A majority of Los Angeles renters meet the federal definition of cost-burdened, meaning they pay more than 30 percent of their income to keep a roof over their heads. The cost-burdened status signifies economic stress, and it means people are holding back from car, clothing and even food purchases, which is bad for them and bad for the economy.
Greater Los Angeles communities that are home to its two largest minority groups, Latinos and African-Americans, are cost-burdened times two. A new report from Zillow concludes that the average share of income needed to pay rent in black and Latino communities is about 63 percent. The figure is the result of the market's high rents and broad income disparity, with minorities often occupying the bottom rungs of the ladder; in Los Angeles County, the median annual individual income is only about $28,000.
The average percentage of income needed for rent in white neighborhoods is 50 percent, the site found. Across all racial groups, "L.A. has the largest share of income needed for rent of any metro area in the country," says Skylar Olsen, a senior economist at Zillow.
That burden, especially for minorities, creates a handicap when it comes to upward mobility, including a home purchase. "When your rent burden becomes really high, you're unable to save for anything," Olsen says.
L.A. wasn't the most burdensome rental market in the nation for African-Americans and Latinos, but it was in the top three for both groups. In New York, it takes an average 67 percent of the local income to live in a Latino neighborhood — the highest figure in that category, Zillow found. San Francisco (nearly 75 percent) and Boston (about 71 percent) required the biggest average slices of income for rentals in black neighborhoods.
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The gap between what it costs to live in white and minority neighborhoods has gotten wider in the last five years nationwide, according to the report. Nationally, white neighborhoods require nearly 31 percent of the average income for rent, while Latino ones demand 48 percent and African-American ones 43.7 percent.
Sandra McNeill, executive director of the housing nonprofit TRUST South LA, says the city, in rejecting the development cap that was Measure S, is well on its way to addressing some of the issues that fuel this housing disparity. Zillow's figures, based on U.S. Census Bureau data and its own rental prices for Los Angeles and Orange counties, are "consistent with what we see on the ground," she says.
She says the solutions include encouraging development of affordable housing in dense neighborhoods (particularly near transit stops), expanding rent control, creating higher wages for minorities and investing tax dollars in organizations that help minorities buy homes and co-ops. "At a basic level we've got to pair economic development strategies with housing affordability strategies," she says.