Rent soars, tenants struggle to find apartments as vacancy hits 22-year low
Rents across the region have seen their biggest one-year gain in at least 10 years
After three months of searching in vain for a place to rent, Penny Friesz jumped at the chance to lease a small, dilapidated duplex in Huntington Beach that needs a refrigerator, washer and dryer, yard work and new paint for the fence.
“It’s a mess. It’s seriously a mess,” Friesz said of her future home after recently signing the lease and putting down a $3,700 deposit. “I probably wouldn’t have even rented it if there were another option.”
Friesz is perhaps one of the more desperate renters in today’s market. But she’s hardly alone.
With apartment vacancies at a 22-year low, Southern Californians shopping for a rental over the past few months faced limited options and rapidly escalating rents as the apartment market rebounds from the pandemic.
A Southern California News Group composite from three rental indexes shows the asking rent for a vacant unit in L.A. County jumped an average 10% from a year ago during the fourth quarter of 2021, snapping a 12-month lull that pushed L.A. rents down during the pandemic.
The same composite showed Orange County asking rents rose an average 18% during the fourth quarter, and Inland Empire rents were up 17%.
SCNG averaged fourth-quarter data compiled by apartment trackers RealPage, Moody’s Analytics-Reis and CoStar.
Vacancy rates, meanwhile, fell to the lowest level last spring in CoStar records dating back to 2000, and to their lowest levels in RealPage and Moody’s-Reis records dating back to 2010. Vacancies were only slightly higher in the fourth quarter, averaging 3.3% in L.A. County, 2.2% in Orange County and 2.3% in the Inland Empire, composite data shows.
“There is just nothing available,” said Richard Green, director of USC’s Lusk Center for Real Estate. “When you’re looking at 2% vacancy or 2.5% vacancy, that’s basically zero.”
As a general rule, rents are expected to drop when vacancies are above 5% and go up when they’re below 5%.
Now, the rents are climbing again.
Composite numbers from the three rental indexes show Orange County’s average rent at the tail end of 2021 was $2,432 a month, or $368 a month more than in the fourth quarter of 2020.
“Rents fell a lot (in L.A. County) at the beginning of the pandemic,” Green said. “But they’ve not only caught up, they’ve more than caught up. And in particular, in O.C., they’ve just gone gangbusters.”
The L.A. County average was $2,264 a month, up $205 in a year; the Inland Empire average was $1,873 a month, up $272.
Those are the biggest one-year gains in the composite index dating at least to 2011.
Health care worker Randy Furbush saw the impact of those hikes firsthand while shopping for an apartment in recent months. He was looking for an affordable rental close to his job in Orange County. He couldn’t find one.
“The prices were extremely expensive,” he said.
Instead, on Jan. 25, he moved across the county line into a one-bedroom unit in Chino, paying $2,155 a month.
“It was somewhat hard,” Furbush, 24, said of his apartment search. “I guess you had to make some sacrifices.”
Returning to L.A.
Apartment statistics represent just a fraction of the 2.8 million rental households living in L.A., Orange, Riverside and San Bernardino counties. Research firms tend to focus on larger, professionally managed apartment complexes, failing to capture rentals owned by smaller operators and mom and pop landlords.
“Our vacancies are down, definitely down, but our rents are not at pre-pandemic levels,” said Matt Williams, principal for Williams Real Estate Advisors, which manages 650 units in Los Angeles, primarily in small buildings.
While there is no up-to-date data for small buildings and mom and pop owners, Williams said one-bedroom apartments in West Hollywood have gone from $2,600 a month pre-COVID to $2,199 with one month’s free rent.
“I’m not getting back to that $2,600 on that one-bedroom,” he said.
The pandemic continues to dog the rental market, with a number of smaller landlords still hurting financially from eviction bans that left apartments occupied by non-paying tenants, association members say.
The Census’ Household Pulse Survey for the period ending on Jan. 10 showed 18% of Southern California tenants — almost one in five — were behind on their rent. That’s almost as many as in December 2020, when 22% were behind on the rent. Southern California property managers say fewer than 10% missed rent payments pre-COVID.
The pandemic had an inverse impact on coastal and inland rental markets, driving work-from-home employees from high-cost job centers in L.A. and Orange counties to cheaper, more spacious rentals in the Inland Empire.
Last year that trend start to ease.
“Employers are getting their employees to come back to work. People who may have migrated out of these urban areas are probably coming back,” said Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles.
Green said there’s little data to confirm the trend definitively, but he agreed demand is returning in L.A.
“When you look at (Los Angeles County’s) vacancy rate at the beginning of the pandemic, it did go up from 4.5% to 5%, and 5% is high for L.A.,” he said. “But now it’s dropped back down to 3.3%,” implying that people are returning to L.A. County.
The effects of eviction moratoriums still linger as well. Although the statewide eviction ban ended on Sept. 30, tenants who applied for rent relief can’t be evicted through March. And the Board of Supervisors extended L.A. County’s moratorium through next December.
That could be contributing to the lower vacancy rate, giving renters strong incentives not to move and landlords incentives not to rent.
“There’s a lot of owners with vacant units who (were) reluctant to rent” during the moratorium,Yukelson said.
Some Southern California tenants may be staying put because they can’t find anything as cheap as they’re now paying, said Randall Lewis, senior executive vice president for marketing at the Upland-based Lewis Group of Companies, which manages 13,000 apartments.
“In our properties, there are fewer tenants moving during the pandemic,” Lewis said. “During normal occupancy, we see 50% to 60% of tenants renew leases. Now, 60% to 70% are staying.”
More jobs, fewer completions
Apartment construction long has lagged job creation in the region. More so now as the economy recovers and supply chain disruptions slow the pace of apartment construction.
Lewis and Green said the pandemic delayed apartment completions by four to six months.
Meanwhile, job recovery has outpaced national levels.
“It takes longer to finish stuff. So if you look at the time between a place being permitted and a place being available for occupancy, the lag times seem to be getting longer,” Green said. “Which means stuff that normally would be available is not available.”
Because of the rental shortage, Victoria Bautista is worried she and her husband won’t find a place of their own before their baby is born in May.
The couple, who have been living with Bautista’s in-laws in Chino Hills, has been shopping for a home in the $2,600- to $2,800-a-month range since November. They’ve looked at more than 15 properties and applied to at least a dozen rentals. They keep losing out, however. Their real estate agent believes they’re competing with overqualified renters with higher incomes.
“It’s a no-brainer for the landlord because they choose the one with a higher income,” said Bautista, 25, who works as a school speech pathology assistant. “We’ve been looking for a small, three-bedroom house or condo or townhome. We may now have to look for a two-bedroom apartment because it’s been so hard to get in.”
Their goal was to rent in Chino, Ontario or Eastvale to be close to family and their church. Now, they’re looking in Rancho Cucamonga and Riverside as well.
“We want to be close to family and friends when we have our baby. (But our applications) are not being accepted,” she said. “I tell my friends you need five months if you want to find a place.”
Friesz, meanwhile, is getting ready to move into her new duplex in Huntington Beach, cleaning out the garage. As she worked, passersby asked her if the unit was available.
“At least six people have stopped by because there’s nothing out there,” she said.
Source: Daily News
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