SoCal Multifamily in Focus: Strategic Opportunities in Los Angeles & Orange County

Southern California’s multifamily real estate market is entering a period of pronounced transformation and opportunity. With Los Angeles at the epicenter of technological innovation, infrastructure investment, and global attention—and Orange County maintaining its hallmark consistency and demand stability—investors are faced with two distinct but compelling value propositions.

 

This article explores the evolving dynamics shaping these two powerhouse markets and uncovers the key themes driving Southern California’s multifamily performance in 2025 and beyond.

 

95% + Occupancy Rate

LA REMAINS ONE OF THE TIGHTEST APARTMENT MARKETS NATIONWIDE

$5.8B in 2024 Sales

LA SECOND ONLY TO NYC

3.17M Residents (+16K in 2024)

A RETURN TO GROWTH IN OC AFTER 2021-23 LOSSES

0.4% Rent Growth in OC in 2024

A PAUSE AFTER PANDEMIC-ERA SURGES, BUT STILL 28% ABOVE 2019

 

 

Los Angeles

A MARKET RECHARGED BY DEMAND, INNOVATION, & GLOBAL MOMENTUM

Despite recent negative press, Los Angeles County remains one of the nation’s premier multifamily investment markets. While population loss during the pandemic gained attention, the narrative is more complex. Growth in nearby Riverside-San Bernardino underscores that limited housing, not waning demand, is pushing people outward. Los Angeles remains a highly desirable place to live and work.

 

The county boasts one of the lowest apartment vacancy rates nationwide at 5.0%. A deep pool of young workers supports long-term demand. However, factors like rent control, increased taxation, and rising insurance costs create challenges that investors must navigate.

 

 

HEADWIND: TAXATION & RENT CONTROL

The ULA “Mansion Tax”, which imposes added costs on real estate transactions above $5.3 million, has reshaped investor strategies. Additional rent controls and regulations within the City of Los Angeles have further dis-incentivized investment. “ULA has made investors more cautious on exit. Some are building in a longer hold, others are discounting the exit cap or trying to stay under that threshold entirely,” said Nabil Awada, Vice President and Associate Director. “Staying below the threshold means that owners are less likely to sell at a discount unless they really need to.”

 

“We’re seeing increased investor focus in San Gabriel Valley–strong job base, diverse renter pool, and less restrictive rent policies. Pasadena’s early rent control push in 2022 has actually redirected attention further east,” Awada added.

 

While Pasadena’s 2022 rent control targets buildings constructed before February 1, 1995, newer properties remain exempt, creating opportunity. Despite these policy headwinds, Los Angeles continues to generate reliable returns, and voters have pushed back on further rent control expansion.

 

“Rent control is forcing us to underwrite conservatively—maybe 3% or less annually— and think harder about how we reposition units between tenants,” noted Awada. “For value-add deals, it’s all about repositioning units legally between tenants rather than relying on aggressive rent bumps.”

 

With the passage of AB 1482 in 2019 and the failure of Prop 33, here is where LA rent control laws stand in 2025:

Properties Subject to Los Angeles Rent Stabilization Ordinance (RSO)

• Pre-1978 construction in the City of Los Angeles is subject to RSO
• Landlords can impose annual rent increases of 4%, plus an additional 1% if they pay for electricity and 1% if they pay for gas

 

Properties Subject to AB1482

• Any properties incorporated in Los Angeles County that do not have their own protection ordinance (excluding the City of Los Angeles)
• Properties in the City of Los Angeles built between 1979 and 2010, with the 15-year exemption rolling forward annually
• Annual rent increases are capped at 5% plus the local Consumer Price Index (CPI)

 

Exemptions

• Properties built post-2005 are exempt from any rent control policies, following a rolling 15-year exemption basis
• Single-family homes and condos remain exempt from local rent control

 

 

HEADWIND: NATURAL DISASTERS & INSURANCE

The 2025 Pacific Palisades and Eaton wildfires displaced over 150,000 residents and destroyed 16,000+ structures. In their aftermath, demand surged in submarkets like West Los Angeles, with spiking rents and vanishing vacancy.

