Despite a patchwork of eviction bans, rent caps and high unemployment, rent throughout San Diego County has seen some of its biggest jumps in decades. Average rent in San Diego County was $2,075 a month at the start of August, a roughly 9 percent increase in a year, according to real estate tracker CoStar. That is the highest annual increase in its records that go back to 2000.

It isn’t just the price jump that is shocking — it’s the 20-year low vacancy rate of 3 percent in San Diego County. CoStar is predicting even bigger annual increases upcoming: 11.8 percent year-over-year in the third quarter, 12.1 percent in the fourth quarter and 12.7 percent to start 2022.

Rental analysts point to several reasons why this is happening: Record-high home prices in San Diego County have meant homeownership is out of reach for many workers who must continue renting; wage growth is allowing renters to pay more; and Covid-19 laws aimed at keeping costs down for current renters are being passed on to anyone signing a new lease.

Joshua Ohl, a managing analyst at CoStar, said the emergency COVID-19 rent cap passed by San Diego officials this summer of 4.1 percent only affected people already in a lease, so that has motivated landlords to ask more for new leases. There is also the issue of non-paying renters who can’t be evicted, again pushing landlords to target new leases as a way to increase revenue.
“Given the state of the market, and the strength of demand,” he said, “landlords just have so much pricing power for available units.”

Ohl said San Diego is not unique in seeing large jumps in rent. It’s a trend occurring in markets across the United States. A big driver has been the historic rise in home prices, which has kept many potential homeowners as renters. National home prices were up 16.6 percent annually in May, according to the S&P CoreLogic Case-Shiller Indices, the biggest gain in its more than 30-year history.

Rent across San Diego County varies much like the housing market: Coastal areas are more expensive than in eastern and southern parts of the county. But rents are up everywhere, and even if wages have increased to make a rental affordable, many workers and students may find themselves facing much farther commutes.

San Diego-based FBS Property Management said it is raising rents about an average of 5 percent across its 737 units in San Diego County. Vice President Lucinda Lilley said rising prices for lumber and parts to make repairs for appliances is one of the reasons it needs to increase rents.

Other reasons include tenants not paying and her company not raising rents during much of the pandemic, resulting in a roughly 10 percent loss in revenue year-over-year.

Lilley, who is also the board president of the Southern California Rental Housing Association, said many property managers and landlords are still reacting to rent cap laws that went into effect in 2020 before the pandemic started.

The law, signed by Gov. Gavin Newsom in October 2019, says landlords cannot increase rent more than 5 percent plus inflation. San Diego County’s inflation rate in March was 4.1 percent, so that would limit rent increases to 9.1 percent.

She said the rent cap means landlords are in a “use it or lose it” scenario because many did not raise rents last year, so they are attempting to make up for it by increasing rates now.

Where you live

The biggest rent gains — 23.1 percent in a year — are in UTC, in part because it is the closest neighborhood for UC San Diego students. There are nearly 3,200 students on a waiting list for housing after the university decided to limit housing density on campus given virus concerns. The decision to change three-bedroom dorms to two-bedrooms wiped out nearly 2,100 beds.

Average asking monthly rents in San Diego County
Studio: $1,627
One-bedroom: $1,823
Two-bedroom: $2,222
Three-bedroom: $2,794

UTC is also near Sorrento Valley, home to San Diego’s surging life sciences industry — which has seen increased importance, and growth, during the pandemic. The average asking rent in UTC is $2,899 a month, said CoStar, bested only by the monthly average of $2,947 in the north shore cities of Del Mar, Encinitas and Solana Beach.

The lowest rents are in National City around $1,517 a month; East San Diego and El Cajon with a monthly average of $1,606 a month; and the Poway/Santee/Ramona region at $1,740 a month.

A hope of many housing advocates is more apartments will be constructed and help slow demand. The building industry kept working throughout the pandemic and was able to build 18 percent more housing in 2020 than in 2019. Construction of 6,326 multifamily homes — apartments, condos and townhouses — increased 26 percent from 2019.

San Diego’s economy

There are thousands of San Diegans struggling because of business closures due to COVID-19. But the overall picture of the economy isn’t so bad to some analysts. Chris Thornberg, economist and founding partner of Beacon Economics, said income growth mixed with a low supply of available rentals will continue to push prices up.

The economy is popping like nobody’s business,” he said. “GDP is up, we’ve gone past pre-pandemic levels of economic activity, job growth is strong, wage growth is strong and Lord knows the housing market in California is up.”

Despite a lot of reasons for economic worry, such as the spread of the Delta variant, Thornberg argues the economic data is better than some might think considering we are still in a pandemic.

Data from the National Multifamily Housing Council, which tracks more than 11.7 million apartments, said 80.2 percent of renters made a full or partial rent payment in the first week in August. That’s around the same rate of payment in non-pandemic times. In the first week of April 2019, 81.2 percent of renters made a payment.

Source: SDuniontribune by Phillip Molnar