Even though there’s a lot of building going on, the countywide rent average is expected to shoot up over the next two years
Most non-millionaire Angelenos have probably come to terms with the idea that they will be delaying buying a home for a while (especially if they’re first-time buyers) and instead are now focused on trying to pay their ever-increasing rents. Bad but predictable news, guys: rents are expected to keep going up for at least another two years, according to an annual rental market forecast out from USC.
The 2016 USC Casden Multifamily Forecast predicts that, for at least the next two years, vacancy rates will “continue their gradual decline” and rents will continue their upward trudge. More specifically, the forecast predicts that in LA County, the average rent will rise—actually, they say “soar”— from its 2015 average of $1,307 up to a countywide average of $1,416. The vacancy rate will stay about the same, at 4.1 percent—just under its 2015 rate of 4.2 percent, says a press release.
But Los Angeles is building. Why aren’t things getting better? Even though apartment construction is back to “pre-recession” levels, the forecast says, the state’s growing economy and population are jacking up demand quicker than apartments can be built; besides which, most of what’s being built is expensive luxury housing.
In LA County, construction permits rose 18 percent from 2014 levels—”well above” the pre-recession totals for apartment building permits. But that’s just not cutting it. “For renters, new construction has simply kept a bad situation from getting drastically worse,” says Raphael Bostic, interim director of the USC Lusk Center for Real Estate in the release.
In addition to demand outpacing construction, the forecast notes that many of the apartments that are being built are on the fancier, more expensive end of the spectrum, and their creation “does little to control rent.” The LA Times says that a study last year from the California Housing Partnership Corp. found that LA County would have to add more than 500,000 more units of below-market rentals in order to avoid overcrowding and a continuation of the cycle of rent burdening for low-income residents. High-end units are doing little to help those renters.
A shred of hope might come if those top tier renters decide to buy. “High-end renters are the first to become homebuyers. As the demand for high-end dwellings slows, savvy developers will seek more projects built for people of more modest means,” Bostic says. Great, so just wait until luxury unit sales slow down, then wait until people figure it out, and then wait until less expensive units get approved and built. Not a huge comfort for people who are already paying half their rent toward an apartment they share with two other people.