Over the course of the year, the average price of a one-bedroom apartment inched up by $39, or 2.2 percent. Two-bedroom prices rose $45 on average, or 2 percent. In the final quarter of the 2019, the average cost of rent stood at $1,773 for one-bedrooms and $2,257 for two-bedrooms.
These figures best represent what prices renters might expect to find when moving to a new unit (not necessarily what longterm tenants are already paying). The average yearly price increase for both one- and two-bedroom apartments was the lowest in the last five years.
The data support a trend observed by researchers at USC’s Lusk Center for Real Estate, who noted last year in an annual forecast that rent growth was “trending down” across Southern California.
The authors of the report speculate that rent growth is slowing down not because of a weak economy or new housing construction, but because sky-high rental prices may be affecting renter demand for apartments in the LA area.
CoStar analyst Stephen Basham agrees.
“Normally you’d associate weaker rent growth with high or rising vacancies, but the vacancy picture is still very tight here,” Basham says. Countywide, about 4.5 percent of units are currently vacant, he says—nearly 2 percent below the national average.
“Affordability is probably the biggest thing weighing on growth now,” says Basham. “Rents grew significantly faster than average incomes for several straight years earlier in the cycle, and that’s just not sustainable over a long period of time.”
Between 2015 and the end of 2019, average rental prices for both one- and two-bedroom apartments shot up more than 13 percent, according to the CoStar data.
A report last year from the Federal Home Loan Mortgage Corporation found that Los Angeles tenants are now among the most cost-burdened renters in then nation, meaning that a disproportionate number of renters spend more than 30 percent of their income on housing.
Basham notes that the impact of such unaffordable prices is seen most visibly in more expensive areas.
“Generally, rents are growing fastest in cheaper, outlying areas,” he says—including Southeast Los Angeles and the central San Fernando Valley. Prices grew more than 3 percent in these areas over the last year. In pricier neighborhoods like Santa Monica and Venice, on the other hand, rents bumped up less than 2 percent.
Unfortunately for renters, that means that relatively affordable neighborhoods may not stay that way for long. And slower rent growth probably won’t turn into negative rent growth anytime soon. The USC forecast projects that rents will continue to rise over the next two years—but at a “modest” rate (around 3 percent annually).