Chances are that a majority of Business Journal readers aren’t struggling to pay their rent each month. But let us be clear. Every member of the L.A. business community should be greatly concerned about the lack of affordable homes in Los Angeles. If you’re not, then you’re ignoring a major hindrance to your ability to be competitive in a global marketplace.
In Los Angeles, the nation’s second largest city, more than 60 percent of our residents – roughly 2.4 million people – are renters. Over the past 20 years, the amount this group has paid in rent each month has increased 30 percent. The same group’s income increased only slightly, if at all, over that period.
This imbalance isn’t just an issue affecting single-parent households or people who have lost their jobs. It affects a vast majority of our friends, neighbors and employees. It impacts educated, employed residents working in the city’s biggest industries: banking and finance, manufacturing, construction, entertainment, fashion and education.
According to RentJungle.com, the average rent in March in Los Angeles was about $1,550 a month. If affordability is defined as costing no more than 30 percent of your monthly pretax income, this rent level is affordable to a family earning $62,000 per year, or roughly $30 an hour with a 40-hour workweek.
Who does this work for? Well, according to the Bureau of Labor Statistics, this rent level is fine for computer programmers, architects, lawyers, finance types, senior managers and doctors. Who does it not work for? Health care support, food preparers, office and administrative support, building and grounds maintenance staff, retail sales clerks, and many teachers, police officers and manufacturing technicians. In short, this is a problem for much of the supportive backbone of our economy and broader communities.
Housing is a key necessity that allows the region to continue to grow and thrive. When it’s not affordable, it prevents families from taking full advantage of the opportunities our region offers, thereby placing stress on workers and employers alike. If employers cannot attract a skilled workforce, then our city cannot continue on a path of steady economic growth. One only needs to drive two hours north on the 101 to see how this crisis can unfold. According to the Department of Housing and Urban Development, between 2000 and 2011, Santa Barbara saw an average of about 750 more people move out than move in each year. High housing prices played a big role in this.
Los Angeles must not continue down a similar path.
More livable, more profitable
Chief executives must look at the situation and realize the impact affordable housing has on their ability to offer a living wage. They must ignore viewing this crisis and judging its solutions through the typical filter of big-government liberalism versus small-government conservatism. They must consider that making Los Angeles affordable not only makes our city more livable, it makes our businesses more profitable.
As we elect a new mayor, businesses will have a vested interest in how the new mayor – whether the winner is Wendy Greuel or Eric Garcetti – handles affordable housing. Business leaders should partner with the new mayor and council members, as well as affordable housing advocates, to champion programs that support a livable and profitable Los Angeles.
Business must establish a voice on housing. In recent years, the business community has been very vocal on bread-and-butter issues, such as taxes and workers’ compensation. But it has been largely missing in action when it comes to housing issues. This is a mistake.
It has not always been this way. Indeed, Southern California business was one of the first champions of inclusionary zoning – a requirement that a fixed percentage of all newly produced units offer restricted rents that are affordable to working-class families. In the 1970s, many were concerned that a lack of affordable housing was making it increasingly difficult to attract and retain talented workers. In response, with support from business, Irvine and Orange County passed two of the earliest inclusionary zoning ordinances to promote more of a jobs-housing balance and relieve some anti-competitive pressure.
No one is naïve. Los Angeles will never be as affordable as, say, Des Moines, Iowa. After all, Los Angeles is an expensive place to live, in part, because the amenities and climate make it such a desirable place to live.
However, there are limits beyond which a lack of housing affordability is a sign of trouble more than a sign of appeal, especially for business and the general economy. Current trends in rents, which have been growing at 5 percent to 10 percent annually in Los Angeles, make clear that each year we are pricing more and more qualified workers out of the market. We can no longer chalk this up to the cost of living in paradise. It’s bad business.
Raphael Bostic, director of the USC Bedrosian Center on Governance, is a former assistant secretary of the Department of Housing and Urban Development. Robin Hughes, executive director of Abode Communities, and Tony Salazar, principal at McCormick Baron Salazar, are board members of Housing for a Stronger Los Angeles.
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