Since 2000, California has experienced its slowest rates of population growth ever recorded. And between 2020 and 2024, California’s population has actually declined, driven by a sharp rise in residents moving to other states.

At the same time, California is facing a well-documented housing shortage that has led to rising costs, particularly for renters. California has a larger share of renters than almost any other state (second to New York) and one of the highest shares of severely cost-burdened renters—three in ten California renters pay 50% or more of their incomes on housing. With the state’s unprecedented population decline, have new vacancies affected rental prices?

The rental vacancy rate, or the number of vacant units “for rent” out of the total number of rental units, is a helpful indicator to assess rental market conditions. Low rental vacancy rates may suggest strong regional job growth or a growing population, both of which drive up the demand for housing. However, high demand with few available units can create a tight market, leading to higher prices and competition among renters. From 2010 to 2023, the rental vacancy rate declined by about 2 percentage points across the state, while the median rent rose by more than $800.

Populous counties, such as Los Angeles, San Diego, and Orange, followed a pattern similar to the state, with steep rent increases and smaller declines in vacancy rates (about 1 percentage point). However, San Bernardino and Riverside Counties experienced an even larger decline in vacancy rates (about 5 percentage points) as rents rose by about $800.

Typically, we would expect these changes—rents increase as vacancy rates decline and fewer units become available. However, from 2010 to 2023, some California counties that experienced significant rent increases also saw higher rental vacancy rates. In the Bay Area, counties like Alameda, Marin, San Francisco, San Mateo, and Santa Clara saw rent increase as much as $1,300 despite a 1–5 percentage point increase in vacancy rates.

These rising vacancy rates could reflect changes in rental market conditions after the pandemic. New housing construction across the state—and especially in the Bay Area—has focused heavily on building for higher-income households. These units could be hard to fill as many workers have relocated elsewhere amidst changes in remote work and people moving from California to other states.

Another possible reason behind increasing rental prices, even as vacancy rates rise, is newer, more expensive construction. Newer rental units built between 2020 and 2022 are more expensive than those built in previous decades (by $200 to $800), driving up median rents. Moreover, landlords in the Bay Area might be using incentives, like one or two months of free rent to bring down renters’ overall costs. This allows landlords to attract renters at a discounted rate while keeping rents high in one of the state’s wealthiest regions. One concern is that the widespread use of an algorithm to set rents allows landlords to align their prices and avoid competition that would otherwise keep rents down. In August, the US Justice Department and eight states, including California, filed a civil antitrust lawsuit against real estate software company RealPage for price-fixing and collusion.

As rents and vacancy rates rise in some regions of the state, many families are feeling the strain, and some are forced to make difficult choices between housing security and other needs. It is critical to understand these trends as California grapples with an acute housing shortage that has led to increases in homelessness and rental stress. Stayed tuned for more from PPIC as we continue to conduct ongoing research into housing and rental prices.