Rent in San Diego County is expected to rise faster over the next two years than the rest of Southern California, said a study released Tuesday.
Researchers found a lack of new construction, mixed with employment and population growth, mean San Diego’s rent should increase by $155 a month by 2018.
The study from the University of Southern California’s real estate school, and prepared by Los Angeles-based Beacon Economics, said San Diego’s rent increases will outpace those in Orange County, Los Angeles County and the Inland Empire.
Higher rents mean more profits for real estate investors, who are paying record-setting amounts to acquire rental units.
But renters are feeling the cost burden, too. A new Zillow report, also released Tuesday, found San Diego renters spend 39.5 percent of their income on rent. That was less than other areas of California. Residents of Los Angeles County pay 47.6 percent; San Francisco, 46.1 percent; and San Jose, 41.2 percent.
Raphael Bostic, interim director of the USC Lusk Center for Real Estate, said the university’s findings are not overly negative. He said it shows there is strong job growth and the rate of rent increases could slow as new apartments open.
“Wages are starting to move. It could be that things aren’t going to get a whole lot worse in the coming years,” he said.
However, Bostic said high rents will continue to have an impact on the economy.
“The bigger issue is we have a lot of renters who are devoting large percentages of their income to rent. If we can back that off, it relieves a bit of the stress and anxiety,” he said, “and get people to turn to more optimistic things, start to be more pleased with how they live and how they can contribute to their communities.”
The USC study noted that last year there were 6,273 construction permits issued for multifamily home construction in San Diego. That was 2,308 less than Orange County and 11,596 less than Los Angeles County.
At one time, San Diego was building more apartments and condos than Orange County, as recently as 2012.
So what happened the last three years?
Borre Winckel, CEO of the Building Industry Association of San Diego, said Orange County has more land and rezoning options.
“Even there, I don’t think we’re going to see a heck of a lot more,” he said. “At some point, Orange County will run into the same issue that San Diego has. We’ve constrained the future land supply by all sorts of regulatory positions, whether its open space, flood control areas or endangered species habitat.”
The USC study used U.S. Census estimates to calculate an average rent of $1,422 for 2015 — significantly lower than most on-the-ground estimates. MarketPointe Realty Advisors, using data from 130,976 units, found in March that the average rent in the county was $1,618.