Southern California to see smaller rent hikes over the next two years, forecast says
By Jeff Collins
Southern California rents will keep rising over the next two years, but at a slower pace as vacancy rates rise slightly in Los Angeles and Orange Counties, according to USC’s Casden Multifamily Forecast released Wednesday, Oct. 17.
The annual forecast, produced by the University of Southern California’s Lusk Center for Real Estate in conjunction with Beacon Economics, also determined that low-wage earners are not the only ones facing an affordable housing crisis.
“We continue to find affordability issues across the board,” the forecast said. “We find that for nearly every occupation in Southern California, there is not an affordable unit at the median (rent).”
Some of the worst affordability problems are in Los Angeles County.
Despite having the second-lowest median income in the region, Los Angeles County has the region’s highest rents.
New construction has put a lid on rent gains in L.A. and Orange counties, however.
The most affordable rents are in the Inland Empire. But because incomes are lower there, residents in the Riverside-San Bernardino county areas “faced the highest rent burden across all of the Southern California metro areas.” Nearly 59 percent of Inland Empire households are rent burdened.
San Diego County tenants face the biggest rent increases. Rents there are projected to rise 10.6 percent there over the next two years to an average of $2,187 a month in 2020.
Forecast highlights include:
— Los Angeles County: The average rent is projected to increase 1.7 percent to $2,305 a month in 2019, up from $2,267 this year, the forecast said. In 2020, rents are projected to increase 2.3 percent more to $2,358 a month.
Vacancy rates are projected to rise slightly but remain low enough to continue pushing up rents, the forecast said. The vacancy rate is projected to increase to 4.3 percent in both 2019 and 2020, up from 4 percent this year.
— Orange County: The average rent is projected to increase to $2,071 a month in 2019, up from $2,035 this year, a 1.8 percent gain. The average rent in 2020 is forecast at $2,087, up 0.8 percent.
Next year’s vacancy rate is projected to increase to 4.3 percent, up from 4.1 percent this year. In 2020, it’s forecast to go up to 4.6 percent.
— Inland Empire: The average rent is projected to increase 3.1 percent to $1,501 next year, up from $1,457 this year. It’s projected to rise 2.3 percent more to $1,535 in 2020.
Next year’s vacancy rate is expected to remain unchanged from this year’s rate of 3.8 percent. In 2020, it’s projected to decrease to 3.7 percent.
The Casden forecast compared renters at various income levels with comparable-level rents, finding affordability issues across the board, the report said.
For example, if the 25th percentile household in Los Angeles County paid rent at the 25th percentile, about 58 percent of its income would go to paying rent, the forecast said.
Median income households paying median rents would spend about 40 percent of their income on rent. The only occupations not having rent affordability issues are those in the science, computer mathematics and architectural engineering fields.
“Even when we look at people at different educational attainment levels, every group has an affordability problem,” the report said.
The original article can be found here.