 

“Investor interest has shifted toward fire-safe zones–the South Bay is gaining more attention because they weren’t affected by fires, and cities like Redondo Beach, Gardena, and Torrance have strong fundamentals,” said Awada.

 

South Bay CRE Sales Surge in 2025

Source: CoStar Group, In. & The MLS | YTD = Jan 1, 2025 – May 22, 2025

Market	Sales Volume YTD 2024	Sales Volume YTD 2025	% Increase
Redondo Beach	$31.4M	$58.6M	87%
Gardena	$30.5M	$48.8M	60%
Torrance	$40.9M	$49.6M	21%

 

Rebuilding could take years as new development will be slow to replace lost housing stock. The resulting supply shock has boosted rental income potential and elevated property values across affected and adjacent areas, offering near-term momentum for multifamily owners, operators, and developers.

 

“With insurance premiums climbing in high-risk zones, I think we’ll see interest hold steady for at least another year or two–especially while there’s room to modernize units and push rents without competing with a ton of new supply,” said Awada.

 

At the same time, these wildfires have underscored the growing risk profile of investing in natural disaster-prone markets like Southern California. The financial hit on insurers is expected to ripple through the broader market. Awada notes the financial impact: “Insurance premiums are rising sharply–20 to 40% increases aren’t uncommon–and that’s directly affecting underwriting.”

 

Investors should anticipate a sharp increase in insurance premiums, which will inflate operating expenses and weigh on underwriting. Roughly $1.3 billion in CMBS-backed commercial real estate lies within fire evacuation zones, and while lenders are unlikely to adjust strategy immediately, persistent natural disaster risk could lead to higher lending premiums or tighter financing terms—particularly if insurers begin pulling back coverage across Los Angeles County.

 

 

TAILWIND: HOUSING SHORTAGE

Los Angeles’ chronic housing shortage remains a powerful driver of demand. According to Zillow, Los Angeles has the second-largest housing shortfall nationally, trailing New York City.

 

With single-family home prices averaging $940,000, affordable to just 2.8% of renters, the metro is creating a higher-income rental base. Housing supply remains far behind demand: 22,000 units are under construction, but the shortfall ranges from 300,000 to 500,000 units.

 

“Construction slowdowns and supply constraints are the dominant forces in the market,” Awada emphasized. “We’re going to see tighter occupancy, more demand for workforce housing, and likely some distress-driven sales as loans mature.”

 

Vacancy is expected to tighten 20 basis points each of the next two years, reaching just 4.7% by the end of 2026. Rent growth is expected to land just shy of 4% in 2025, even with the potential for increased rent control measures. With limited homeownership options and rent control impeding new supply, multifamily owners are poised to benefit from enduring tightness.

 

Los Angeles Housing Shortage Stalls Amid National Gains

Source: Zillow

Metro Area	Housing Shortage	Change in Housing Shortage YOY (#)	Change in Housing Shortage YOY (%)	% Non-Homeowner Households That Could Afford Typical Mortgage
United States	4,540,773	256,847	6.0$	15.1%
New York , NY	389,924	13,548	3.6%	9.3%
Los Angeles, CA	336,728	2,866	0.9%	2.8%
Chicago, IL	97,379	9,946	11.4%	22.0%
Dallas, TX	48,150	528	1.1%	14.5%

 

 

TAILWIND: DEMOGRAPHICS UNDERSCORE ENDURING DEMAND

Los Angeles County’s nearly 10 million residents offer significant scale and strength for multifamily investors. After peaking at 2.2% during the pandemic, annual move-outs have dropped to just 0.3%.

 

Higher than average incomes are the most notable factor for LA renters, allowing owners to provide high-end housing options at rates far larger than the national average rent. Los Angeles renters earn $10K more than the national average, supporting rental rates that are 32% above the national average. And with the median age of 36 (versus the U.S. average of 39), the metro’s larger Gen Z and millennial population supports household formation and apartment demand.

