are working to include density bonuses and other features that would help defray the cost of the affordable units, it will be difficult to offer enough incentives to compensate for the rising cost of construction in a way that is palatable to the communities of single-family homeowners who will be directly affected by the new developments.