Apartment rents are expected to grow between 2% and 4% in the next two years in all five Southern California housing markets, according to the new University of Southern California Casden Real Estate Economic Forecast.
In Los Angeles County alone, rents are projected to grow 2% over the next two years.
“For now, rent growth will be somewhat moderate,” Moussa Diop, forecast author and USC Sol Price School of Public Policy associate professor of real estate, said in a release about the findings.
It is a statistic that might not be welcome news for apartment owners.
“I don't think anyone on the ownership side — direct owners, operators and developers — like to hear 2%,” Northmarq Regional Managing Director Vince Norris said. “Currently, inflation exceeds that number, so it's tough to make money with a 2% rent growth target.”
Northmarq’s third-quarter report for this year also anticipates 2% rent growth in LA County in the coming year.
Los Angeles rents were relatively flat month-over-month at the end of October and down 2.8% year-over-year, according to Apartment List data. Rent growth in Los Angeles in the 12 months trailing October was below both the national average of negative 1.2% and the California average of negative 2%, Apartment List found.
Median rent for a one-bedroom unit in LA stood at $1,633 per month and $2,157 for a two-bedroom as of the end of October, according to Apartment List.
Owners of the more than 600,000 rent-stabilized apartments in the city of Los Angeles, the majority of rental units in LA, can raise rents for the first time in three years after a pandemic-related pause on increases. The Los Angeles City Council voted this week to allow rent increases of 4%, or 6% if landlords pay for tenants' utilities and gas, beginning Feb. 1.
“A 4% increase doesn't even begin to make up for the fact that there have been no increases for 36 months and collection issues during Covid,” CBRE Executive Vice President Dean Zander said.
But some owners said that, while rent growth is an important metric, it isn't the only factor in the value of a property.