Well, a 3BR is at least $3000/month, generally more. There are many people willing to pay that. So landlords can require a credit check (that you pay for), can say "no pets", can limit the # of people living there (there are 650 sf studio apartments for rent that landlords say "1 person only", because they can). Also: no Section 8, no smoking, etc. etc.
What do these places cost to buy?
You could build a nice 3BR out here for $150k including the lot. I'm wondering if these landlords are even making money, what's the capital involved here? Are renovations more expensive there as well?
3 BR houses are running about $900k-ish+. The super low-end is about $800k. A 2BR low-end would be $700k. Renting is still WAY cheaper.
A lot of folks complain about the slumlords gouging people. But honestly, if you are a family that bought your house 10 years ago and have to leave town due to job loss and are renting it out? $3000 will pay the mortgage and property taxes on a 2 BR house. You'd probably be losing a couple hundred dollars a month. That's not the case for long time landlords. Many of them bought decades ago for $200k or less, and their property taxes are $1k to $2k per year (Thank you prop 13!) Renovations are also pretty expensive, gotta love Coastal So Cal.
I have a friend who has a rental condo (he kept it when he traded up to a house), and he's losing a few hundred a month on it by renting it out. However, long term he will probably be fine. I expect it may be 5-10 years before rents catch up to where he will break even. But he's only in his early 40's. One might assume, that when he's retired at 65 or 70 and his kids have graduated from HS, that it will be a good part of his retirement plan.
And that's kind of what it is in this town. To buy a house you need to have high incomes, or inherit money, or if you grew up here - inherit a house. If you happen to time the market well, then you can maybe even get a rental unit. I do not begrudge any of the landlords their income, "gouging" or not. It's a business. Some of them have been raking it in for years, some had years of losing money. Some of them have to deal with renters trashing their places. I feel terribly bad for the lower income people who cannot find a place to live - it's awful, and it sucks to think about spending 50% of your income on rent, or commuting an hour, or leaving a town you grew up in. But I don't have a solution to it. If we ever left (no plans to), I would rent out my house, and you'd better believe it would be at market rate (~$2800+), which would still be a couple hundred dollars loss a month.