A typical renter doesn’t afford enough to pay median rents
Most Los Angeles renters are probably all too aware of the city’s high housing costs, but a new report from the Federal Home Loan Mortgage Corporation breaks down how the Los Angeles area compares to other regions in terms of housing affordability.
Drawing from four separate studies, the report concludes that Los Angeles is the third-most rent burdened metropolitan area in the nation—behind only Miami and San Diego.
That doesn’t mean that rental prices are higher in those cities. In San Diego, rents are slightly more expensive, but in Miami, the median rent is 12 percent lower than in LA. The report examines how pricy rents are relative to typical incomes.
Under federal guidelines (used in the report), tenants spending more than 30 percent of their income on housing are considered to be cost burdened, since the amount of money they spend on rent can make it difficult to afford other necessities like food and healthcare.
In the LA metro area, which includes Los Angeles and Orange counties, the median rental price was $1,340 in 2018. To afford that price without spending more than 30 percent of your monthly income, you’d need to earn $53,600 per year.
But data presented in the report show that a typical renter in Los Angeles brings home just $44,000 per year.
In other cities, including San Fransisco and San Jose, rental prices are much higher—but so are wages. With a median price of $1,840 per month, San Jose has the costliest rents in the nation.
But the San Jose metro area’s median renter income is $75,000, meaning that a typical tenant there can still spend less than 30 percent of her income on rent if she lives in a median-priced apartment.
But as the report points out, half of all renters earn less than the median income, and rent burden can be much greater for lower earning residents. In the Los Angeles metro area, a renter earning California’s minimum wage of $11 per hour in 2018 would have needed to work 90 hours per week to comfortably afford a typical one-bedroom apartment.
How do those numbers translate to the city of Los Angeles, where minimum wage rose to $13.25 last year?
According to Apartment List, which bases its rent calculations on census data, the median price of a one-bedroom apartment in Los Angeles stood at $1,360 last month. Even after the minimum wage hike, a renter would need to work roughly 79 hours per week to pay that price without going over the 30 percent threshold.
Steve Guggenmos, vice president of multifamily research at Freddie Mac, says in a statement that the results of the organization’s analysis show that supply of affordable housing “just hasn’t kept pace with demand in many metros, and that’s pushing affordable rents out of reach for millions of American families.”
That’s particularly true in Los Angeles, where the report indicates that fewer rental units are affordable to median-earning renters than in any other major metropolitan area.
A separate study released last year by the California Housing Partnership and the Southern California Association of Nonprofit Housing found that 568,255 new affordable housing units would be needed to meet demand in LA County.