Study shows rents will grow 6% this year with occupancy expected to near 97% by the end of 2005. By Alicia Robinson NEWPORT-MESA — Apartment rents in Orange County are expected to continue rising over the next two years, in part due to the area's buoyant economy and a lack of rental housing supply, experts said. A study released today by the USC Lusk Center for Real Estate predicted Orange County rents will grow at 6% this year and 9% next year, with occupancy expected to approach 97% by the end of 2005. The average monthly rent for bachelor to three-bedroom apartments in 2003 was $1,260 in Orange County, compared with $900 in Riverside and San Bernardino counties and $1,300 in Los Angeles, the study found. The average rent in Orange County rose about 20% over the last four years, according to the study. "It means that things are going to be tough, basically," said USC associate professor Raphael Bostic, author of the study. "This is a really tight market." This is the second year USC's Lusk Center has done the study, which is an annual project established by a donor's gift to the school, Bostic said. "If you're looking to rent you should expect to see your rents rise regularly, and life in that regard will probably not get easier for some time," he said. Local rental companies supported the study's conclusions. "It's not as easy to find a place as it used to be," said Patrick Verge, a manager at Westside Rental in Costa Mesa. Everyone wants to live near the water, but with rents continuing to climb it's getting harder and harder to afford, he said. Because of high rental rates people are doing more research when looking for a place to live, and they are more likely to share an apartment to decrease their rent, Verge said. The rental market has started to soften a little because people who were renting higher-end apartments took advantage of low interest rates and bought homes, sad Eric Reichert, president of Orange County Property Management, which manages rental properties for owners. Rents have risen for several years, which has made affording an apartment a struggle for people in low- to middle-income brackets. "Those are the ones that probably hurt the most because they can't qualify to purchase anything," Reichert said. Rents have continued to rise in Newport Beach because there are plenty of jobs available and a dearth of employees qualified to fill them, said Richard Luehrs, president of the Newport Beach Chamber of Commerce. "Orange County has a very diverse economy, so other places in the country where they're very dependent on a particular sector [of the economy], we don't have that," Luehrs said. The city of Newport Beach last week reported apartment vacancy rates averaged between 6% and 11% during each quarter of 2003, based on a survey of nearly a quarter of the city's rental units. Some new rental units are becoming available in Newport Beach, where about 1,000 units are being added at the Bluffs on MacArthur Boulevard Rental housing is in shorter supply in Costa Mesa, where many development proposals have lost steam when faced with opposition from anti-development groups. The lack of supply has pushed rents higher in the same way that housing sale costs have appreciated due to a shortage of homes for sale, Costa Mesa Chamber of Commerce Executive Director Ed Fawcett said. "From my viewpoint the rentals are high simply because very vocal people are trying to stop any development from occurring," he said. Orange Coast College has proposed a project that would add about 250 units on college property at Adams Avenue and Pinecreek Drive, but otherwise few new rental units are in the works, Fawcett said. Bostic said the number of jobs available in Orange County is expected to increase in the next few years, but no significant increase in the supply of rental housing is predicted. Costa Mesa has traditionally offered more affordable housing than Newport Beach. But if nothing is available here, people working here have to live farther away, adding to traffic congestion, Fawcett said. "The demand is always increasing," he said. "The demand is not going to diminish, and if no more apartments are allowed or if no more housing is allowed, certainly the rates are not going to go down.”
March 30, 2004