Southern California’s housing crisis shows no sign of easing, according to the latest University of Southern California Casden Real Estate Economics Forecast. The report, released annually by the USC Lusk Center for Real Estate, predicts rent increases through 2026 across the region despite the economy’s resilience to high interest rates and ongoing outmigration.
The forecast evaluates multifamily rent trends and vacancies across Los Angeles, Orange, San Diego, Ventura Counties, and the Inland Empire, revealing a stark contrast between Southern California and other regions of the country. Despite a robust economy and a strategic soft landing engineered by the Federal Reserve’s monetary policies, the region’s housing shortage remains dire. The report highlights how inflation, soaring interest rates, and slow housing production have worsened an already strained market.
“While the economy has proved resilient, new housing supply and affordability remain on shaky ground,” said Moussa Diop, Associate Professor of Real Estate at the USC Sol Price School of Public Policy, who authored the forecast. “As rates slowly drop, the mortgage market will improve, but California is falling behind in building new housing compared to Sunbelt states like Florida and Texas.”
The Southern California Housing Landscape
The forecast points to a troubling trend: While Sunbelt states like Georgia and North Carolina are building new housing at above-average rates (with increases of 1.53 percent and 2.01 percent, respectively), California lags significantly, contributing just 0.67 percent to the national stock of new housing. This shortage, coupled with high outmigration—around 250,000 people left California in 2023—has left the region in a precarious position.
Diop and co-author Eunha Jun, Research Associate at USC’s Lusk Center, also address the impact of local regulations on the housing market. Tight lending environments, compounded by stringent local policies and rent control measures, have limited the ability of developers to meet demand. “Most housing control is local, and outside of California, other regions are facilitating the supply of desperately needed housing despite higher mortgage rates,” Diop added.
The forecast provides a detailed look at rent and vacancy trends for key Southern California regions over the next two years:
Los Angeles County:
Rent growth remains moderate, with a forecasted average annual increase of 1.46 percent. However, new unit deliveries have been consistently below pre-pandemic levels, exacerbating the supply shortage.
• July 2024 Average Rent: $2,269 (5.40 percent vacancy rate)
• July 2026 Forecast: $2,334 (4.45 percent vacancy rate)
Orange County:
As the most expensive rental market in Southern California, Orange County is experiencing intensified outmigration, with a projected rent increase of 2.34 percent per year. Affordable submarkets in Anaheim and Santa Ana may offer some relief, but high rents in coastal areas continue to push residents out.
• July 2024 Average Rent: $2,653 (4.02 percent vacancy rate)
• July 2026 Forecast: $2,786 (4.59 percent vacancy rate)
San Diego County:
San Diego’s aggressive housing response contrasts with Orange County’s, which has seen a significant increase in multifamily unit deliveries. Rent is forecasted to grow by 2.17 percent annually, and vacancies are expected to decrease slightly.
• July 2024 Average Rent: $2,463 (5.52 percent vacancy rate)
• July 2026 Forecast: $2,604 (4.47 percent vacancy rate)
Ventura County:
Despite high demand and limited multifamily options, Ventura County continues to see steep rent increases, forecasted at 3.18 percent per year. Without an aggressive development strategy, rents are expected to climb even higher.
• July 2024 Average Rent: $2,590 (5.17 percent vacancy rate)
• July 2026 Forecast: $2,775 (4.69 percent vacancy rate)
Inland Empire:
The Inland Empire has experienced rapid growth, driven by e-commerce and deglobalization trends. The region is poised to maintain steady rent growth of 3.2 percent annually, supported by a burgeoning housing construction boom that is helping to alleviate the demand pressure from neighboring counties.
• July 2024 Average Rent: $2,046 (6.31 percent vacancy rate)
• July 2026 Forecast: $2,211 (5.45 percent vacancy rate)
Looking Ahead
The USC Casden Real Estate Economics Forecast paints a challenging picture for Southern California’s housing market over the next two years. As outmigration slows and demand continues to outstrip supply, rents are set to increase across the board. The region’s failure to address its housing deficit will have long-term consequences for residents and businesses alike. With increasing rent prices and limited housing availability, the call for comprehensive regulatory reforms and accelerated development in key areas has never been more urgent.