According to the US Census Bureau, 63.4% of Los Angeles residents rent, rather than own, their home. Compare this to the national average, which shows that 35.2% of all Americans rent.
LA has an established renter culture. Between the high home prices, low inventory of homes for sale, and transient nature of those who flock to LA in pursuit of dreams of stardom, homeownership simply feels out of reach for most Angelinos.
This need to rent creates a market of renters who are paying higher rental rates than you’ll find in nearly any other American city. And yet, those who live in LA would rather stay and pay than go somewhere with a lower cost of living.
So real estate investors who are able to find properties and pay the upfront cost of purchasing them can make impressive returns in this unique rental market. They can increase rents at a higher rate than property owners in much of the country. But just how much more? How do Los Angeles rental rate increases compare to the national average?
A note on the data
One quick note before we dive into the data: tracking rental rates can be messy for a number of reasons. First, some market researchers use lease data to see what renters are actually paying, while others use FMR (fair market rates), which measures the current market value, regardless of how much renters are actually paying. Some researchers look at the average rent price per unit, while others attempt to calculate the rent price per square foot. Then, rates can vary depending on lease terms; an annual lease is typically offered at a lower rate than a six-month lease, for example. This can also skew the data.
So we can’t expect a perfect data set when measuring average rental rate growth. However, we can analyze the available data to establish trends and predict future return potential on rental investments. And that is exactly what this article will do for you!
Los Angeles Rental Rate Increases Compared to the National Average
Data from the LA Almanac, which uses information from the US Department of Housing and Urban Development, shows that the average LA County rental rate as of 2024 is $2,638. This represents an incredible year-over-year increase of 14.09% and brings the average annual increase to around 4.94% since the year 2000.
To find national values, we looked to iPropertyManagement, which amalgamated data from the US Census Bureau, HUD, Apartment Guide, and REALTOR.com to create a nationwide rent inflation factor report. This data, which goes through 2022, reports the national average rental rate at $1,388. While this rent inflation factor report doesn’t display values by size (one-bedroom, two-bedroom, etc.), it does allow us to calculate an average annual rental increase rate of 3.19%.
From this data, we can conclude that Los Angeles rents increase nearly 2% more than the national average each year.
Are There Rent Controls in California?
There are rent controls in California. But they are fairly new and fairly limited.
In 2020, California Bill 1482 was signed into law, limiting rent increases for existing tenants to 5% plus inflation for a 10-year period. Inflation is measured by the Consumer Price Index (CPI), which is calculated and released annually. If, for example, the CPI this year is 2%, rental rate increases would be capped at 7% (the 2% inflation rate plus the 5% allowable base).
However, many properties are exempt from this rent control measure. The increase cap does not apply to apartments built within the last 15 years or single-family home rentals (unless they’re owned by corporations or institutional investors).
Are There Extra Rent Controls Specifically in Los Angeles?
In addition to the California rent increase caps, there are additional rules for rental properties in the city of Los Angeles. The Rent Stabilization Ordinance (RSO) has been in place in Los Angeles since 1979. This ordinance limits increases to a rate of 3-8%, which varies by year, based on the CPI. In 2024, for example, the allowable increase rate was 4%.
As with the California rent control measures, the LA RSO ordinance contains several exemptions. The following properties are not covered by the RSO:
- Single-family homes (that are the only residential structure on the parcel),
- Affordable housing developments that have been granted an exemption by the LA Housing Department,
- Luxury housing developments that have been granted an exemption by the LA Housing Department, and
- Rentals that were built after October 1, 1978 (unless these buildings were constructed after July 15, 2007, in place of a demolished property that was eligible for RSO).
How to Make the Most of Your LA Rental Investment
Despite the rent controls in place across California, and specifically in Los Angeles, LA rental rates still increase at a substantially faster pace than the national average. In fact, increasing rental rates are one of the major reasons why Realtor.com listed Los Angeles as one of the hottest real estate markets to watch in 2024.
In our detailed Los Angeles Housing Market Analysis for 2024, we break down the LA market to help real estate investors know what to expect in terms of prices, rental rates, and consumer demand. That market analysis also explores the top five submarkets in the LA metro for investors looking to outperform the market!
Invest with Gatsby Investment for Full-Service Project Management and Low Investment Minimums
If you’d like to see the benefits of investing in Los Angeles, but you’re intimidated by the high home prices and complex landlord-tenant law, we have a solution for you.
Gatsby Investment is an LA-based real estate investment company specializing in real estate syndication. Syndication allows investors to pool money to fund specific real estate projects. This means you can buy into a high-value deal for a small fraction of what you would pay to purchase a property on your own. And Gatsby manages every detail of the project for you, with a team of local experts who are well-versed in acquisitions, design, construction, marketing, and landlord-tenant law.
With our unique multi-family built-to-rent investment model, you can get in on the ground floor of a new housing development, taking advantage of the forced appreciation earned during the construction phase and the ongoing cash flows earned during the rental phase. And since we handle the details for you, you never have to worry about finding the right property, overseeing construction, or managing tenants. Your returns are completely passive!