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Report: Southern California’s Affordable Housing Crisis Not Just Limited To Low-Income Households

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The affordable housing crisis that stretches across Southern California is not exclusive to low-income earners but also affects residents whose incomes are in the median and 75th percentile, according to a University of Southern California report.

The report further stated unaffordability for renters is only going to get worse in the next two years as rents continue to rise, albeit moderately, and not enough housing units are coming onto the market.

A photo of a rendering of the affordable housing units being developed in the Jordan Downs Housing projects in Watts.
A rendering of the redevelopment of Jordan Downs, an affordable housing development in Watts

Residents whose household incomes are in the 25th to the 75th percentile are spending 58% of their income on rent, according to the report from the USC Lusk Center for Real Estate and Beacon Economics released Wednesday.

Experts say residents should only spend about 30% of their income on housing.

“There is a poor match between people’s housing cost and incomes right now, and no amount of sorting will, by itself, fix this issue,” USC Lusk Center Director Richard Green, who co-authored the study, said in a news release. “One of the striking results we found is that where vacancy has increased slightly, there is a relief in rental increases. The way to raise vacancy rates is to build more.”

The USC study comes at a time when markets across the state, including in Southern California, are grappling with an affordable and workforce housing crisis. The high cost of acquiring land, the lengthy political process along with record prices for construction materials and labor are increasing multifamily development costs. 

Developers say without tax credits or other incentives the only way to get back return on their investment is to build market-rate housing. On the flip side, renters and tenant groups are pushing for an initiative that would allow cities to enact more rent control measures.

By 2020, average monthly rents are expected to jump by $91 in Los Angeles County, $52 in Orange County, $209 in San Diego County, $107 in Ventura County and $78 in the Inland Empire, the report states.

Report: Southern California’s Affordable Housing Crisis Not Just Limited To Low-Income Households
USC Lusk Center for Real Estate Director Richard Green at an event in San Francisco

Here are some highlights from the report:

LOS ANGELES COUNTY

By 2020, the average monthly rent for an apartment is forecast at $2,358, up 4% from $2,267 per month currently. The market has a 4.3% vacancy rate. In two years, the vacancy rate is expected to drop to 3.95%.

Los Angeles County has more renters than homeowners. There were 3.3 million occupied housing units in 2017, with 1.8 million being renter-occupied.

ORANGE COUNTY

Orange County has the highest vacancy rate among all of the Southern California metro markets.

Because of the large amount of inventory entering the market, rent by 2020 is projected to go up only slightly to $2,087 a month, a 2.5% increase from today’s average monthly rate of $2,035. 

The vacancy rate is 4.14% and expected to rise to 4.56% in 2020.

SAN DIEGO COUNTY

San Diego is expected to have the largest price increase in the next two years.

With a forecast low vacancy rate of 3.7% and expected growing demand from young professionals for jobs and seniors retiring, San Diego’s monthly rent is forecast to hit $2,187 by 2020. Currently, the average rent in San Diego is $1,978.

INLAND EMPIRE

This region boasts the lowest monthly average rent in the Southern California region and will continue to have a low price in the next two years.

By 2020 apartment rent will reach $1,535, a 5% increase from $1,457 per month in 2018.

Vacancy rate is expected to slightly decline from 3.84% in 2018 to 3.68% in 2020.

VENTURA COUNTY

With slow growth in the region, rent is projected to climb to $2,090 in 2020, up $107 from $1,983 a month in 2018. The market's vacancy rate is going to decrease slightly over the next two years from 3.91% to 3.85%.