If you can’t afford to buy a home in the Los Angeles area and think renting will be more obtainable, think again. The City of Angels is now the City of Eaten Paychecks – rent is taking an increasingly large chunk out of Angelenos’ paychecks, as apartment construction fails to keep up with overwhelming demand.
A report released by Harvard University’s Joint Center for Housing Studies concludes rental affordability is a growing problem locally and across the country. The report found that in Los Angeles and Orange counties, 58.5% of renters spent more than 30% of their income on housing last year. At the bottom of the income ladder, rents continue to get even less affordable, with 32.8% of renters in L.A. and Orange counties spending more than half their income on housing. It has come to the point at which economists consider it burdensome.
The number of renters has exploded in the last decade, in part because families lost their homes to foreclosure. Tighter lending standards also have forced people into renting by making a home purchase harder. While developers nationwide are building multifamily homes at the fastest pace in nearly three decades, it hasn’t been enough. Plus, many new builds are luxury apartments aimed at high-earning professionals.
Chris Herbert, managing director of the housing studies center, said, “The crisis in the number of renters paying excessive amounts of their income for housing continues. The market has been unable to meet the need for housing that is within the financial reach of many families and individuals with lower incomes.”
Falling income nationwide played a significant role in the problem. Renter incomes have fallen 9% since 2001, while rents have risen 7%, according to the report.
The reality is about half of all U.S. renters paid more than 30% of their income on rent, reaching a record 21.3 million. In 2001, only 14.8 million, or 41%, of all renters, paid that much.
How do you advise clients on buying or renting in the current market?
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