L.A. Apartment Rent Growth Accelerates

Los Angeles apartment rent growth is accelerating. According to a new report from Apartment List, rent growth has accelerated each month of the year—following rental rate decline in January. With seven consecutive months of rent growth, average apartment rents have increased 1.3% for the year. In July, rents were up .2%. As of July, the median price for a two bedroom in Los Angeles was $1,750.

“The falling rents L.A. experiences from last October through this January are consistent with seasonality in the rental market, as fewer renters mover in the winter months,” Chris Salviati, a housing economist at Apartment List, tells GlobeSt.com. “The subsequent pickup of recent months is the result of heightened demand from the larger number of renters who move during the summer.”

While rents have continued to increase this year, Salviati doesn’t expect the growth rate to reach the record highs of 2016 and 2017, when the growth surpassed 3%, or 2014 and 2015, when the growth rate was steady throughout the year, reaching nearly 3%. “Year-over-year rent growth in Los Angeles currently stands at 1.3%, and this figure has been falling throughout this year,” he says. “Throughout most of 2017, year-over-year growth in LA was in the 4% to 5% range; it is unlikely that rent growth will increase back to that level in the near term.”

Apartment List’s rate of rental growth includes all apartment sizes. “We calculate a single rent growth estimate across all bedroom sizes, meaning we estimate the same year-over-year and month-over-month growth rates for both one bedroom and two bedroom units,” explains Salviati.

The strong multifamily demand has fueled a development boom throughout Los Angeles. There are thousands of units in the development pipeline, but much of the development is occurring in specific pockets, like Downtown Los Angeles. New construction deliveries have impacted rent growth, but not significantly. “Some segments of the L.A. market have seen notable numbers of new units hit the market over the past year, which has certainly tempered rent growth,” says Salviati. “That said, most of these units have served the luxury end of the market, and there is still high demand for more affordable units in L.A.”

While rent growth has been strong and consistent this year, rent growth typically wans in the second half of the year. As a result, we may have already hit a peak for rent growth this year. “As we enter the fall and winter months, rental activity generally falls off, so we do not expect rapid rent growth in the second half of the year,” says Salviati.