 

“The demand we’re seeing from younger renters and tech workers is unlike anything I’ve seen in the last decade,” said Awada. “LA has become a lifestyle market–and these high-income renters are keeping occupancy tight even in newer Class A stock.”

 

With average household sizes larger than the national norm (2.8 vs. 2.5), LA’s constrained supply continues to suppress household formation, further fueling future multifamily demand.

 

 

TAILWIND: LOS ANGELES 2.0

Los Angeles is expanding beyond its entertainment roots, emerging as a tech powerhouse in AI, cloud computing, and cybersecurity. This shift has increased demand for amenity-rich, centrally-located rentals.

 

“As tech spreads beyond Silicon Beach, tenants are chasing convenience and transit-oriented locations,” said Awada. “Mid-market demand is growing fast in places like West Adams, Koreatown, and Inglewood–areas with upside and access.”

 

The average tech salary in Los Angeles now exceeds national benchmarks, supporting robust demand for both premium and mid-market multifamily assets. This job growth has played a critical role in stabilizing Class A occupancy, even amid a surge of new deliveries in 2024, and has helped fuel sustained leasing velocity throughout the metro.

 

“For Class A, developers are targeting walkable, amenity-rich pockets near transit and coworking spaces,” said Awada.

 

The upcoming Summer Olympics in 2028 and FIFA World Cup in 2026 are also catalyzing infrastructure improvements and investor interest. These global events are driving an ambitious infrastructure agenda, most notably the “Twenty-eight by ’28” plan, which will modernize transportation networks, upgrade neighborhoods, and enhance citywide connectivity.

 

“Investors are eyeing transit corridors and Olympic-adjacent zones for value-add plays and short-term rental potential,” said Awada.

 

 

TAILWIND: LA COUNTY APARTMENT INVENTORY OPTIONS FOR EVERY INVESTOR

Los Angeles’ inventory includes the nation’s highest concentration of small apartment buildings (under 25 units), enabling easier entry for private capital. While the market includes institutional-grade properties, this diversity adds resilience and liquidity.

 

“Private capital is active in the Valley, South Bay, and Long Beach–looking for value-add deals where prices are soft but demand is solid,” Awada explained. “It’s institutional capital that’s turned cautious, especially post-ULA.”

 

Entry costs can vary anywhere between $200,000$600,000+ per unit from the San Fernando Valley all the way to Long Beach. Despite the market’s reputation as a high-cost metro, smaller and more cost-effective options mean investors from all over the country can acquire properties in Los Angeles. Deal variety like this provides options whether a syndicator with a 5-year time horizon, a private investor looking for long-term passive income, or a larger institution looking for a stable and safe return on capital.

 

 

TAILWIND: MARKET LIQUIDITY REMAINS AMONG THE HIGHEST IN THE NATION

Despite the national slowdown in deal flow resulting from the rapid increase in the Federal Reserve overnight rate, Los Angeles County remains one of the most active apartment markets in the country. In 2024, nearly $5.8B changed hands for LA apartments, trailing only the New York City Metro, which includes parts of New Jersey and Connecticut. Los Angeles records four times more transactions than San Francisco and 2.5 times more than the entire Bay Area. “We’re seeing more sellers meet the market now, and buyer activity has stayed surprisingly strong considering the macro headwinds,” Awada commented.

 

 

Orange County

A MARKET DEFINED BY STABILITY, AFFLUENCE, & SUPPLY CONSTRAINTS

Orange County’s multifamily market continues to be one of the most resilient and desirable in the U.S., distinguished by persistently tight vacancy, a highincome tenant base, and strong investor demand. While rent growth has plateaued after a pandemicera surge, occupancy remains near historical highs, reflecting the county’s enduring appeal.

 

These tight conditions are driven by consistent job creation, limited housing supply, and a chronic affordability gap that keeps a growing portion of the population in rentals. Despite affordability and policy-related headwinds, the county’s fundamentals position it as a defensive, long-term play for multifamily investors.

 

“Orange County investors like the economic demographics, general county policies, rental market stability, and value stability,” says Mark Bridge, Executive Vice President. “Whether during the 2008 financial crisis or the COVID collections of 2020, Orange County stood the test better than its Southern California neighbors.” He adds that “Orange County rent growth has often been in the top 10 nationwide, and values have historically declined slower and rebounded faster than surrounding counties.”

