Multifamily Rent Increases To Outpace Income Growth In Southern California
Average monthly rents in Southern California are expected to increase by more than $100 by 2019, exacerbating a growing affordable housing problem in the region.
Rent growth is outpacing income growth at a rate that is not sustainable in Southern California, according to the 2017 University of Southern California Casden Economics Forecast.
Average monthly rents in 2019 could rise by $136 in Los Angeles, $149 in Orange County, $121 in San Diego County, $124 in the Inland Empire and $98 in Ventura County.
"It's certainly no surprise to anyone — developers, landlords, tenants and elected officials — that available units are becoming more scarce and more expensive in Southern California,” said USC Lusk Center Director Richard Green, who co-authored the forecast with economists at Beacon Economics. “As employment and wages improve in the region, homeownership remains stagnant. This combination is a key stressor in the availability and cost of apartments and has an increasing impact on the local economy.”
Many long-term renters are in rent-controlled units, so much of the increase will fall on the shoulders of new renters who are moving into the state or signing their first rental agreement, according to Beacon Economics founding partner and forecast co-author Christopher Thornberg. That means an additional challenge for companies looking to bring new workers to the area from out of state.
Los Angeles County's growing population and more millennials starting to rent will increase multifamily demand as homeownership stays low, the report notes.
In Orange County, there has been a steep decline in multifamily construction permits. That creates a future challenge even as demand for housing and the price of single-family homes are on the rise.
In San Diego County, though housing stock will increase slightly to push up vacancy, supply will not keep up with demand, driving up both the county's home prices and rents.
Here is the outlook for those counties:
- Los Angeles County
- 2017: $2,237 average rent; 3.94% vacancy
- 2019: $2,373 average rent; 3.91% vacancy
- Orange County
- 2017: $2,008 average rent; 3.87% vacancy
- 2019: $2,157 average rent; 3.5% vacancy
- San Diego County
- 2017: $1,927 average rent; 3.93% vacancy
- 2019: $2,048 average rent; 4.03% vacancy
For more on the outlook in Southern California, join us for Bisnow's Future of SoCal: CRE Leadership Forum on Nov. 16 at 1 Cal Plaza in Los Angeles.