Rent prices in San Diego mostly flat. So why does it feel so expensive?

by Phillip Molnar

San Diego has some of the highest rents in the nation but, in a minor consolation for tenants, they haven’t gone up as much recently.

Average asking rent was $2,532 a month in San Diego County in early September, said real estate tracker CoStar, up roughly 1% in two years. Average rent is still the highest its ever been, and costs vary by area, but it is rare for monthly prices to be this tempered.

Long-term renters have lived through a few rough years. The average rent increased 11.5% in 2021 — its highest in 25 years of data — just as many workers had lost jobs during the pandemic. Rent has only decreased twice in that time period, both during the Great Recession: Down 2.2% annually in 2009 and down 0.1% in 2010.

CoStar’s data comes from its inventory of nearly 300,000 San Diego County apartments, which is, by far, the biggest sample size of any rental tracker. While average rents are down in many areas of the county, there are always exceptions: Maybe a landlord didn’t raise rates at all during the pandemic, and just decided now was the time, or a neighborhood got its first new apartment building in years and it charges more than anything around it.

Rent growth is sluggish throughout the nation, not just in San Diego, and most experts tend to cite increased building as the main reason. The U.S. had 980,000 multifamily (apartments and condos) units under construction in summer 2023, which was its highest since records started in 1970. Construction numbers have stayed fairly similar in the years since, despite increased borrowing costs.

San Diego metropolitan area, which includes all of San Diego County, had 12,391 multifamily units under construction in April, said commercial real estate firm Yardi Matrix. That’s nowhere near the top dog, Dallas-Fort Worth, which has 60,535 apartments under construction, but not bad in context. For example, San Diego metro has more apartments under construction than San Francisco, Chicago and Las Vegas.

Nathan Moeder, a San Diego housing analyst with London Moeder Advisors, said there are still so many new apartments opening this year that it will probably keep rent growth low for a while.

“It will take 12 months to absorb all that inventory,” he said.

Roughly 4,000 new apartments are opening in San Diego County this year, coming near or matching totals in the past few years, which were among the biggest multifamily construction years in the region’s history.

Moeder’s firm does market analysis for developers thinking of building downtown and in other parts of the county. He said they are seeing two factors also keeping rents lower, other than competition from so many new apartment complexes: Renters increasingly taking on roommates to keep costs lower and young professionals moving to less expensive metros.

Lucinda Lilley, an apartment specialist who consults for several property management firms in San Diego County, said she has advised landlords not to greatly increase lease agreements when someone is ready to renew.

She said a few years ago you could just increase rent, and if a tenant didn’t like it, someone was standing right behind them to take their place. That’s clearly not the case anymore.

“You have to avoid vacancy at all costs,” Lilley said.

San Diego County’s average vacancy was 5.1% in early September. That’s up from 2.65% near the middle of 2021, but still near historic norms. One reason vacancy rates are higher is there are a lot of new apartment complexes opening, which can take a full year before they fill up. That’s most felt in downtown San Diego, where most new complexes have opened this year, and the vacancy is at 9.8%.

National rents were down 1.1% annually in August, said real estate website Zumper, which tracks rents by one-bedroom units. It was the fourth month in a row when annual rents had fallen. New York had the most expensive rent in the nation at $4,400 a month for a one-bedroom. San Diego was tied in eighth place with Washington, D.C.

CoStar breaks down rents by submarkets to get bigger statistical areas. Some markets might raise eyebrows, like Balboa Park, because it has some of the oldest apartments in the county, which is why its rents — on average — are lower. Here’s how rent breaks down by area, ranked by rent reductions:

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