Rents Rise to Record Levels in Southland
The average apartment rent in Orange County smashed through the $1,000-a-month mark for the first time as the region’s economy produced far more jobs than it did housing, according to a new rental survey.
Mirroring the sharp increase in home prices over the last year, the average rent hit an all-time high of $1,003 a month, up 7.8% from a year ago, according to RealFacts, a Novato-based real estate research firm. The county’s apartment complexes were 97.4% occupied at the end of June.
The average rental rate was the highest in the Southland and 21% greater than the national average of $828 a month.
Analysts called the trend a troubling one, noting that higher housing costs will force many families to seek cheaper housing inland, leading to longer commutes, more freeway congestion and more smog.
“Eventually, we become a city of only very rich or very poor,” said Ann Sewill, executive director of the Enterprise Foundation in Los Angeles, a nonprofit group that works to encourage the building of affordable housing. “Everyone else who has a choice will go elsewhere.”
Record-high rents also make it more difficult for growing companies to attract workers, eventually causing some businesses to leave the area as higher costs make them less competitive. That scenario unfolded in the Southland a decade ago and was a major contributor to what became the recession of the early 1990s.
Already, inflation in Southern California has more than doubled from a year ago, to an annual rate of 2.5%, largely because of higher housing prices, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp.
“But the general response is [a] yawn,” Kyser said. “Right now, everybody’s happy with what’s going on, jobs are plentiful and times are good in Southern California. They just don’t want to deal with the issue. There’s a housing shortage looming in Southern California.”
Orange County’s median home price--meaning that half sold for more, half for less--hit an all-time high of $241,000 in June, dimming for many families the hope of home ownership.
With home prices at record levels, landlords are finding it easier to raise rents without losing tenants, analysts said.
With rents taking a larger portion of incomes, families will have a harder time saving for a down payment on a home, said G.U. Kreuger, an analyst at the California Assn. of Realtors.
“That makes it harder to become part of the American dream,” he said.
Indeed, many middle-class civil-service employees, such as police officers, firefighters and teachers, are struggling to afford rents in Los Angeles and Orange counties and are at risk of being priced out of the housing market, according to analysts and state government surveys.
Rents rose an average of 6.9% across the Southland as occupancy rates climbed to an average of 97.4%, the RealFacts survey found. In Los Angeles County, the average rent jumped 7.8%, to $982 a month. Apartments were hardest to find in Ventura County, where units were 98.5% occupied.
Housing Construction Is Up More Than 30%
Ironically, housing construction in Southern California this year is expected to reach its highest level in a decade, running more than 30% ahead of year-ago levels. About 15,000 permits for new homes and more than 4,700 permits for apartments, condominiums and townhouses were issued in Los Angeles, Orange and Ventura counties through June, according to the Construction Industry Research Board.
But a study released this week by the Irvine-based Meyers Group housing research firm found that Los Angeles County led the nation in housing demand, with only one new home being built for every six jobs created. Orange County ranked fifth in that survey, Ventura County 17th.
The RealFacts apartment study surveyed 1,196 apartment complexes containing at least 73 units in Los Angeles, Orange, Ventura, Riverside and San Bernardino counties.
Builders are finding it more difficult to develop multifamily projects because of a growing number of obstacles. Building new apartments often faces vigorous opposition from homeowners’ groups, which fear that the rental units will lower property values.
Land also is harder to come by, especially in popular coastal areas near big job centers. When developers are able to find a site, high land costs force them to build at prices that appeal only to the wealthiest renters.
“If the trends continue, you’re going to see a substantial shortage of housing,” said Dan Faller, president of the Apartment Owners Assn. of Southern California, the largest apartment owners group in the state. “We’re going to need more housing, more units.”
Nowhere was the growing gap between the housing haves and have-nots more apparent than in Los Angeles County, where the highest average rent was in Brentwood, at $3,233 a month, and the lowest in Compton, at $483 a month.
Poorer families will be hit hardest by rising rents in a region already identified as having four low-income renters for every unit available. The problem has grown worse as more landlords have opted out of federal subsidy programs that have preserved thousands of low-income rental units throughout Southern California for low-income earners.
The Los Angeles Housing Department said that 25% of poor renters live in overcrowded conditions, many of them having seven or more people sharing a two-bedroom apartment. Those numbers will only get worse as rents rise, analysts said.
In well-to-do-areas, the effects of a tight rental market also have been dramatic. In Marina del Rey, a new 170-unit luxury apartment building boosted rents 10% above the rates originally planned. More than 90% of the units, with rents ranging from $1,000 to $3,000 a month, were leased within months of being offered.
In Santa Monica, where rent control ended this year, landlords have offered tenants in one-bedroom apartments as much as $20,000 to leave so they can raise rents to market rates. And in Orange County, there are waiting lists for studio apartments in Irvine that rent for $1,075 and for two-bedroom penthouses in Newport Beach that go for $4,000.
