Los Angeles ranked among the top cities for "cost-burdened" renters in the latest "State of the Nation's Housing" report from Harvard's Joint Center for Housing Studies. Greater L.A., including Orange County, was grouped with Miami, New York, Daytona Beach, Riverside and Honolulu when it comes to metros with the biggest rent problems.
Being cost-burdened means you're paying 30 percent or more of your income for rent. Harvard found that more than 57.1 percent of Angelenos were paying that much or more. Only Miami (61.5 percent) has a bigger slice of its rental community dealing with cost-burdened rents, according to the report. Other California cities, including Riverside (56.7 percent) and San Diego (54.6), also saw huge cost burdens. San Francisco, often cited as America's high-rent and home-price champion, has a cost burden of only 46.4 percent — because folks there are generally wealthier.
Earlier this year, an analysis from rental listings site Zillow concluded that in L.A.'s black and Latino communities the average renter was shelling out a whopping 60 percent of his income to stay sheltered. And, according to the Harvard report, 70 percent of local renters who earn $30,000 to $45,000 are cost-burdened. In all, nearly 1.3 million people in Greater L.A. suffer from some level of cost burden when it comes to rent, Harvard found.
Chris Herbert, managing director of the Joint Center for Housing Studies, says being a cost-burdened renter has ripple effects for a family and for a community's economy. "The reason it's so important is that if you're spending a lot on housing, you have very little to spend on whatever else you need in life," he says. "The rent eats first."
For the local economy, "It will mean that people have less to spend on clothes, entertainment and other things," Herbert says.
Matt Schwartz, CEO of the California Housing Partnership Corporation, says the high cost of housing in markets like Los Angeles and the Bay Area is starting to weigh on employers. He pointed to a report that suggested Toyota moved its North American headquarters from Torrance to Texas because its workers couldn't afford to live anywhere near the South Bay. "The business community wants to see more housing produced," he says.
The report also notes the huge increase in homelessness in Los Angeles and other cost-burdened metros. And it cites a California Housing Partnership Corporation analysis last month that concludes L.A. County needs 550,000 new apartment units to keep up with demand from people who could be on the edge of living on the street.
The 30 percent mark was established by the U.S. government in 1937. It's "a rule of thumb for the amount of income that a family could spend and still have enough left over for other nondiscretionary spending," according to the U.S. Census Bureau.
Herbert acknowledges that many Angelenos are actually spending more like 50 percent of their income on rent. However, he says, there's a difference between a single professional making $50,000 or even $75,000 a year spending that much on rent and a family of four living off a single earner's median individual income for the county, about $28,000, eking by with very little left over for basic necessities.
"For poor families you'll need that 70 percent of your income to survive, especially if you have multiple mouths to feed," he says.
If there's hope for an end to Los Angeles' housing crisis, it will come in two forms: a boost in income and increased construction of apartments, particularly for the poor, Herbert says. Even with staggered bumps in the minimum wage for L.A. and California and an economy heading toward what he calls "near full employment," these things just aren't happening at the necessary scale yet, Herbert says. With the still-pending $15 minimum wage, a full-time worker wouldn't have nearly enough to rent a median-priced, one-bedroom place (nearly $2,000).
"L.A. is in the unhappy situation of having high housing costs and a lot of working poor people," he says. "It's a fundamental mismatch that can create a lot of misery."
Schwartz of the California Housing Partnership says the biggest solution is having the state and city contribute lots of cash to building units for low-income Angelenos. "The housing crisis is forcing people to vacate increasingly wide areas of cities in California," he says.