SoCal Apartment Dwellers to Pay Triple-Digit Rent Increases

The 2021 University of Southern California Casden Economics Forecast projects triple-digit dollar rent increases in the next two years for apartment dwellers in each of the region’s five markets with the highest rates of increase occurring in suburban submarkets. The annual forecast predicts that by the end of third quarter 2023, rents will increase over current levels by $252 in Los Angeles County, $410 in Orange County, $348 in San Diego County, $310 in Ventura County and $241 in the Inland Empire, which includes San Bernardino and Riverside counties.

These numbers represent rates of increase that tend to get higher going out from Los Angeles and San Diego. As a result of changes to renter behavior during COVID-19, many submarkets outside of the metros are experiencing vacancy rates at historically low levels.

“COVID-19 caused a large-scale move from central cities to the suburbs that resulted in a sharp rise in apartment vacancies in downtown LA, Koreatown and Beverly Hills, and historically low vacancies in Rancho Cucamonga, North City San Diego and Oxnard,” said Richard Green, director of USC Lusk Center for Real Estate, who co-authored the forecast with Eunha Jun, a postdoctoral scholar and research associate with the Lusk Center. “While vacancies are coming back down in urban areas, the outskirts remain low in supply and will see rents go up at a much higher rate than the cities.”

In general, current vacancy rates telegraph how much rent will go up or down during subsequent periods. Any market with a vacancy rate below 5 percent can anticipate higher rents. Currently, only downtown Los Angeles, Koreatown and Beverly Hills are above 5 percent, but all three submarkets have high absorption rates and can expect more moderate increases in rent.

However, vacancy rates are 1.69 percent in Rancho Cucamonga, 1.86 percent in Oxnard and 1.56 percent in the San Diego suburb of North City. These historic lows will drive triple-digit rent increases in the next two years.