 

As of late 2024, the apartment vacancy rate hovered around 4%, making Orange County the second-tightest rental market among the top 50 metros in the U.S.

 

 

HEADWIND: AFFORDABILITY CONSTRAINTS IMPACT CLASS A PRODUCT

Affordability remains a defining pressure point in Orange County’s multifamily landscape, especially for Class A and luxury assets. Renters are increasingly cost-burdened, and the income needed to afford market-rate units continues to rise. As of Q2 2025, the average asking rent in Orange County reached $2,730 per month, a 25% increase since Q4 2019. To rent without being cost-burdened, a household must earn $54.94 per hour, 3.3 times the state’s minimum wage.

 

“The cost of housing in Orange County is sky-high, and is a major barrier to middle-income families,” says Mark Bridge. “That’s why Class B and C assets are in such high demand, they’re the only housing option left for much of the local workforce.”

 

This pricing ceiling is particularly relevant as Orange County has one of the highest shares of Class A inventory among major U.S. markets. As of Q2 2025, over 6,400 Class A units are under construction, representing 2.5% of the county’s 250,000-unit apartment base. In submarkets like Newport Beach, over 40% of its housing supply is high-quality Class A buildings.

 

Although this is below the national average of 3.0%, and significantly below the 6% to 12% under construction in the nation’s five most active markets, the pipeline is still substantial, especially given Orange County’s historic supply constraints.

 

“Orange County is an infill development location,” Bridge explains. “Most Class A development is happening on underutilized or vacant lots.” But even these infill opportunities are limited. In November 2024, for example, a proposed 500-unit development in Anaheim Hills was rejected due to density concerns and the neighborhood’s wildfire evacuation risk highlighting the difficulty of bringing large-scale supply online even in a market with sustained demand.

 

As these new Class A units enter lease-up phases, landlords may face slower absorption and need to offer more concessions to fill units. The affordability ceiling also limits future rent growth prospects in this segment, as more tenants seek attainable alternatives in Class B and C properties.

 

 

HEADWIND: REGULATORY PRESSURE & SUPPLY-SIDE CHALLENGES

Alongside affordability, regulatory pressure and development challenges continue to weigh on multifamily investment and construction. Despite statewide efforts to promote pro-housing policies, including ADU reform and density bonuses, Orange County’s approval processes remain slow and inconsistent.

 

“The entitlement process is still a hurdle, land costs remain high, and despite funding increases, we’re not producing enough units–especially for low-income renters,” says Bridge. While California has boosted support for housing production and preservation, reaching $249 million in Orange County in 2025, up 50% year-over-year, those gains still fall short of addressing the County’s estimated 121,000-unit shortage for low-income renters.

 

The region also faces deepening challenges around the loss of affordable development pipelines. Low-Income Housing Tax Credit (LIHTC) production and preservation dropped 61% between 2023 and 2024, severely limiting progress toward affordability goals. That drop comes just as the county grapples with alarming cost burdens: 81% of extremely low-income households pay more than half of their income on housing, compared to only 3% of moderate-income households.

 

Meanwhile, Santa Ana remains the only city in the county with stricter rent control than California’s AB 1482, capping rent growth at 80% of CPI or 3% annually since 2021. “Santa Ana’s rent control caused a larger decrease in pricing and slowed transaction velocity,” Bridge notes. “That aside, Santa Ana values have ticked up slightly from the bottom as the market adjusts post-rate hike.”

 

Despite the policy headwinds, Orange County’s underlying fundamentals, tight vacancy, economic diversity, and high barriers to entry continue to attract capital. However, rising interest rates have compressed investment returns, pushing average cap rates to around 4.4% and narrowing spreads, particularly for institutional-grade assets. Deal velocity has slowed in many submarkets, but liquidity remains strong in coastal areas like Irvine and Newport Beach, where institutional interest has persisted.

