Renters outnumber homeowners in some Southern California cities
The dream of homeownership is slipping away for residents in many Southland cities as renters increasingly outnumber those who own homes.
That’s the takeaway from figures released this week by the nationwide apartment search website RENT Cafe. The latest communities to achieve this distinction are Pasadena, Lancaster, San Bernardino, Anaheim and Santa Ana.
In 2006, 49.9 percent of Pasadena’s population were renters. But by 2016, that had risen to 58.3 percent, an increase of nearly 17 percent. Lancaster has experienced a similar trend with an even more dramatic increase. Its share of renters rose from 36.2 percent in 2006 to 51 percent in 2016, an increase of nearly 41 percent.
The ripple effect
Mel Wilson, broker and owner of Mel Wilson & Associates Realtors in Northridge, ties much of the trend to rising home prices. Housing is in short supply, he said, and it’s created a ripple effect that’s hitting middle-income residents hard.
“Home prices in Southern California are high and they’re increasing every year,” he said. “That’s put a lot of middle-income workers in a bind because they can’t afford homes. Their only other option is to rent.”
Some residents are pushing for rent-control ordinances that would put a cap on rental increases. But Wilson said that creates a disincentive for investors who want to build apartments.
“If you are trying to recoup your investment, a cap on rental prices would discourage you from wanting to build more,” he said.
And with fewer units to go around, rents will continue to rise.
“In many jurisdictions where there is no rent control, a one-bedroom apartment could start at $1,700 to $1,800,” Wilson said. “And many times, you’ll only get 600 to 700 square feet.”
Rents are high
A report issued last month from industry tracker Zumper shows that one-bedroom apartments in the L.A. region saw a 15.6 percent year-over-year increase in December, boosting the median monthly rent to $2,300. That was the biggest yearly increase among the top 10 most expensive U.S. markets. Two-bedroom units in the L.A. area rose 11.1 percent to $3,200.
Long Beach landed 13th on the list with a 10.3 percent annual increase that hiked the monthly rent for a one-bedroom unit to $1,500. The median price for a two-bedroom apartment rose 8.3 percent over the previous 12 months to $1,950.
Another sobering fact to remember is that the median monthly price represents the point at which half of the rents are higher and half are lower. So prices are considerably higher in some areas of Southern California. Santa Monica, for example, lists some two-bedroom apartments for as much as $4,000 to $6,000.
RENT Cafe’s data additionally show that during that same 2006-2016 period, San Bernardino’s share of renters jumped from 48.1 percent to 54 percent. Anaheim went from 46.3 percent to 57.9 percent, Santa Ana rose from 48.2 percent to 56.6 percent, and San Bernardino’s share of renters increased from 48.1 percent to 54 percent.
Other Southern California cities already boasted a rental majority by 2006, and that trend has continued upward. In 2006, 56.6 percent of Glendale residents were renters, a share that increased to 63.7 percent in 2016. Costa Mesa rose from 55 percent in 2006 to 62.6 percent in 2016.
Cites nearing a renter majority
Several other local cities are rapidly nearing a renter majority, according to RENT Cafe’s 2016 numbers. They include Irvine (49.7 percent), Orange (47.7 percent), Riverside (45.3 percent), Ontario (44 percent), Moreno Valley (43.6 percent) and Huntington Beach (40.5 percent).
Steve Basham, a senior market analyst with CoStar Group Inc., a San Diego-based provider of real estate data, said recently that developers in Southern California are currently focused on building luxury apartments in areas such as downtown Los Angeles.
“They are targeting households that make $100,000 and up,” he said.
California’s regulatory environment has also made it tough developers to build new apartment units.
“Most of our primary areas are already built out and there is often well organized community opposition to multiunit developments, so when a project is proposed, the lawsuits start rolling in,” Basham said. “All of that combines to build a potent mix of factors that make it difficult to bring new housing to market.”
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