L.A. Apartment Rent Growth Continues to Slow

Los Angeles apartment rents are continuing to slow down. According to a report from Apartment List, apartment rents for a two bedroom increased only .06% year-over-year in June. Month-over-month, apartment rents for a two-bedroom in Los Angeles were flat. Now, rents for a two-bedroom are $1,760 on average.

“Rent growth is decelerating for a couple of reasons. First, a solid batch of new multifamily construction has come online in the past year or so, putting new vacant units on the market and relieving some rent pressure,” Igor Popov, chief economist at Apartment List, tells GlobeSt.com. “The construction boom appears to be mostly in downtown L.A., which houses a fair share of the city’s rental stock and density. Second, despite the slowing growth rent levels remain high, so we’re starting to see renters move to chase more affordable housing. We recently found that about a third of renters in LA looking for their next apartment are looking to move out of town. The top destinations are Phoenix and Riverside, which let renters fleeing L.A. keep their sunshine but ditch the high rents. This trend means fewer renters looking for housing, which also limits rent growth.”

Despite the slow down in rental rate growth, rents have continued to increase for the last five consecutive months, and that trend is likely to continue. In other words, Popov doesn’t expect rents to fall or even stall. “Even though rents in Los Angeles aren’t on a tear, they are still growing,” he says. “We expect that to continue. Los Angeles continues to be a desirable city with a strong and growing economy, and those fundamentals will continue fueling a strong rental market. L.A. rent growth trails the national rate, which stands at 1.6% year over year. In general, we’re seeing slowdowns in the nation’s highest-rent markets as renters increasingly search for more affordable metros and suburbs.”

New supply has had a lot to do with the slow down. In the last year, thousands of new apartments have delivered into Los Angeles, and that has helped to temper rent growth. “The billions that have been invested into L.A. multifamily construction over the past decade are starting to materialize and lead to lower rents,” says Popov.

Rents are rising faster outside of Los Angeles, a trend propelled by rapidly rising rents in Los Angeles. “We’ve been seeing the strongest rent growth in markets right outside of LA proper—Santa Clarita, Anaheim, Long Beach have all seen rents rising more quickly than in L.A.,” says Popov. “This may be driven by renters seeking more affordable neighborhoods that are still close to their jobs.”