Does It Cost Too Much to Live in LA?

We all know that LA – and most of California for that matter – is an expensive place to live, but what percentage of income is spent on housing here? The answer may surprise you, as a recent study has found that residents of LA spend more of their income on housing than in any other metropolitan area across the nation! The report is the latest evidence of a growing affordability crunch in Southern California’s housing market.
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Let’s face it – costs to buy and rent homes have grown far faster than incomes in recent years, pushing more families to spend a greater share of their income to live here.

According to a new study from Harvard University, half of the households in metro Los Angeles spend at least 30% of their income on rent or mortgage payments, the highest rate of 381 metropolitan areas in the U.S. One in four households here spends at least half its income on housing.

But Los Angeles isn’t alone. Seven of the 10 metros with the highest share of “cost-burdened” households are in California, including the Inland Empire, San Diego and Ventura County.

Many economists peg 30% of income as a point at which housing costs start to become burdensome, crowding out other spending. At 50%, it becomes a “severe burden.” Of low-income households that spend at least that much on housing, 39% reported spending less on food and 65% cut spending on healthcare, the report said.

“Pretty much all other necessity spending is getting crowded out,” said Dan McCue, research manager at the Harvard Joint Center for Housing Studies. “Food, clothing, healthcare, you name it. There’s just less to go around.”

Renters are especially squeezed, with 6 in 10 renting households spending at least 30% on housing. Among homeowners in metro Los Angeles, 4 in 10 spend that much, the sixth-highest rate in the country.

In Southern California, the challenge is one both of high housing costs and stagnant wages. Median household income, adjusted for inflation, has fallen 11% here since 2005, while rents have climbed.

“The basic cause of these high cost burdens is weak income growth,” McCue said.

When, if ever, do you foresee these rates lowering? What needs to change? We’d love to hear your thoughts!

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  • R. Edgar

    Wow, I knew LA was expensive, but I didn’t realize quite how much some people are spending to live here. I’m not sure if these rates will ever lower though, as homes here will always be in demand. The only way things will change is if wages go up!

    • SoCal Living

      As a So Cal Realtor since 1982, experience has taught me that when wages rise… so do the prices. The only winner is the Tax-Man.