Los Angeles is now the most unaffordable rental market in the country. It is also the metro area with the largest share of renters vs. homeowners: While U.S. rentership has fluctuated around 35 percent, Los Angeles is at 52 percent.
This affordability crisis has deep roots. Los Angeles has been a majority renter city since 1970, and the disparity between renters and owners reflects an economic divide that has widened over decades.
Our studies show a severe housing burden among poor renters has existed since 1970, and that the burden has grown even more severe during periods of increasing inequality.
Renters are paying more for the same quality housing, suggesting that neither market forces nor changing housing quality fully explain the increasing rents.
Altogether, the data show that the solution to this long-term crisis is to address its root causes – low incomes and high rents – by increasing both renter earnings and affordable housing.
In both the United States and Los Angeles, the median income of homeowners is more than twice that of renters. In the United States, that large gap is a new phenomenon, but in Los Angeles, owners have made twice as much as renters off and on since 1980.
But perhaps the most alarming gap in Los Angeles is the disparity between rent and renter incomes. This rent burden is generally expressed as the percentage of income devoted to rent. The share of renters experiencing moderate (30 percent-50 percent of income) and severe (50 percent-plus) rent burden in Los Angeles has consistently outpaced the nation. As of 2013, Los Angeles, at 47 percent, had the highest median rent burden in the nation. Not only were a greater share of renters burdened but the size of their burden was also greater.
Of particular concern are renters in the lowest quintile, or bottom 20 percent, of the income distribution. In 1970, 54 percent of these L.A. renters shouldered a severe rent burden (i.e., devoting half or more of their income to housing). Nationally, 46 percent of the lowest quintile renters were severely burdened.
Low Incomes, High Rents
L.A.’s burden is not caused just by the usual suspects: tight rental markets or higher-quality rental product. Instead, the problem appears to be two-fold. Los Angeles has a lower median household income than comparable cities such as New York or San Francisco but only a small difference in median rents. At the same time, Los Angeles has relatively fewer publicly subsidized units and weaker rent control. This is particularly true in comparison to New York. L.A.’s Section 8 voucher program waiting list has been closed for almost a decade. According to the Los Angeles Department of City Planning Housing Needs Assessment, the city needs to produce roughly 5,300 units per year that are affordable to moderate incomes or below. Los Angeles has instead averaged roughly 1,100 units a year since 2006. Compounding the problem, since 2000, 143,000 rental units that had been affordable to those making less than $44,000 a year became unaffordable.
Additionally, as older, more affordable units convert to condos aimed at high-income earners, affordable housing stock shrinks even further. Non-profit research corporation the Economic Roundtable recommended that the Housing and Community Investment Department halt condo conversions in community plan areas with vacancy rates below 5 percent.
Taken together, the data show that response to the housing burden has been very poor. A solution must address both components – low incomes and high rents – by increasing renter earnings and affordable housing units.
Increasing the minimum wage would help: A recent Economic Roundtable report calculates that a $15 minimum wage would lead to $1.8 billion extra dollars spent on housing annually, largely by allowing households to buy rather than rent.
Simultaneously, affordable housing production and preservation needs to accelerate. L.A.’s affordable housing trust fund is chronically underfunded, particularly since the dissolution of the California Redevelopment Authority and with a reduction in federal funding. Money from the fund is needed to leverage other federal programs like the Low Income Housing Tax Credit. The recently passed California state budget allocates 10 percent of funds from the cap-and-trade program to affordable housing, but the total amount projected for the state would not make up the shortfall in L.A.’s fund.
Los Angeles leads the nation in many areas, but its rent crisis is not one to be envied.
Paul Ong is a professor of urban planning, social welfare and Asian American studies at UCLA. Silvia Jimenez is the assistant director at the Center for the Study of Inequality at UCLA, where Rosalie Ray is a research assistant. Research published by UCLA Ziman Center for Real Estate.
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