As rent growth persists nationwide and national news media derides San Francisco for its alleged 'downfall,' San Diego has reportedly dethroned the City by the Bay as a more expensive city for renters, and now ranks in the top three highest rental cities in the United States. According to recent data from Zillow's June 2023 Rent Report, San Diego's average rent stands at $3,175, edging out San Francisco's $3,168, marking a dramatic shift in the hierarchy of California rental markets.
Interestingly, San Francisco used to have a 29% higher rent than San Diego in February 2020, but now finds itself surpassed in the rankings, as Hoodline Bay Area reports. The battle of the rental markets continues, with the Zillow Observed Rent Index (ZORI) showing an average 0.6% increase in rents nationwide in June.
(Data: Zillow)
June's rental growth patterns closely resembled pre-pandemic data from 2015-2019, indicating that the rental market is slowly finding stability after a rocky period. However, this new equilibrium comes at a price, as San Diego positions itself as one of the most unaffordable cities for renters, with the Times of San Diego highlighting a 78.7% higher median rent than the national figure. The discrepancy is also prevalent in San Diego's neighboring city of Chula Vista, where median rent is reported at $2,437.
The most expensive major market is San Jose, boasting a typical monthly rent of $3,411, followed by New York City at $3,405, as mentioned in another 10 News article. Northeastern and Midwestern markets, such as Boston (7.0%), Hartford (6.9%), Providence (6.9%), Cincinnati (6.8%), and Chicago (6.3%), have seen the highest annual rent growth.
Conversely, the weakest year-over-year rent growth lies mostly in the West, with cities like Las Vegas (down 1.8%), Austin (down 0.8%), Phoenix (0.2%), Seattle (1.0%), and San Francisco (1.2%). The fluctuations in these rental markets may likely be attributed to tech industry hiring weaknesses and the remote work exodus experienced during the earlier stages of the pandemic.
With nearly a million multifamily housing units under construction in May and a rising vacancy rate in rental housing, Zillow's report predicts sluggish growth in the market for the foreseeable future. As these new housing units come on stream in the next one to two years, the rental market may experience less dramatic swings than it did in 2020 and much of 2021.
However, the shifting balance among rental markets in California presents the question: what factors contributed to San Diego's surge in rent prices, and how will these changes affect affordability and housing demand in other major cities across the nation? While San Francisco grapples with its newfound challenge, San Diego now enters the spotlight as a city with rent growth that is worth keeping an eye on, whether that is a mantle the city wants or not.
