June 4, 2015

The National Low Income Housing Coalition has published a comprehensive report entitled Out of Reach 2015 describing in great detail how low wages and high rents affect people throughout the United States.

California, our most populous state and a historical trendsetter, has the 3rd highest rents in the nation.  Currently the Fair Market Rent (FMR) for a two-bedroom APARTMENT (not a single family home, which is much higher) is $1,386. In order to afford this level of rent and utilities — without paying more than 30% of income on housing —a household must earn $4,619 monthly or $55,433 annually. Assuming a 40-hour work week, 52 weeks per year, this level of income translates into an hourly Housing Wage of $26.55. This in a state where the minimum wage is $9, the average renter’s wage is $18.96, and where fully 45% of the population rent. But that’s not all. The rent affordable at median income is $1,808.

Yes, unemployment has declined since the 2008 economic collapse. But many of the new jobs are so low-paying that too many people can support themselves only if they’re homeless. In the Los Angeles Area, for example, the trend is to share housing. Except for the well to do and above, it is now common to find three, four or more generations in one household. The higher density and lack of privacy has ramifications that negatively impact the quality of life of the occupants and cause great stress to public services. Water pipes, sewers, schools, freeways- all strain to keep up with the demand, with no relief in sight.

There are of course several reasons for this nightmarish situation. One is the abysmal, widening gap in the distribution of wealth and income, where a tiny minority owns most of the wealth and take the lion’s share of national income. Builders, who are in business to make money, tend to cater to high-end buyers, and that’s not the 45% of the population presently compelled to rent because they cannot afford to buy, even in gang-infested slums. Another is lack of vacant land to build on within the greater metro area, already absurdly spread out. Yet a third is lack of economic growth east and north of the city due to a number of factors, including demographic changes, topography and lack of water, currently exacerbated by the ongoing long term mega drought.

Thus, the higher rents are a function of lack of large-scale, low-cost new construction, particularly for young people saddled with long term college loans. Under the present circumstances, it’s no surprise to see a declining birth rate for those with college degrees, with all its related consequences.