USC report: Average LA rents will go up $91 by 2020
“What we find is depressing”
By Elijah Chiland
The average Los Angeles renter will spend a little over $90 more per month on housing in 2020 than in 2018, according to a new report from USC’s Lusk Center for Real Estate.
The authors of the 2018 Casden Multifamily Forecast, a rental market study published Wednesday, estimate that LA renters now pay $2,267 per month, on average. They project that number will rise to $2,358 in 2020—an increase of 4 percent.
Tenants might not see that as cause for celebration, but that’s a far more conservative bump in prices than what was predicted last year in the same forecast. Authors of the 2017 report estimated that monthly rental payments would rise 6 percent by 2019, with average prices hitting $2,373.
The 2020 forecasted price is lower than that in 2019 in part because LA’s rental market has stagnated in recent months. According to the report, rental prices in the county climbed 1.1 percent in the last year. Between 2016 and 2017, they rose 5 percent.
The report’s authors note that, while more than half of LA residents rent rather than own their homes, the county’s homeownership rate increased by a full percentage point in 2017. The pace of new housing construction is also on the rise. In the first two quarters of 2018, the number of housing permits issued is up 44.8 percent countywide.
These factors may have contributed to a slight uptick in the countywide vacancy rate, which now stands at 4 percent. As the report notes, that’s still low enough to push rents upward, but lower demand is helping to keep prices from soaring.
None of this means that rents are affordable for residents—including those earning typical incomes.
“What we find is depressing,” write the authors of the report, in a section on affordability in Southern California.
In Los Angeles, renters who earn the county’s median income would need to devote nearly half of their earnings toward rent in order to afford a median-priced apartment.
Things get worse for lower-earning renters. For those in the 25th percentile of earners (meaning that they make less than 75 percent of residents), paying for a rental unit in the 25th percentile of price points would require an investment of 58 percent of their pay. That’s nearly twice the 30 percent threshold deemed appropriate for housing costs by the U.S. Department of Housing and Urban Development.
“There is a poor match between people’s housing cost and incomes right now, and no amount of sorting will, by itself, fix this issue,” Richard Green, director of the Lusk Center and a co-author of the study, said in a statement.
Green suggests the key to housing affordability in Southern California is ensuring that vacancy rates continue to rise.
“The way to raise vacancy rates is to build more,” Green said.
The original article can be found here.