Why rents in SoCal will keep rising in the coming years
USC researchers are forecasting that the average rent on an apartment in much of Southern California will rise by at least $100 over the next two years.
That projection is being revealed today as part of the USC Casden Multifamily Forecast, which is released annually by USC's Lusk Center for Real Estate. Researchers from Beacon Economics prepared the report for USC, analyzing rents, housing supply and population growth in Los Angeles, Orange, San Bernardino, Riverside and San Diego counties.
They found that housing supply remains low in Southern California. The low vacancy rates in the region are allowing landlords to fetch high rents on their apartment units.
Researchers found that in 2015, more than 38,000 construction permits were issued in Southern California for new apartment units. But, they said, that inventory will not be enough to satisfy the demand for housing.
"Though multifamily construction permits are back to pre-recession levels and have provided some relief, population and employment growth are driving up demand faster than new inventory can hit the market," said Raphael Bostic, interim director of the Lusk Center. "For renters, new construction has simply kept a bad situation from getting drastically worse."
In 2015, the average rent in Los Angeles County was $1307, according to the report. Researchers found that by 2018 the average rent in L.A. County will rise to $1416. Rents, however, will not rise that high for all tenants. Those living in units protected under L.A.'s Rent Stabilization Ordinance, which applies to most buildings built before 1979, can only see their rents rise by 3 percent per year maximum.
The average rent is higher in Orange County. It was $1587 per month in 2015. By 2018, it is expected to increase to $1736, the forecast said.
In the Inland Empire, the average rent was $1155 per month in 2015. That's expected to rise to $1239 by 2018.
The forecast also looked at the national rental market, which is beginning to cool as more renters become home owners. However, the USC report found that renters in California aren't able to buy homes as easily. Meanwhile, more people are moving to Southern California, and young adults in the Millenial Generation are entering the rental market. That's keeping the local rental market strong.
"At a national level, it is clear that the great apartment bull market that started at the end of the great recession is coming to an end," said Christopher Thornberg, a founder of Beacon Economics, which prepared the forecast for USC. "Local supply constraints combined with solid economic growth implies that the softening will not be experienced locally."