Residential Rents Top the Charts
One in three Americans spend more than
30% of their monthly income on housing, as of 2013. This has
jumped from twenty years ago when only one in five Americans
devoted more than 30% of their income on housing. A recent
report by rental listing site, Hotpads, details the top ten
metro areas where the highest percent of income is spent on
The bad news for Californians: six of
these areas are in the Golden State. Californians average
housing expenses equaled:
- 47% in Los Angeles;
- 41% in San Francisco;
- 40% in San Diego
- 36% in Riverside;
- 33% in San Jose; and
- 32% in Sacramento.
Spending nearly half your already depressed
income on housing in Los Angeles translates to an average
cost of $1,500 for a studio and $2,000 for a one-bedroom.
In San Francisco, the average studio rent is $2,700 and $3,500
for a one-bedroom.
While San Franciscos tech boom
has brought high-paying, quality jobs to the area, the side
effects have been less than widespread in the population.
The city has the second-highest level of income inequality
in the country (behind Atlanta, Georgia Los Angeles
is number nine on the list of income inequality). The top
5% of San Franciscos population earns $350,000+ a year,
while the bottom 20% make about $20,000 a year, according
to the Brookings Institution. Its impossible to imagine
an individual acting alone to qualify for even a studio in
San Francisco on $20,000 a year.
This dichotomy is explored in a recent
piece by Vox:
The key difference between
a tech hub like San Francisco compared to Seattle, Austin,
and Raleigh the first of which has a greater share
of its economy rooted in tech is housing supply. Other
tech hubs around the country build more, which alleviates
demand. San Francisco is one of the most regulated cities
in America when it comes to urban development, which heavily
restricts how much can be built.
Better zoning laws for growth
Seattle home to tech giants Microsoft
and Amazon has sustained relatively affordable rents
for its growing population by building more housing to meet
increased demand. However, San Franciscos ridiculous
zoning laws prohibit any real local growth. Thus, in competition
for housing, highly paid tech employees outbid those in low-paid
support industries. In turn, those who cant afford the
rent are forced onto the streets (often through eviction)
or out to the suburbs, a quality of life issue.
This harms turnover and stifles economic
growth, and ought to be a chief concern for real estate professionals,
planners and authorities.
The rent is too high because of an excess
of demand. Thus, the clearest answer to skyrocketing rents
is to meet demand. That means allowing builders to build up.
Too often, a small but vocal minority of residents
not in my backyard (NIMBY) proponents drown
out sensible attempts by lawmakers to adjusting zoning for
Instead, try becoming a yes, please
in my backyard advocate. Theres enough room in
our cities for sustained growth. We just have to help make
rents a little less colossal, and a little more realistic
for its residents, those here and to come. Businesses beneficial
to a community will remain only so long as their employees
have housing that accommodates a productive workforce. Travel
time in commute reduces that productivity. Businesses then
respond, either politically for change or by relocating to
more employee-friendly digs. Brokers and builders have a need
to be concerned.
Posted Carrie B. Reyes |
December 4, 2014 | In Real Estate Newsflash