Rent Falls as Vacancies Rise in California
In California, 2023 is turning out to be in favor of the renter. The housing market has been decelerating for the last two years in the wake of the pandemic, which is adding competition among California landlords. On top of that, the number of available units is the highest it’s been in about two years.
So, what’s really going on in the state that historically has one of the most competitive housing markets in the nation? Let’s take a closer look at the data to find out what’s really happening to the California rental market.
According to ApartmentList, the vacancy rate across California was 5.2% in March, almost double what it was in late 2021. Of course, an increase in vacancy means renters have more power in the market, which explains the statewide decrease in rent. While rent dropped 3.5% from August 2022, it still is 15% higher than the average three years ago.
This trend can be seen in all of California’s hottest counties. San Francisco County, for example, has an average monthly rent of $2,184, which is 4.5% lower than its late 2022 peak. Orange County has an average of $2,380, 3.9% down from the July 2022 peak, and vacancies are at 4.5%, compared to a mere 2.6% during the pandemic. In San Diego county, the rent is down 4.5% to $2,338 and vacancies are at 4.9%, compared to 1.1% in the height of COVID-19. Overall, rents seem to be dropping faster among counties in Northern California, where some averages are actually decreasing in the long-run. San Francisco’s average rent is down 15% over the last three years.
What is causing the increase in empty apartments? The first culprit is Californians’ natural tendencies following the housing scramble when COVID-19 hit. People are no longer afraid of crowded living situations, workers are returning to offices, and the pressure to hunker down has lifted. The trend back to “normal” living is leaving many apartments unrented.
Our next culprit is development; in the housing scramble of 2021, many developers rushed to build, wanting a piece of the market while it was burning hot. Total statewide permits for multifamily housing in 2021 and 2022 were 106,000, which is almost a 50% increase from the typical average over the last 30 years.
A combination of changing renter trends and a significant increase in housing supply leave no one surprised that vacancies are up in California — a trend that likely isn’t going anywhere soon.
