By 2020, average monthly rents are expected to increase over their 2018 levels by $52 in Orange County, $209 in San Diego County, and $78 in the Inland Empire, according to a study by USC Lusk Center for Real Estate in partnership with Beacon Economics. The rise means that few units in Southern California will be affordable, a release from a representative of USC Lusk says.
Richard Green, director of the USC Lusk Center, who co-authored the study, is quoted in the release as saying, “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. One of the striking results we found is that where vacancy has increased slightly, there is a relief in rental increases.” His conclusion? “The way to raise vacancy rates is to build more.”
According to the report, the homeownership rate in Orange County has historically been higher than in other nearby counties, and Orange County has the highest vacancy rate among all Southern California metro markets, due in large part to several years of elevated multifamily construction levels. With population growth and income gains continuing and the pace of construction slowing, the market will continue to be tight and rents will trend upward, the report predicts. Average rent in Orange County in 2018 is $2,035, with a 4.14 percent vacancy rate; by 2020, the average rent is expected to be $2,087, with a 4.56 percent vacancy rate, the report says.
The report also finds that San Diego County’s economy has grown strongly in recent years, with job growth until this year, ranging between 2 percent and 3 percent annually. For the metro area as a whole, the vacancy rate in 2018 remains unchanged at 3.9 percent from the year prior, according to the report. “San Diego County can expect continuous economic and population growth over the foreseeable future,” the report states. “The economy’s leading sectors will continue to draw a variety of workers. Additionally, the region is perennially attractive to older members of the population, including retirees. In turn, there will be continued housing demand in both the renter and owner-occupied markets, and rents will continue to increase as vacancy rates remain low.”
Current average rent in San Diego is $1,978 average rent with a 3.94 percent vacancy rate, according to the report. The average rent in the market is predicted to be $2,187 by 2020, with a 3.75 percent vacancy rate.
Even the Inland Empire won’t escape rising rents. The report says that the Inland Empire has been Southern California’s fastest growing economy for several years. “Economic growth is projected to continue and will bring sizable population increases and a demand for rental housing,” the report states. “Average monthly rent and rent growth are also among the lowest of all Southern California counties. However, multifamily and single-family permits have decreased in the first half of 2018. The rental market is expected to remain tight as the lack of affordability in Los Angeles and Orange counties will continue to attract both buyers and renters to Riverside and San Bernardino counties.”
Current average rent in the Inland Empire $1,457 with a 3.84 percent vacancy rate; the forecast for 2020 is $1,535 average rent with a 3.68 percent vacancy rate, according to the report.