Orange County’s multifamily market fundamentals remain some of the strongest in the country as local real estate investors brace for new state-wide rent control policies beginning Jan. 1, 2020. There will undoubtedly be an education process for landlords regarding this new law and how it may impact the valuation of multifamily in the future, but the long-term stability of the overall apartment market looks bright.
Matthew J. Kipp, Marcus & Millichap
Orange County boasts historically low unemployment and low apartment vacancy, but the region continues to have a shortfall in the development of workforce housing. Orange County is expected to deliver about 2,900 new Class A units to the market in 2019, about 500 units more than last year. With an extended economic expansion throughout Southern California, Orange County has benefitted greatly with large segments of its population fully employed and seeking places to live. The county has one of the nation’s highest median home prices at more than $833,000, making homeownership unattainable for many of its residents. This workforce housing shortfall will continue to put further pressure on the demand in Orange County as its apartment average vacancy rate is anticipated to drop 40 basis points to a very low 3.4 percent in 2019. This robust economic growth and limited new housing supply are the key drivers of the overall investment demand for all classes of multifamily.
The market’s biggest change will be the implementation of the state’s new rent control bill, AB 1482. Of course, numerous California cities have had rent control policies before the state’s legislation, and investors have been actively buying and selling multifamily properties in those markets for many years. However, none of the local municipalities within Orange County have had a rent control law until today. The idea of the law is to protect affordability with renters that have been affected with steep increases over the past few years.
Tyler C. Leeson, Marcus & Millichap
— By Matthew J. Kipp, first vice president of investments, Marcus & Millichap; and Tyler C. Leeson, senior managing director, Marcus & Millichap. This article first appeared in the November 2019 issue of Western Real Estate Business magazine.