Rent headaches: 8 reasons why Southern California feels the financial pinch
The rent check can sting in Southern California.
The regional cost of renting has surged at double the pace of overall inflation so far this century. Renters in Los Angeles and Orange counties give more of their paychecks to the landlord than any other metro in the nation. No big-city renters in the nation give more of their paychecks to the landlord than folks in Los Angeles and Orange counties. And perhaps three-quarters of Southern California’s renters claim they are ready to bolt.
An exaggerated upswing in Southern California rent is frequently blamed on an economic mismatch: solid employment growth outstripping the developer’s ability to build enough apartments to meet demand, especially for those not seeking luxury digs. Rising home prices also nixes ownership for many. So, a growing flock of renters is chasing too few vacant units, and that supply shortfall pushes up rent prices.
To better understand the monetary impact of high rents, here are eight examples of how they affect Southern California’s family budgets:
1. Large numbers
Essentially, local rents are running in the ballpark of record highs while vacancies are near previously unseen lows.
Second-quarter data from NAI Capital, tracking what’s happening at large complexes owned by giant landlords, shows:
Orange County: Average asking rents were at a record $1,832 a month, up 1.4 percent in a year. Just 4.1 percent of the units at large complexes were vacant, near historical lows.
Los Angeles County: Landlords were asking for a record $1,678 a month, up 5.1 percent in a year. Only 3.9 percent of L.A. apartments were empty.
Inland Empire: The region’s bargain rents average $1,226. That’s up 5.3 percent as only 4 percent of units were available.
2. Rapid upswing
Local rents have been rising quickly for a long time.
From 2000 through July, the regional Consumer Price Index shows local rent expenses are up 102 percent. So they’ve doubled since Y2K! Note that nationwide rent costs rose only 72 percent in the same period. (Note: CPI rent trends come from regular surveys of households.)
Doubly hurtful inside these stats is how the 2000-17 rent jump compares to a gain of only 53 percent for the overall CPI for Los Angeles, Orange, Riverside, San Bernardino and Ventura counties. This local inflation gap — rental costs vs. the overall basket of goods and services — is growing.
Compare the current rent “double” that took 17 years to the previous “double,” which took 19 years from 1981 to 2000. In that period, overall inflation rose almost as much as rents — up 82 percent.
Sadly, local salaries aren’t keeping up with the growing rent check.
Since 2000, local rents rose at a 4.2 percent annual clip. Pay in the same period, measured by per-capita income, grew at 3.5 percent rate in Los Angeles and Orange counties and 2.8 percent in the Inland Empire.
3. Big hunk of pay
Typical L.A.-O.C. rental expenses ate up 48.7 percent of a household’s budget in 2017’s first quarter, according to online property tracker Zillow.
That’s the biggest chunk of pay going to a landlord in the nation, according to this measurement of rent affordability, which compares local rents with typical wages. In Riverside and San Bernardino counties, 36.1 percent of income was spent on rent in the first quarter, 17th highest among 317 markets tracked.
Nationally, rents equaled 29.1 percent of income at the start of 2017 vs. 29.6 percent a year ago.
4. Itch to move
The pocketbook pain often has locals thinking about relocating.
A report by Apartment List showed 78 percent of renters from the Inland Empire have plans to move to a new city while 77 percent of L.A.-O.C. renters having the same thoughts.
Only 64 percent of renters nationwide eye relocation with Sunbelt renters in Arizona, Texas and Florida the most likely to stick where they are.
When L.A.-O.C. renters plot a relocation, Phoenix was the most popular out-of-state destination. Nationwide, the Top 5 were San Antonio, Louisville, Houston, Raleigh and Charlotte.
And despite high costs, L.A.-O.C. and Washington, D.C., remain popular destinations for renters from elsewhere.
5. A new twist
Renting locally has long been expensive compared with elsewhere in the nation, but the region didn’t always top the charts.
From 1985 to 1999, Zillow says L.A.-O.C.’s rent slice of income averaged 36.2 percent, 23rd highest among 317 U.S. markets tracked. Inland Empire renters paid 32.7 percent of their income to landlords, 52nd highest.
But since the Great Recession ended in 2010, L.A.-O.C. tenants had the nation’s largest average rent burden since 2010; the Inland Empire ranked 16th.
6. The affordability nudge
Renters know it’s cheaper elsewhere.
Affordability is the biggest L.A.-O.C. motivation to leave town, cited by 49 percent of those renters thinking of a move, according to Apartment List. Affordability was No. 1 in the Inland Empire, too, but only at 31 percent.
Almost as big of a reason to exit the Inland Empire was job opportunities, noted by 28 percent of potential movers. Among L.A.-O.C. renters, 18 percent said jobs were the top reason to flee.
In fact, job opportunities were the top explanation nationwide for a willingness to move (34 percent), followed by affordability (30 percent). Renters in San Diego, Seattle and Portland frequently cited affordability as a reason to leave. In the Rust Belt and across the South, the big concern was job opportunities.
Money talks when it comes to apartment dwellers.
7. Who it hits hardest
Southern California is a poor place to be poor.
The region has 782,000 of its poorest renters living in “worst-case” situations, slightly more than half of what the federal government considers very-low-income tenants.
Every two years, the U.S. Department of Housing and Urban Development tallies the number of highly stressed renting households across the nation. The latest report, compiled from 2015 data, is the first to detail trends in 20 large metropolitan areas.
Nationally, 8.3 million poor households were in what HUD defines “worst-case” housing situations in 2015, up 600,000 from 2013, but still 180,000 below the peak of 2011. These are poor renters earning less than half of the regional median income. They lack government housing assistance, and pay half their incomes or more to landlords or live in severely substandard conditions or both.
In Los Angeles and Orange counties, 1.04 million renter households were considered very low income in 2015 with 567,000 in “worst case” scenarios, or 54.5 percent — the fourth highest share among the 20 metro areas tracked.
Riverside and San Bernardino counties had 215,000 very low-income renter households with 123,000 in the worst case designation, or 57.2 percent, placing the Inland Empire at No. 2 nationally.
The only other metro areas with more than half of their poorest renters in worst-case conditions was Miami (61 percent) and Phoenix (55 percent.)
8. It could be worse
A local renter’s only solace may be that recent hits to the wallet ran deeper in other markets.
Southern California’s first-half rent jump of 5.1 percent was a 10-year high and beat the nation’s 3.9 percent jump. Those looking for silver linings could point to the fact that the local increase was bested by eight of 26 other major U.S. markets tracked by the CPI.
The biggest hike was Portland’s 8.4 percent upswing in a year, followed by Dallas, up 6.9 percent; Seattle, up 6.7 percent; and Atlanta’s 6.6 percent increase. Plus, rents in Western states rose at a collective 5.5 percent annual rate.
Those stats may help a Southern California tenant’s psyche, but they don’t help meet the hefty local rent burden.
Powered by WPeMatico