Rent Increases Adding to Southern California’s Housing, Homeless Woes

August 30, 2019 Updated: September 3, 2019

The cost of renting a home or apartment in Los Angeles and Orange counties has jumped 5.8 percent in the past year.

The latest rent hike is the highest since 2005 and has increased at the fastest pace in 14 years, according to the Consumer Price Index calculated by the U.S. Bureau of Labor Statistics. A year ago, the CPI reported rent had jumped 4.7 percent. The CPI polls consumers in contrast to other rent measurements that are derived from landlord surveys to track rent costs.

The average cost of renting an apartment in both counties is now about $2,000 a month or more, depending on the area, according to the website RentCafe.

Neighboring counties of San Bernardino and Riverside also saw rental properties surge 4.3 percent since last July, according to the CPI.

While many factors affect housing costs, it all boils down to simple supply-and-demand economics, according to the California Association of Realtors (CAR).

CAR Senior Economist and Director of Research Oscar Wei said in a phone interview on Aug. 23 that job growth may be one of the greatest causes for the increase in demand.

Wei cited the low unemployment rate, particularly in Orange County at 3.2 percent, which is less than the 3.7 percent national average, and Los Angeles County at slightly higher than the national average, as a sign of a strong economy.

Within the past year, the statewide median sale price of a home has risen 8 percent, he said.

“When it comes to supply, whether it be in the sales market or the rental market, it has been pretty tight … and that’s why home prices have increased quite dramatically at eight percent,” Wei said.

The steep increase in home prices has had a ripple effect on the rental market, though not as extreme, he said.

Millennials and maybe even some Gen-Xers entering the housing market may be another reason for the housing shortage and rent increases, he said.

“Because of job growth and improvement in the economy, people are forming households. The number of households being formed has increased. And, as they are formed, they need to either rent or buy,” Wei said.

“Millennials who graduated in 2008 or 2009, when we were hit with a recession, were staying with family — mom and dad, and they finally moved out in 2012, 2013 or 2014. As they get better income, they want to buy or rent and find a better or different place to live. That’s why I think home prices, as well as rental rates, have been increasing.”

Developers are trying to keep up with the demand for more affordable housing but are dealing with increased costs of land, labor and zoning restrictions, Wei said.

“Take downtown L.A., for example, where there are requirements to build parking spaces. Developers have to take that into consideration because it will affect the cost of rental properties,” he said.

“In the upcoming year, we will continue to see the economy grow at a decent level,” Wei said. “There will be some slowdown in terms of demand … but I don’t think the labor market will all of a sudden see a significant dip.”

According to the Fair Housing Council of Orange County website, “Because there is no rent control in Orange County a landlord can raise a tenant’s rent as much and as often as they wish, so long as they give proper notice of the change in terms.”

Proper notice means that to legally increase a tenant’s rent by any amount less than 10 percent, the landlord must give 30 days written notice, and increases of more than 10 percent in any 12-month period require 60 days written notice.

For the working poor, rising rent will add to commute times and traffic snarls as more families are forced to find more affordable housing in areas farther away from their workplaces in Los Angeles and Orange counties, which could lead to higher rent in San Bernardino and Riverside counties.

According to Census data, 13,000 people left Los Angeles between 2017 and 2018, with rising rent costs believed to be the main reason for the exodus.

Though illegal immigration is also a factor contributing to the housing shortage, Wei said that all migration — legal or not — always contributes to a tighter market.

The recent rental hikes, combined with already exorbitant rent costs, are expected to heap more woes onto the backs of taxpayers, as government agencies attempt to address Southern California’s affordable housing shortage and ever-growing homeless crisis.

Meanwhile, Gov. Gavin Newsom has pledged 3.5 million new homes to be built in California by 2025, but the state is reportedly not yet on track to meet that goal.

Brad Jones is a freelance writer based in California.