Rent prices are still going up in San Diego County, but not at as quickly as in previous years
Rent in San Diego County was an average $1,852 a month in the third quarter, an increase of 2.7 percent in a year.
The rate of increases has slowed considerably, said data from real estate tracker CoStar, after years of bigger growth. At the same time last year, rent had increased 4.1 percent annually and 3.9 percent in the third quarter of 2017.
Rent gains throughout California since the end of the Great Recession have added to the state’s housing woes, eventually boiling over in statewide rent control taking effect in January. Even before the push from tenants’ rights groups for relief — who argued increases were not keeping up with wage growth and pushing workers to live far from employment — rent gains had slowed from the heyday of 2015 and 2016.
Nathan Moeder, a principal with real estate analysts London Moeder Advisors, said if renters could handle more increases, rent would probably be going up more.
“If there was more elasticity that you could increase rent, landlords would have,” he said. “We’re tapping out, leveling out, because rents are really expensive relative to what people can afford.”
Moeder said for years the San Diego market had seen rents rise as new, more expensive apartment buildings opened. With a new benchmark set, the older buildings would increase rates to catch up. He said, at this point, there aren’t a ton of buildings left charging below-market rent, so that is another reason why the market isn’t jumping in price as frequently.
CoStar said San Diego County has added 3,809 new apartments in the last 12 months, although its report notes that is still considered under what is necessary for population growth. The countywide vacancy rate stayed low, around 4.9 percent, but varied based on neighborhood.
National City had the lowest vacancy rate, 3.4 percent, while downtown San Diego was at 14 percent. The majority of all new apartments in the county have opened downtown, with many new complexes opening across the street from each other in East Village and Little Italy — competing for the same pool of renters.
Several management companies are offering concessions downtown to get new renters signed up. At K1, a new complex in East Village, CoStar said renters can get up to eight weeks free for a 15-month lease.
Downtown rent was still the third-highest of county neighborhoods in the third quarter at $2,483 a month. The most was North Shore cities (Del Mar, Solana Beach, Encinitas) at $2,630, and followed by La Jolla/UTC at $2,519 a month.
The least expensive was National City at $1,400 a month. It was followed by the Balboa Park area at $1,477 a month and East San Diego/El Cajon at $1,487 a month.
A recent study from Zillow said the regions experiencing the highest recent rent gains were lower-cost areas, such as Phoenix, Las Vegas and Charlotte. But nationwide, it predicted upward pressure on rents because the number of homes for sale have been dropping.
Home inventory shot up at the end of last year, increasing options for potential buyers and shifted many areas away from a sellers’ market. But, lowered mortgage interest rates helped kick-start the market, and most regions have seen inventory fall again — making it more difficult for potential buyers, which Zillow said could keep them in the rental market longer.
High-cost markets, especially San Diego, had a noticeable drop in home buying options. There were 6,082 homes for sale in October, said the Greater San Diego Association of Realtors, down from 7,918 at the same time last year.
Another factor in the rental market in 2020 will be California rent control taking effect in January. The new legislation will cap rent increases in San Diego County around 7 to 8 percent (5 percent, plus local inflation) a year. It also only applies to rentals that are more than 15 years old.
The most rent in San Diego County ever went up in nearly 20 years of CoStar data was 7 percent in the third quarter of 2015.
“I don’t think there’s a huge concern as the legislation currently stands,” Moeder said.
CoStar is still forecasting 2.7 to 3.6 percent rent increases next year, and no decreases in rent in its predictions going all the way to 2024. The last time rent decreased in San Diego County was the third quarter of 2010 when it declined 0.7 percent annually.
Big projects anticipated to open next year are 702 Broadway, a downtown Bosa development with 620 units; Purl, a Mission Valley development with 435 units; Park + Market, an East Village development with 426 units; and Alexan Rivue, an Otay Ranch development with 253 units.