Local Rents Highest in L.A.
Renters looking for an “affordable” home in the Mid-Wilshire or Los Feliz areas may need to re-adjust their understanding of that word before they venture out into the rental market.
“Affordable” means different things to different people, but according to the Dept. of Housing and Urban Development (HUD), the definition of affordable housing is that which requires no more than 30% of the income of a buyer or renter.
In a report analyzing the 2nd quarter of 2015, Zillow, the real estate website, found that renters in the Los Angeles metro area spend 48.9% of their income on housing. This makes Los Angeles the least affordable city in the country for a renter.
As a reference, HUD guidelines define 50% or more of income spent on housing as a “severe burden,” which can make it difficult for consumers to afford other basic needs.
According to Zillow data for July 2015, the Mid-Wilshire area—defined by Zillow as Hancock Park, Windsor Square and Larchmont Village—the median monthly rental price hovered at $4,663 per month. In Los Feliz, the median rental price was $4,302, while Silver Lake checked in with an average of $3,272 per month.
If one uses the HUD definition of affordability, one would need to earn an income of $186,520 to affordably rent in the Mid-Wilshire area and $172,080 in Los Feliz.
All of these neighborhoods are in Los Angeles City Council District 4 under the watch of newly elected David Ryu.
“Unless you make a very high salary…there is probably no place in Council District 4 that a person would spend 30% or less of their income [on rental housing],” said Tara Bannister, a housing expert and consultant who formerly served as the executive director of the California Apartment Association. “Council District 4 has the highest number of renters of any of the 15 council districts…and as a whole, the highest median rental price.”
Ellie Hernandez, a Los Feliz-based real estate agent with The Rental Girl, said she has seen the reaction to the area’s high rental rates from clients who come from less expensive cities or who have lived in the same Los Angeles rental for many years
“I’d say they are shocked,” said Hernandez.
And because the real estate market is currently favoring sellers over buyers, some homeowners who had second homes and used them for rental income are now asking tenants to move out to take advantage of the market.
Despite these high median prices for rentals, the competition among renters can be fierce.
“Most [property] owners have multiple applicants to choose from,” said Hernandez. Consequently, she said, some renters offer to pay a higher amount, bigger deposits or to pay rents upfront to be more attractive to a landlord.
Although some new developments do offer affordable housing as part of their permitting with the city, Bannister said that building our way out of the problem is not the end-all solution, as most new construction is aimed at the luxury market.
To face this situation, Bannister said that there is a growing trend since 2008 of renters “doubling or even tripling up” as roommates to meet the rent.
Hernandez confirmed this trend and estimated that about 35% of her clientele employs this strategy.
Unfortunately, Bannister does not see the situation easing as there is no incentive to offer more affordable housing when the demand far outstrips the supply.
“The demand is everlasting…and [Los Angeles] is behind in creating enough units,” she said. “We can’t catch up.”