Rent across Southern California continued its upward surge as tenants struggle to find a home amid the tightest market in at least two decades.
While vacancies eased slightly in the spring quarter, availability rates remain among the lowest in data dating to the year 2000.
“In many of the SoCal markets, there has been a longstanding challenge in delivering new housing,” said real estate economist Carl Whitaker, research director for Dallas-based rental market tracker RealPage. “The lack of supply relative to local housing demand means limited vacancy.”
Vacancy rates this spring ranged from 2.5% in Orange County to 2.7% in the Inland Empire and 3.2% in L.A. County, according to a Southern California News Group composite of three leading apartment indexes — RealPage, CoStar and Moody’s Analytics-Reis. That’s up slightly from last winter, but it’s still well below the region’s average of 4-5% during the decade preceding the pandemic.
Eviction bans and rental assistance programs are among the reasons vacancies are low since those programs helped thousands of tenants keep their homes during the pandemic. Further boosting rental demand, more millennials are moving out on their own, and would-be homebuyers who got priced out of the for-sale market are continuing to rent.
As a result, nearly every apartment index shows rent is soaring by double digits.
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Orange County’s average rent for a vacant unit jumped 18.5% from the spring of 2021, hitting a record-high average of $2,570 per month, the composite index shows. That’s up $400 a month from the year before — and it’s more than $1,000 higher than 2010’s average rent.
Inland Empire rents were rising almost as fast, climbing 16.4% year over year to a record-high average of $2,002 – breaking the $2,000 per month barrier for the first time in Riverside and San Bernardino counties. Inland Empire rents jumped by more than $650 a month over the past five years.
Los Angeles County rents continued to rebound from pandemic-era rent drops, rising 14.1% last quarter to a record-high of $2,407 — up almost $300 a month from the year before.
L.A. County numbers were mixed. CoStar figures showed L.A. County’s rent growth down from the previous quarter, while RealPage and Moody’s both showed rent growth was up.
The rental market has been on fire since the summer of 2021, when vacancies plummeted and rents began rising by double-digits. Economists said most rentals were essentially full, while some tenants said they were offering to pay a year’s rent upfront or were offering to pay more than landlords were asking.
“There was a massive amount of pent-up demand that released in 2021,” RealPage’s Whitaker said. “Put another way, think of the demand that never happened in 2020, essentially resulting in two years’ worth of demand happening in a short summer window.”
There hasn’t been much letup since.
Sophie Lee was shocked last month when she found a notice on her apartment door saying her rent would jump $619 monthly beginning in September, rising 24% to $3,208 a month. Last year’s monthly increase was just $100, she said.
“We didn’t believe it. We had such an easy renewal last year. I thought, ‘Oh, we’re in the clear,’ ” the 25-year-old Irvine resident said. When she asked management why the increase is so big, “they just kept saying, ‘It’s the market. This is where the market is today, blah, blah, blah.’ ”
A state law capping rent hikes at 10% this year doesn’t apply to Lee’s building because it was built within the past 15 years.
The $619 per month increase is only if she signs a 13-month lease. If she goes month to month, rent for her two-bedroom, two-bathroom unit would triple to $8,000 per month. She tried negotiating – twice. Management said no.
Other tenants in her building said they got similar increases. “It’s crazy,” they said.
Lee said she and her roommate don’t know what they’ll do.
“We don’t want to move to a new place, but we have to consider moving within the complex or somewhere else,” she said. “We don’t think we should be forced to downsize. We like the things that we have, and we worked hard for them.”
Rental houses also are seeing big hikes.
In Los Angeles County, rent for houses jumped 10.9% in May, the latest month in the CoreLogic Single-Family Rent Index. That’s tied with April as the highest percentage increase since October 2000.
Single-family rents jumped 15.6% in Orange County, tied for the biggest gain since March 2001, CoreLogic figures show. Inland Empire house rents increased 13.7% in May.
CoreLogic attributes high rent growth to low unemployment rates and priced-out homebuyers, which created a larger pool of potential tenants and gave landlords more leverage to raise prices.
“Increases in mortgage rates and high home prices can be headwinds to the for-sale housing market, but may be continually pushing up single-family rents,” Molly Boesel, a CoreLogic economist, said in a statement last month.
There’s no end in sight for rent hikes, but the pace of rent growth is expected to subside. A CoStar forecast shows Southern California rent hikes will moderate to 5-6% by the spring of 2023. Rent growth is expected to shrink to the 3-4% level by the spring of 2026.
Source: Orange County Register