 

Where OC rent control laws stand in 2025: In Santa Ana, rent growth is capped at 80% of CPI or 3% annually, whichever is lower.

 

 

TAILWIND: POPULATION GROWTH & DEMOGRAPHIC RESILIENCE

Orange County’s population is once again trending upward, reinforcing long-term demand for multifamily housing. In 2024, the county added nearly 16,000 new residents, a 0.5% gain that marked a clear reversal from the average -0.3% annual population losses between 2021 and 2023. This growth brought the total county population to 3.17 million.

 

Several of the county’s largest cities drove the expansion. Irvine led with a population increase of more than 3,600, followed closely by Santa Ana (+3,500), Garden Grove (+2,200), and Anaheim (+1,700). Stanton recorded the fastest percentage growth, jumping 3.6% thanks in part to new developments like Cloud House, a 321-unit apartment community featuring Orange County’s most expansive rooftop deck.

 

This return to population growth has translated directly into tightening multifamily fundamentals. In Irvine, stabilized apartment vacancy stands at just 3%, well below the county average of 4.1%. Projects like the 287-unit Enzo from TX partners and the upcoming 876-unit Volar by Garden Homes are helping to meet demand, but Orange County’s housing pipeline remains too limited to shift overall market dynamics meaningfully.

 

Supporting this demographic momentum is Orange County’s diverse, high-wage economy, anchored by leading employers across sectors like tourism, healthcare, education, and technology. Major firms including Disney, University of Irvine, Broadcom, Edwards Lifesciences, and Providence Health ensure job stability and sustained household income growth. By the end of 2024, job growth was tracking at 1.4% annually, with unemployment under 4.5%—outpacing both state and national benchmarks.

 

These jobs support a median household income of approximately $116,000, yet with median home prices exceeding $1.2 million and mortgage payments nearly double the average apartment rent, home ownership remains out of reach for a large share of the population. In fact, roughly 75% of local residents cannot afford a median-priced home, making “rentership” the default housing strategy for many.

 

Orange County’s demographic profile adds further strength to its multifamily appeal. While the region experiences modest domestic outmigration due to its cost of living, this is offset by strong international immigration, a high birth rate, and growing numbers of young professionals and college graduates. Millennials and Gen Z are continuing to form households, and a rising number of empty nesters are downsizing into high-quality rentals. These trends are expanding the county’s renter base across both age and income segments.

 

Additionally, Orange County has a high educational attainment and robust professional job growth, supporting a deep pool of tenants with the financial capacity to sustain elevated rents. As Mark Bridge notes, Orange County’s stable economy and diverse demographics are foundational to its long-term investment appeal.

 

 

TAILWIND: CLASS B & C STRENGTH, CLASS A STABILIZING

Orange County’s multifamily market is increasingly defined by a split between high-cost and attainable housing. Class B and C assets—largely built from the 1960s to 1980s—are outperforming due to their relative affordability. With vacancy between 2.5% and 3.0%, these units are near full occupancy and continue to record modest but steady rent growth (1% to 2%).

 

The Class Divide in OC

Source: CoStar Group, Inc.

	Units	Vacancy Rate	Rent
Class A	76,768	5.5%	$3,272
Class B	86,996	3.8%	$2,691
Class C	95,734	3.3%	$2,104

 

“Class B and C properties benefit from a broader renter base seeking affordability in OC’s high cost of living,” Bridge says.

 

Class A buildings, particularly recent deliveries in Irvine and Anaheim, saw some softness but are showing signs of stabilization. Rents across the county rose only 0.4% in 2024—a modest increase, but one that leaves average rents nearly 28% above pre-pandemic levels.

 

“Everyone is looking for value-add deals in OC,” Bridge notes. “That’s the play in today’s market. Turnkey deals are tougher to move.”

 

Meanwhile, active development continues in key hubs. Irvine has more than 4,000 units in the pipeline. Anaheim’s $4B+ ocV!BE project will bring housing and entertainment to the Platinum Triangle. Santa Ana’s transformation is accelerating with the OC Streetcar, and major highway and infrastructure upgrades are enhancing both access and livability countywide.