Despite rising construction, increasing demand for apartments will keep vacancies low and drive significant rent increases in San Diego County and elsewhere in Southern California over the next two years, according to a University of Southern California forecast.
A report from USC’s Lusk Center for Real Estate, prepared by Beacon Economics, said average monthly rents in San Diego County are expected to rise by $155 from their 2015 average of $1,422 by 2018.
The predicted dollar increase is higher than those forecast for Los Angeles County ($109), Orange County ($149) and the Inland Empire ($84).
By 2018, forecasters said, the average rent will reach $1,577 in San Diego County, $1,416 in Los Angeles County, $1,736 in Orange County, and $1,239 in the Inland Empire.
San Diego County’s apartment vacancy rate is forecast to be at 4.8 percent in 2018, higher than those of Los Angeles (4.1 percent) and Orange County (3.8 percent), but lower than the Inland region’s 7 percent.
The San Diego region saw construction permits issued for 6,273 new apartment units in 2015, the most since 2005. Researchers noted that despite permits being issued for more than 38,000 new units in Southern California in 2015 – the highest since before the recession – vacancy rates are projected to continue their gradual decline through 2018.
“Though multifamily construction permits are back to pre-recession levels and have provided some relief, population and employment growth are driving up demand faster than new inventory can hit the market,” said Raphael Bostic, interim director of the USC Lusk Center. “For renters, new construction has simply kept a bad situation from getting drastically worse.”
The report said California’s home prices are twice the national average, and regulatory controls have combined with faster-than-average population growth to constrict the housing supply.
Bostic said most multifamily construction in Southern California, particularly in Los Angeles and Orange counties, currently targets higher-income renters and does little to control rent.