Apartments in O.C. Bring Record Rents

By DARYL STRICKLAND

May 22, 1999 12 AM PT

TIMES STAFF WRITER

Apartment rents have hit an all-time high in Orange County, with landlords charging an average of $990 per month, a study released Friday shows.

Competition for apartments is fierce: Occupancy is at 97.5% and a robust local economy means thousands of newcomers need housing. And, with very few new apartments being built, there’s no relief in sight.

It is unlikely that tens of thousands of units could be built in time to prevent average rents from breaking the $1,000 barrier, a level that will turn increasing numbers of lower- and middle-income workers into commuters from inland areas.

“It will get nothing but worse,” said Pamela Wooldridge, president of Research Network Ltd. of Rancho Santa Margarita, who completed the annual report along with California State University at Fullerton.

Wooldridge estimates that two out of three new hires will be forced to live outside Orange County in the coming years.

While the average rent in the county last year was $990, it varies widely by city--in Newport Beach, it’s $1,324; in La Habra it’s $699.

Last year rents overall increased by 7.6%; bringing the increase for the past five years to 27%. The occupancy rate rose for the fourth consecutive year.

Among the factors that have combined to limit construction is a lack of available land and community resistance to apartment units.

The report, which has tracked Orange County rents over the past 15 years, provides the most detailed snapshot of the county’s apartment market. The survey sampled more than 108,000 units in complexes containing 20 units or more, about half of the county’s apartment stock. It does not include senior or income-restricted housing.

The division of the county’s wealth is evident in the range of rents, exposing a widening gap between more working-class areas in north and central Orange County and the newer, more affluent communities in the south.

Cities with the lowest average rents included Los Alamitos at $730; Buena Park at $791; Anaheim at $794; and Stanton at $799. Cities with the highest rents included: Irvine and Aliso Viejo, both at $1,274; Seal Beach at $1,261; and Yorba Linda and Foothill Ranch at $1,143.

While a jolt to renters, the run-up has been a boon for landlords, who suffered through an eight-year drought in the late 1980s and first half of the ‘90s, when rents rose a total of 4%--an average of $31.

Like Orange County homeowners, landlords saw their properties depreciate throughout the recession earlier this decade. Since then, while most single-family homes have regained value and fetched premium prices on the market, many apartment landlords find themselves still making up lost ground. In order to have kept up with inflation since 1985, the average monthly rent would need to increase $99 a month, to $1,089, the report found.

The increased demand for apartments also has reduced the perks that landlords had routinely offered. Only 14% of the county’s apartment complexes offer move-in incentives such as a free month’s rent, the lowest rate ever recorded. In 1994, 81% of apartment projects granted such perks.

“Who would have thought three or four years ago we would be in this market?” asked Jay Skendarian, a partner in an apartment brokerage in Newport Beach. In the past, many landlords had few applications on their desks. Now, “They have people knocking on their door to get in. It’s definitely an owner’s market.”

The dearth of new construction is brightening the outlook for landlords, the survey found.

While more than 60,000 jobs were created in the county last year, only about 10,000 homes and apartments were erected. In order to keep pace with demand, Wooldridge said, at least 40,000 units would have to have been constructed.

“We’re nowhere in the ballpark for building the number of housing units needed for that kind of job growth,” Wooldridge said.

Currently, apartment complexes totaling 3,269 units are under construction in only five cities--Irvine, Newport Beach, La Habra, Orange and Santa Ana--and in some unincorporated areas. Many more cities haven’t built rentals in years. And some, like Seal Beach, Villa Park or Fountain Valley, haven’t seen any apartment construction since at least the early 1980s.

Renters Stretched to Financial Limit

For many renters, monthly increases have stretched their finances to the limit.

Carol, a San Clemente saleswoman, has leased a three-bedroom duplex a block from the beach for nearly seven years. And for six years, her rent didn’t increase.

Then her luck ran out. She has seen her rent rise by $150 over the past year, to $1,000 a month.

Instead of stockpiling savings, Carol, a single mother of two teenagers, has spent money from a promotion and several bonuses trying to maintain her modest lifestyle. She juggles bills, uses credit cards and continues to live paycheck to paycheck.

The family’s love of ocean breezes and watching sunsets has kept them from moving.

Carol, who asked that her last name not be used for fear her rent will be raised again, said that if it does, her family will have to move.

“I won’t be able to afford it,” she said. “I cross my fingers every day my rent will not be increased.”

Mattie Williams, 79, learned recently that rent on her subsidized one-bedroom unit at Anaheim’s New Horizon Village will rise $52 in July to $572 per month. And her landlord soon will require $8 a month for liability insurance as part of her monthly payment, said Jan Colella, Williams’ daughter.

Colella, who is married and raising two children, will have to scrimp further to help her mother pay bills. Williams, who is nursing a broken hip, said she cannot afford another rent increase.

With housing and medical expenses exceeding her mother’s income by more than $600 a month, the family will try to make up the difference. Colella, 49, already has refinanced her family’s home to free up more money. The family will cut costs too, things like dumping season tickets to Disneyland, curtailing eating out, and looking for less expensive groceries.

In time, she may have to sell her home to find a larger one that can accommodate her mother.

“I’ll do whatever it takes to help her,” Colella said, “but there’s a lot of people who don’t have anybody.”

Fair Housing Council Flooded With Calls

The region’s rental picture won’t improve any time soon for the disadvantaged if the county’s job growth continues to outpace housing construction by such wide margins, report author Wooldridge said.

The increase in rents, in some cases raised twice in a year, has created a flood of callers to the Orange County Fair Housing Council in recent months. Many renters were under the false impression that increases can be curbed by law, said David Levy, a counselor and housing rights advocate at the council.

Unlike necessities such as food, transportation and utilities, lower-income families can’t simply “use less” housing when prices spiral upward, Levy said.

And the choices continue to shrivel as landlords convert federally subsidized apartments to market-rate rents. In an effort to preserve as many units as possible, the Department of Housing and Urban Development recently said it will spend $30 million to boost subsidies nationwide.

“It’s a tough situation for those on the edge,” Levy said.

Wooldridge said the options facing low-income residents are “troubling. The reality is, “those people who need affordable housing will not be served,” she said.

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Area Rents

Newport Beach has the most expensive rentals, averaging $1,324. La Habra was lowest at $699.

Moving up, moving down

The highest rents paid in Orange County by city:

1. Newport Beach: $1,324

2. Irvine & Aliso Viejo: $1,274

3. Seal Beach: $1,261

4. Yorba Linda & Foothill Ranch: $1,143

5. Laguna Beach: $1,140

And the least expensive rents in Orange County by city:

1. La Habra: $699