Southern California apartment rents will increase 2-4% a year through 2025, giving renters some relief from the incessant hikes that plagued their pocketbooks in recent years, a USC forecast said.
Below-average increases are forecast for Los Angeles, San Diego, Riverside and San Bernardino counties, according to the University of Southern California’s recent Casden Multifamily Forecast.
In Orange County — Southern California’s strongest rental market — increases will be slightly above average, with the typical asking rent hitting a record high of $2,800 per month by late 2025. Ventura County hikes are projected to be in the average range.
But rent growth in 2024-25 will be nowhere near the massive increases seen during the pandemic, when hikes ranged from 12-18% a year.
After two years, however, the pace of rent hikes should increase amid a slowdown in apartment construction, according to the forecast, complied by the USC Lusk Center for Real Estate.
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And landlords will face hard times as they struggle to replace low-interest loans coming due in the next four years, the forecast said. High interest rates and surging operating costs will put more building owners in a bind, resulting in foreclosures and fewer resources needed to increase the housing supply.
“As the industry takes time to sort out financing, new supply will dip lower and lower,” forecast authors said in a statement. “Vacancy will drop, and rents will climb.”
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A metro-by-metro breakdown — based on CoStar’s survey of market rate buildings with five or more apartments — shows:
— Orange County: average asking rent will hit $2,837 a month by the summer of 2025, up from $2,631 this past summer.
— Los Angeles County: rent will average $2,306 in the summer of 2025, up from $2,231 this past summer.
— Inland Empire: rent will average $2,049 in the summer of 2025, up from $1,994 this past summer.
— San Diego County: rent will average $2,540 in the summer of 2025, up from $2,421 this past summer.
— Ventura County: rent will average $2,671 in the summer of 2025, up from $2,507 this past summer.
Vacancy rates are projected to remain in the 4-6% range over the next two years, forecast figures show.
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Census data shows rent already is too high for most people. As of 2021, more than half of all renter households in the region paid more than 30% of their income on rent, an amount economists deem to be unaffordable.
Such “rent-burdened” households accounted for 53% of tenants in Orange, Riverside, San Bernardino and Ventura counties and 56% of tenants in Los Angeles and San Diego counties, census data showed.
And eventually, the pace of rent hikes will creep back up as high interest rates continue to discourage new apartment construction.
“The rental housing shortage in Los Angeles County remains a chronic problem,” the report said. “Even though the number of delivered units was above average for the last twelve months, … the county is still not producing enough housing.”
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LA County building permits for new apartments this year so far fell 13% to just under 11,000 units, the forecast said.
Orange County is on track to build only about 2,600 units a year from 2023-25.
Apartment construction in the Inland Empire, meanwhile, is outpacing Orange County and, on a per capita basis, L.A. County.
The Inland Empire issued permits for just over 6,200 apartments this year so far. That amounts to 4.1 permits per thousand renters vs. 2.3 permits per thousand in L.A. County.
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