Los Angeles is the fourth least affordable rental market in the nation, according to a USC study released Tuesday.
The USC Price School of Public Policy used a new method to assess the rental markets by measuring the growing mismatch between rising rents and incomes. The results can distinguish metropolitan areas more accurately over time, according to the school.
Washington, D.C., was the least affordable metropolitan area overall in the nation, according to the study, and four of the 10 least affordable metros are in California — San Diego (#2), Los Angeles (#4), Riverside-San Bernardino (#5) and Sacramento (#10).
The nation’s most affordable cities include Atlanta, Salt Lake City, Las Vegas and Phoenix, the study found.
“The study shows a growing mismatch of rents and incomes, how rents are rising faster than wages. It’s an affordability problem acute among the poorest people, but it affects a much broader constituency of people,” said Dowell Myers, a professor of urban planning and demography at USC Price and director of the school’s Population Dynamics Research Group.
The study authors said the prevailing method of assessing a lack of affordability is excessive rent burden, which is measured by the percentage of renters who spend more than 30% of their household income on rent, but the technique has shortcomings because it does not distinguish degrees of local affordability very well. Myers said it also leads to anomalies, such as finding that affordability in San Francisco or Washington, D.C., is better than the national average.
The USC researchers employed an indicator they call the “constant quartile mismatch,” which uses census data to compare changes in rent and income distributions from their values in a base year — in this study, 2000, which precedes both the housing bubble and the Great Recession, to 2016.
Nationwide, the study found slight changes in income distribution, but large changes in rents. While renters’ income expanded slightly to include 25.9% of renters in the top bracket in 2016, fully 39.1% of all U.S. renters are now paying rents in the top quartile, an upward shift of 14.1%.
In Los Angeles, the changes were more extreme than the national picture. There was a small upward shift of incomes into the top quartile to 29.3%, an increase of four percentage points, but the upward shift of rental payments since 2000 was far greater at 54.4%, an increase of 29 percentage points.
Half of all the renters in L.A. are now forced to pay what were previously top-drawer rents, even though the number of top-drawer incomes increased relatively little, the study showed. Adjusted for the income increase, this amounts to a net upward shift and a mismatch of 25.2 percentage points, according to the study.
Conversely, L.A. lost 14% of the rentals from the lowest quartile, even while the share of low-income renters remained virtually unchanged, which created stress at both the low and high ends of the market for a total mismatch of 38.6%, the study found.
The study appears in the peer-reviewed, policy research journal Cityscape, which is produced by the U.S. Department of Housing and Urban Development.
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