Southern California apartment rents are expected to get even pricier over the next two years, as demand increases along with job growth, a report released Wednesday said.
In Los Angeles County, average rents in 2018 are forecast to hit $2,304, up 3% from the previous year. In 2019, rents are expected to climb another 3%, to $2,373, according to the annual USC Casden Real Estate Economics Forecast.
Similar increases are expected in Orange County, where the average rent is expected to rise to $2,157 in 2019.
So far this year, rent growth has actually slowed in both counties. Averages in the second quarter rose 1% over the previous year, compared with the 6% and 5% increases seen in 2016.
Richard Green, director of the USC Lusk Center for Real Estate, said that slowdown probably reflects a flood of new apartment buildings that have opened. But he doesn't expect the trend to continue.
“We think incomes are going to keep rising and we are not going to build enough,” he said.
The forecast comes amid increased concerns over the cost of housing in California. Economists say sky-high rents and home prices are one reason the state’s economy has slowed this year.
“The high cost of housing is a huge challenge for employers attempting to recruit out-of-state talent,” said Chris Thornberg, founding partner of Beacon Economics, which coauthored the report along with the Lusk Center.
Many residents already are struggling to get by, a fact that’s pushing some tenant groups to lobby cities for new or more robust rent-control ordinances. Economists generally agree that the root cause of California’s affordability crisis is that for decades too few homes have been built relative to population and job growth.
In 2015, 31% of renters in Los Angeles and Orange counties spent more than half of their income on housing costs, according to the latest study from Harvard University’s Joint Center for Housing Studies.
The large millennial generation was singled out in the USC report as one key reason rents will rise over the next two years.
"With more millennials entering their late twenties and early thirties, demand for multifamily property should be particularly strong," the report said.
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