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High Rents Make Housing Unaffordable in Southern California

In order to afford a modest, two-bedroom apartment at Fair Market Rent in Southern California, renters need to earn at least $26.88 per hour in the Los Angeles metro region, $21.54 in the Riverside/San Bernardino metro region, and a high of $31.62 in Orange County. This is Southern California’s 2014 Housing Wage, revealed in a report released today. The report, Out of Reach 2014, was jointly released by the National Low Income Housing Coalition, a Washington, DC-based research and advocacy organization, and the Southern California Association of Non Profit Housing (SCANPH).

Every year, Out of Reach provides this figure, referred to as the Housing Wage, and other housing affordability data for every state, metropolitan area, combined non metropolitan area, and county in the country. An estimated 65% of renters in Los Angeles metro region, 58% in the Riverside/San Bernardino metro region, and 60% in Orange County do not earn enough to afford a two-bedroom unit at the Fair Market Rent. It is estimated that 61% of renters statewide cannot afford this rent.

According to Robert Dhondrup at SCANPH, “the divergence between the ever growing costs of housing to real income levels of Southern California working families has gotten wider. Real income has stagnated or remained flat for most Southern California households but the cost of housing, even with the financial crisis, has kept increasing – especially with regards to the rental market. Those foreclosed families are now renters adding to the market pressure.”

Working at the minimum wage in California, a family must have over three full-time wage earners working full-time, or one full-time earner working 130 hours, to afford a modest two-bedroom apartment. This would demonstrate that arguments calling for increasing the minimum wage at both the State and local levels, as with the City of Los Angeles, could provide a substantial amount of economic relief to these minimum wage households.

The national Housing Wage is $18.92 in 2014. In California, the Fair Market Rent (FMR) for a two-bedroom apartment is $1,354. In order to afford this level of rent and utilities – without paying more than 30% of income on housing – a household must earn $4,514 monthly or $54,168 annually. Assuming a 40-hour work week, 52 weeks per year, this level of income translates into a Housing Wage of $26.04 in California – the second highest in the nation only behind Hawaii.

In California, the estimated mean (average) wage for a renter is $18.50. In order to afford the FMR for a twobedroom apartment at this wage, a renter must work 56 hours per week, 52 weeks per year. Or, working 40 hours per week year-round, a household must include 1.4 workers earning the mean renter wage in order to make the two-bedroom FMR affordable.

The California Legislature is currently debating SB 391, the California Homes and Jobs Act. This legislation would provide a dedicated source of state funding for affordable home production. As the costs of housing keep increasing for most California households, SB 391 would help to make more affordable housing available and help alleviate the high costs of housing.

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