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Little Change Seen in Apartment Rents

Apartment rents in San Diego have been holding fairly steady – a change from the surging rents immediately following the pandemic.

Alan Nevin
Director
Gafcon Economic Consulting Group

“We had this one spurt two years ago where rents were increasing 10% to 15% a year and that’s over,” said Alan Nevin, an economist with Gafcon in San Diego.

“The increases have slowed down in the 3% to 4% range,” Nevin said, adding that rents are likely to stay steady for the rest of 2023.

“The demand is such that most (apartment) managers cannot really raise rents as they did, particularly downtown San Diego which is suffering because of the 25% vacancy rate in office space,” Nevin said. “There is pressure to keep rents more normal. I know that a number of projects are offering rent concessions.”

Molly Kirkland of the Southern California Rental Housing Association, based in San Diego, said that like Nevin, she expects rents to rise at about 3% to 4% after dipping slightly earlier this year.

“I don’t know that we’ll see a reduction, but we’ll definitely see a leveling,” Kirkland said.

Many landlords raised rents following the worst of the pandemic to recover from rent freezes that were in place during the pandemic.

“All of this is kind of normalizing after the pandemic,” Kirkland said.

Rob Warnock
Researcher
Apartment List

Rob Warnock, a researcher at Apartment List, a national listing agency, said that rental rates in San Diego and nationally are easing.

Spring and early summer are typically the peak seasons for the rental market, but the firm reported that rent growth was sluggish in May, with monthly rents rising 0.7% in San Diego, slightly higher than the national average in May, which was 0.5%.

“We’re seeing a kind of sluggishness on the demand side and growth on the supply side,” Warnock said. “Fewer new households are being formed and fewer people are moving.”

Much of the new construction has been either in pricey apartment towers or affordable housing that is subsidized with tax credits and other incentives.

“With the current building and financial environment that we’re in right now, that’s what’s favored by a lot of developers because it can make the most sense in terms of needing to turn a profit,” Warnock said. “It’s not surprising that we see a lot of private funding going into the high-end product right now and the public funding going to the affordable product.”

Year-over-year, San Diego monthly rents rose 1.3% so far this year, according to Apartment List.

By comparison, monthly rents for the same period in 2022 rose 27.9%

The overall median rent in May among all apartment sizes in San Diego was $2,415. For a one-bedroom apartment, the median rent in May was $1,986 and $2,561 for a two-bedroom apartment, according to Apartment List.

Even with the slowing rental growth, Apartment List ranked San Diego as the fifth most expensive city among the country’s 100 largest cities.

For comparison, the median rent across the nation in May was $1,169 for a one-bedroom apartment, $1,340 for a two-bedroom apartment, and $1,363 across all bedroom sizes.

Prior to the pandemic in May 2019, the median rent for a one-bedroom apartment in San Diego was $1,525 and the median rent for a two-bedroom apartment was $1,957, according to Apartment List.

Warnock said that he expects rents to remain relatively flat for the rest of 2023, heading into 2024, following the trend of the first half of the year.

“I expect that to continue until the broader macroeconomic conditions allow people to move and create new households,” Warnock said. “What that suggests is that this year, rent growth is going to be very modest relative to what we’ve seen.”

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