SoCal Housing Market Suffering From Low Supply, Crawling Rent Growth

Southern California’s housing market has limited upside, with its years-long availability crisis in full swing and few signs that rent growth will accelerate beyond a crawl.

Los Angeles County is one of the most undersupplied multifamily markets in the state, yet rent growth slipped to just 0.5 percent this year, compared with 1.52 percent the previous year, according to the University of Southern California’s latest Casden Real Estate Economics Forecast. 

That dip, which is below the national average for the same period, does not come by way of increasing affordability via an influx of new units, per the report. Instead, the rising vacancy rate for luxury units, and the low to zero price increases in that price range, offset the average and the more affordable units that come with tight rent control laws. 

L.A. County’s forecast over the next two years is similarly bleak. USC researchers expect rent growth to remain flat at about 0.6 percent through 2027, the lowest projected gains for Southern California. The ultimate cause, naturally, is the dearth of market-rate and affordable housing development, which lags far behind other states like Texas and Florida. California is home to 11.6 percent of the U.S. population, but contained only 10.1 percent of the country’s housing inventory as of late 2024, per the report. That equates to 12.5 percent fewer units per capita than any other state. 

“Housing affordability keeps shrinking for the people who need it most. The most data-backed solution is obvious: We need more housing,” Moussa Diop, report author and associate professor of real estate at the USC Sol Price School of Public Policy, said in a statement. “Beginning with the 2008 (Great Recession) downturn, the U.S. lost the production capacity needed to meet long-term demand. We can build back, but it’s going to take an all-hands approach.”

Conditions in most of the four other major markets surveyed by USC aren’t much better. 

Orange County is the region’s tightest and most expensive rental market, with average monthly rents reaching $2,776 and a vacancy rate of just 3.8 percent as of October 2025. Yet the county added only about 1,500 units over the past year, less than 0.5 percent of its rental inventory, while average rent growth dipped to 1.5 percent. New construction is pegged to rise to about 2,500 units annually, with rents likely to rise roughly 2.5 percent annually through 2027, yet the county will remain handicapped by supply and attitude toward increased development for the foreseeable future, according to USC. 

Ventura County has likewise found itself as one of the most expensive and lowest-delivery rental markets in Southern California. Although a rare spate of developments reached completion this year, such as Fore Property Company’s 333-unit Panorama in Oxnard, vacancy has historically held well below 5 percent due to lean construction, per USC. Ventura County’s average rent growth in 2025 was just 0.64 percent, and is expected to double (however modestly) to 1.2 percent over the next two years. 

San Diego County, on the other hand, has reportedly responded far better to the housing crises. Solid development and some pro-housing legislation has led to the addition of nearly twice as many units as Orange County over the past five years, and San Diego County’s average rent prices are currently 9 percent lower. Still, average rent growth this year in San Diego County was by far the lowest in Southern California, at barely 3 percent. USC predicts rent prices will decline to 1.9 percent through 2027 with less expected deliveries and vacancy spikes. 

“Rent control or subsidies may offer short-term relief, but without new supply, these policies only entrench the problems they seek to solve,” Diop said. “San Diego shows what’s possible: In just five years, it built enough supply to make average rents cheaper than in Orange County after years of similar prices. We’ll soon see whether [California Environmental Quality Act] reform improves the reliability of infill development.”

The high desert region known as the Inland Empire, which includes both Riverside and San Bernardino counties, is Southern California’s most affordable housing market with average rents of $2,112, as of October. That figure is 10 percent below L.A. County, and 25 percent below Orange County, per USC, despite average rent growth of about 3.6 percent over the past five years. A shrinking supply pipeline means that rents are projected to grow by 4.6 percent by 2027 to $2,210 per month, per USC, yet the Inland Empire is one of only a few markets in the region where new deliveries have driven modest rent growth.

Several macroeconomic challenges pose yet more risk to financing for multifamily development. An AI investment-fueled stock market bubble, unrestrained federal debt and elevated interest rates could all further tighten the amount of available capital for housing construction, with renters ultimately hit the hardest, per USC. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.