As the effects of the pandemic wane, rents are increasing at record-setting indices month after month in 2021.

Looking back, rents fell in Spring 2020 as the nation began responding to the COVID-19 pandemic and recession. As of March 2021, national rent prices had rebounded to their pre-pandemic levels. By May, rents were above where they might have been had no pandemic or recession occurred at all.

Here in California, as of May 2021, year-over-year rents changed by:

  • 17.4% in Fresno;
  • 12.7% in Riverside;
  • 12.2% in Bakersfield;
  • 10.3% in Sacramento;
  • 6.2% in San Diego;
  • -2.2% in Los Angeles;
  • -7.9% in San Jose; and
  • -14.3% in San Francisco, according to Apartment List.

However, on a monthly basis, between April and May 2021, month-over-month rents changed by:

  • 3.8% in San Francisco;
  • 3.0% in Fresno;
  • 2.6% in Riverside;
  • 2.5% in Sacramento;
  • 2.1% in San Diego;
  • 2.0% in San Jose;
  • 1.8% in Bakersfield; and
  • 1.3% in Los Angeles.

For reference, the average U.S. rent growth experienced from April to May 2021 was 2.3%, a record-breaking figure, according to Apartment List.

California’s average rental rate is $1,820 as of May 2021. Nationally, the average price paid for rent is $1,190.

As rents become more expensive, and without incomes to keep up with rising prices, tenants continue to spend more of their monthly income on rent. This affects their ability to become homebuyers and their capacity to contribute to the local economy.

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Rental trends in California markets

The trends occurring in California reflect national trends. Namely, rents decreasing in the more expensive, coastal metros such as San Francisco and Los Angeles, and increasing for suburban, mid-size markets, such as Fresno, Sacramento and Riverside throughout 2020-2021.

Less restrictive zoning in these smaller, inland cities has led to more residential construction, and thus, a more stable housing supply.

Also, the shift in remote work policies during the pandemic encouraged an exodus from the denser, more costly cities for those who are able to work remotely.

Rental vacancies were significantly lower than the historical equilibrium of 5.5% in 2020, at 4.1%. This low vacancy rate stems partly from the eviction moratorium, which has kept tenants in place throughout the pandemic, whether they paid rent or not.

Future vacancy rates will be influenced by:

Despite the gains experienced in less populous cities, when jobs eventually return, they arrive first and fastest in city centers. California jobs are down 1.7 million before the onset of the 2020 recession as of March 2021. It took six years for employment to stabilize during the last recession. Until around 2024, expect the jobs market to remain hampered, dependent upon the extent of government intervention to support job creation.

More residential units are needed to fulfill California’s housing demand, along with less restrictive zoning to encourage stability. Until then, expect rents to continue to rise in the most desirable areas as a shrinking supply of available units persists.

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