Valley-area rents are still going up but not as much as they were a year ago. After nearly a three percentage point hike in rents last year, the rate at which rents are rising has dropped by more than a percentage point in 2007. “It is flattening out over the last quarter,” explained Chris Bates of housing market research group Real Facts. The reason for this is multifaceted. “What we saw in 2006 was high but possibly not sustainable,” said Daniel Blake, an economics professor who heads the San Fernando Valley Economic Research Center at California State University, Northridge. Between 2002 and 2005, rents rose, Blake said, but by no more than five percent. Then, in 2006, the rate at which rent increased jumped to 7.6 percent. The fact that it’s now hovering at just above 6 percent was inevitable, believes Nancy Ahlswede, head of the Apartment Association-Southern California Cities. “The market finds its own saturation point,” she said. “It was only a matter of time that it would happen. It seeks its own equilibrium.” But more concrete factors, such as development, are also at play. “There’s been quite a bit of building in high transit areas of Glendale, North Hollywood and Woodland Hills,” Blake said. “There’s a substantial amount of building. We have 5,300 new units coming on the market now. Most of those multiple family dwellings are going to be apartments, or, even if they’re condominiums, some of the condominiums may be rented. We’re 1,200 above the normal in the last few years.” Due to the turnaround in the number of units available for rent in the Valley, occupancy rates are falling as well. “Occupancy has declined from 96 percent to 93 percent,” Bates said. To be considered full, a building must usually be at least 95 percent occupied. The fact that Valley apartment buildings have struggled to fill up in recent months may be related to the housing boom, Ahlswede said. She believes that because so many people were given the loans required to settle into their first homes in recent years, the rental market took a hit. Now, of course, many of those first-time homebuyers are foreclosing on their properties. But the return of these individuals back into the rental market will likely not drive rents upward. Thus far, this year, there have been almost 300 foreclosures in the San Fernando Valley. “It could marginally push up rents and push down vacancy rates, but they’re not going to push up rates any more than they’re going up now,” Blake explained. Geographical trends in housing have also contributed to the change in rental and occupancy rates in the San Fernando Valley, said Bates. “There’s been a shift with the market,” he explained. “The Inland Empire, Los Angeles and Phoenix are slowing and other markets San Jose, Seattle and Portland,have started to accelerate. Exactly why that’s happening a lot of people have a lot of different ideas. In L.A., it’s just too expensive.” Shari Rosen of the Apartment Association of Greater Los Angeles agrees. Even those willing to rent a two bedroom, one bathroom apartment in the Valley, which now averages $1,630, according to Real Facts, may have been turned away. “Mostly, I would say that the volatility, as far as our owners are concerned, it’s more due to a lack of qualified tenants,” Rosen said. “Maybe their debt-to-rent income ratio is not as good as it could be. They don’t have enough income to qualify. In the past, they’ve declared bankruptcy.” While a number of factors may be responsible for curtailing the rate of rent increases in the Valley, what’s for sure is that the shift will benefit renters. “They’ll have more options,” Bates said.