Other renters also are getting squeezed. Move-in specials such as a month’s free rent, once common throughout Southern California, have all but ended. And more properties are being upgraded so that landlords can charge more. Tenants in popular locations can expect rent increases of 10% to 15% when their leases expire, said Stephen Stein, Los Angeles regional manager for Marcus & Millichap, one of the nation’s largest apartment brokerages.
The time, cost and effort spent moving elsewhere may prove fruitless for residents, considering that the rents of other apartments have risen as well.
“When people see their rent increases, they may be upset, but in the marketplace they find out they can’t go anywhere because everyone’s pushing the envelope on rents--and getting it,” said Jay Skendarian, a Newport Beach apartment broker. “They’re trapped,” he said.
He said that the new owners of a Santa Ana apartment building near South Coast Plaza recently raised the rent on one-bedroom apartments by $100, to $750 a month, after painting the building’s exterior, patching the roof and planting more shrubs.
He said landlords are trying to recoup losses suffered during the economic downturn earlier this decade, when rents barely budged. In Orange County, for instance, rents rose a total of just 4%, or an average of $31, over an eight-year period ended in the mid-1990s, according to Research Network Limited.
But that is of little consolation for renters.
“We’re almost to the point of being in a crisis for finding decent rentals,” said Joe Carreras, planning manager of the Southern California Assn. of Governments.
“People who didn’t think they would have a problem finding a home to rent now have a problem.”
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A Grand a Month
The average O.C. apartment rent rose nearly 8% over the last year and now exceeds $1,000 a month. The upward quarterly trend:
1997
Sept. $894
Dec. 905
1998
March 919
June 931
Sept. 956
Dec. 970
1999
March 983
June 1,003
Source: RealFacts
Pricey Places
Orange County’s average monthly apartment rent broke the $1,000 barrier for the first time. Rents reached that amount in 17 communities. Here’s a look at the county’s apartment market.
Average
*--*
Community Units occupancy rent Aliso Viejo 3,677 92.2% $1,248 Anaheim 14,391 97.8 814 Anaheim Hills 742 95.6 1,154 Brea 2,003 97.9 927 Buena Park 1,958 96.7 821 Costa Mesa 7,633 97.8 1,049 Cypress 1,465 98.0 895 Dana Point 1,190 97.2 1,208 Foothill Ranch 1,344 96.7 1,167 Fountain Valley 2,288 97.7 974 Fullerton 7,174 97.9 845 Garden Grove 2,996 98.6 891 Huntington Beach 6,316 98.3 1,014 Irvine 11,664 95.2 1,326 La Habra 1,459 98.6 797 La Palma 800 98.3 900 Laguna Beach 421 97.1 1,127 Laguna Hills 1,601 96.0 1,029 Laguna Niguel 3,214 97.7 1,098 Lake Forest 2,747 97.3 993 Mission Viejo 2,314 97.7 961 Newport Beach 5,639 97.2 1,634 Orange 2,604 97.7 930 Rancho S. Margar. 2,408 93.6 1,080 San Clemente 810 97.0 1,037 S. J. Capistrano 274 90.1 1,181 Santa Ana 9,155 98.1 922 Seal Beach 549 94.4 1,306 Stanton 1,124 99.1 816 Trabuco Canyon 184 96.0 1,085 Tustin 5,915 97.3 987 Westminster 1,910 98.1 865 Yorba Linda 816 98.2 1,208 Countywide 110,165 97.4 $1,003
*--*
Source: RealFacts
Rising Rents
Southland apartment rents rose an average of 6.9% in the second quarter and hit record highs in the five major counties. Here’s a look at rental statistics in each county:
Los Angeles
Average rent: $982
% increase from year ago: 7.80%
Average occupancy rate: 97.40%
Highest average rent: Brentwood: $3,233
Lowest average rent: Compton: $483
Average studio: $680
Average 2-bed, 2-bath: $1,140
Average 3-bed, 2-bath: $1,343
*
Orange
Average rent: $1,003
% increase from year ago: 7.81%
Average occupancy rate: 97.40%
Highest average rent: Newport Beach: $1,634
Lowest average rent: La Habra: $797
Average studio: $715
Average 2-bed, 2-bath: $1,152
Average 3-bed, 2-bath: $1,283
*
Ventura
Average rent: $938
% increase from year ago: 7.40%
Average occupancy rate: 98.50%
Highest average rent: Newbury Park: $1,072
Lowest average rent: Port Hueneme: $813
Average studio: $666
Average 2-bed, 2-bath: $1,049
Average 3-bed, 2-bath: $1,219
*
Riverside
Average rent: $671
% increase from year ago: 5.42%
Average occupancy rate: 96.70%
Highest average rent: Corona Hills: $860
Lowest average rent: Banning: $415
Average studio: $467
Average 2-bed, 2-bath: $732
Average 3-bed, 2-bath: $830
*
San Bernardino
Average rent: $702
% increase from year ago: 6.09%
Average occupancy rate: 96.90%
Highest average rent: Chino Hills: $954
Lowest average rent: Victorville: $512
Average studio: $522
Average 2-bed, 2-bath: $754
Average 3-bed, 2-bath: $851
Source: RealFacts
