Although the region is still more affordable than neighboring areas closer to the coast, the Inland Empire is contending with the same cost pressures weighing on the rest of Southern California, and rents will continue to rise, according to a report released Thursday.
The USC Lusk Center for Real Estate’s annual report, a component of the university’s Casden Economics Forecast, said that inflation factors, stemming partly from limited housing availability, pose challenges for the IE, but the extent of the impacts weren’t crystal clear.
Lusk Center Director Richard Green said the Federal Reserve Board’s moves to contain galloping price increases nationwide by gradually boosting benchmark interest rates could put home mortgages out of reach for residents, pushing them into rental properties, where demand is already stratospheric.
The Lusk Center projects that the current average monthly rent for living space in the Inland Empire will rise from $1,978 to $2,230 — or 13% — in two years.
“The Fed has increased interest rates at a frequency not seen since the end of the Reagan administration,” Green said. “While it might slow inflation, rapid rate hikes could have a different impact on housing in Southern California. High interest can be a barrier to new housing construction, or a renter’s decision to become a homeowner. Both add stress to the rental market and drive up prices.”
According to the report, Riverside and San Bernardino counties remain reasonably attractive to Southern Californians fleeing higher rent locales, including Los Angeles and Orange counties, and the outmigration that occurred from those areas, especially during the COVID public health lockdowns, was driven toward the IE, as well as other places to the east.
“Outmigrants were largely lower wage earners seeking affordability in places like the Inland Empire or Las Vegas and Phoenix, where housing is built more rapidly and rents are less expensive,” Green said. “The big unknown is whether the outmigration trend will continue in the post-pandemic work environment.”
According to the report, housing inventories have leaned out across the bi-county region, with the surge in population growth — particularly in Riverside County, the fastest growing county in the state — unmatched by new multifamily construction.
“Limited vacancies and high rent — combined with relatively low income — has made housing unaffordable to many,” the report stated.
The most recent figures released by the U.S. Bureau of Labor Statistics indicated that rents in the Riverside metropolitan area jumped 6.3% over the last year.
The Lusk Center’s full report can be viewed at lusk.usc.edu/.