Big City Exodus Spells Relief for California’s Rental Market

A car drives by a building advertising apartment leases in San Francisco, Calif., on Sept. 1, 2020. (Justin Sullivan/Getty Images)

Opinion

The once piping-hot rental markets in California’s largest cities have finally stabilized.

San Francisco rents are down 24 percent from a year ago, while Los Angeles rents are down 15 percent year-over-year, according to data provider Zumper.

During the past year, many people have moved away from California’s high-density areas—such as San Francisco, San Jose and Los Angeles—and toward inland areas.

In the bay area, rents for one-bedroom apartments in San Jose fell 18 percent during the past year. Meanwhile, rents for one-bedroom apartments in Sacramento rose 10 percent as people from San Francisco and San Jose moved inland, as well as to other areas such as Idaho and Utah.

The SoCal Experience

In Southern California, people also moved away from high-density areas into lower-density areas.  Throughout the past year, rent for one-bedroom apartments fell 15 percent in Los Angeles, according to Zumper.

Conversely, rent in Ontario and Riverside rose 20 percent and 23 percent respectively as people found homes. For such people, renting a single-family home meant they wouldn’t have to share elevators with neighbors. It also allowed them to walk through suburban streets in comfort.

As people were moving away from some large cities, the experience of the San Diego and Irvine rental markets differed.

Both Irvine and San Diego are relatively self-contained economic geographies and already had many of the benefits being sought by people leaving places such as Los Angeles and San Francisco. Both boast nature trails, relatively low-density housing, and plenty of green space.

The average rent in San Diego was unchanged during the past year (pretty amazing for a major city during the COVID-10 crisis) while rents in Irvine actually climbed one percent from March 2020 to March 2021, according to Zumper.

The Rent Also Rises

Meanwhile, rental markets in Southern California’s Inland Empire remain in flux.  Even though rent was up 23 percent from the year-ago period, it is a still climbing. It increased by an additional six percent in Riverside during the past month, Zumper reported.  Conversely, rents in Ontario have started falling. Although its rent is up 20 percent from last March 2020, it dropped seven percent from last month.

Rent differentials likely explain the differing trajectories of the Inland Empire cities.

The median rent for a one-bedroom Ontario apartment is $1,747 today, compared with $1,903 in Los Angeles. For only about $150 more per month, many more people will likely choose not to leave Los Angeles and move further east. This is especially now that sporting venues, concern venues and bars and restaurants are reopening.

However, moving inland still may make sense for many people commuting into Irvine: the median rent in Irvine is $2,153, still about one-third higher than in Riverside, where the median rent for a one-bedroom apartment is only $1,645.

Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.