Could rents in LA finally be coming down?
Rents in Los Angeles County are likely to rise about 2.9 percent in 2018, to an average monthly price of $1,840, according to real estate company CoStar.
That’s less than the 3.2 percent bump in prices seen over the past year, and considerably below the 6 percent uptick in prices that LA renters weathered in 2015.
CoStar Senior Market Analyst Steve Basham tells Curbed that prices aren’t growing nearly as quickly as they have been, partly because construction of new housing has picked up.
Between 2009 and 2013, less than 11,000 units were built in LA County. In the four years since then, that number has grown to nearly 27,000. CoStar projects that close to 22,000 additional units will be completed over the next two years.
All that new supply should keep rent increases fairly manageable across the LA area.
But will it be enough to make rental prices drop? Quite possibly, says Eric Sussman, adjunct professor of real estate and accounting at UCLA.
“It would not surprise me if rents are flat or even begin decreasing by 2019,” Sussman says (CoStar predicts a modest 2.2 percent increase in that year).
Part of the reason for that, he explains, is that Los Angeles rents are already so high.
“You can’t have rental rates continuously outpacing inflation and wages. At some point something has to give,” says Sussman. “A huge number of people are spending 50 percent of their income on rent. That is not sustainable.”
Indeed, a recent analysis from Apartment List indicated that nearly 60 percent of renters in Los Angeles are cost-burdened, meaning that they devote more than 30 percent of their income toward housing. About one-third of renters spend half their income on rent, according to the study.
The city’s dire need for affordable housing may dampen the excitement over a potential drop in overall rental prices for many residents. Even if all the new housing being built causes rents to flatten out, it’s not likely to move the needle much for those struggling to make ends meet.
Part of that is because most new housing being built is aimed at higher earners.
In Downtown LA, for instance, where development is booming, average monthly rents are roughly $700 higher than they are countywide, according to CoStar.
“You need to be making $100,000 to afford what’s being built Downtown,” says Basham. “It’s all fancy gyms and swimming pools.”
A host of local policy changes aimed at bolstering LA’s supply of affordable housing could help—a little.
Recently approved fees on developers will fund future low-income housing, and new incentives meant to promote affordable housing construction near transit are already proving popular with builders.
But Sussman says such programs may just be a drop in the bucket.
“Those changes are so marginal,” he says. “You’re still going to have [the same] problems.”
We never said renting in LA was easy.