The online real estate database company, Zillow, has recently reported that the average Los Angeleno renter spends 48.9 percent of his personal income to pay his rent. This makes Los Angeles the least affordable place to rent in the entire USA, less affordable than San Jose, San Francisco and New York.
But what is referred to here is not the average low-income nor the average mansion-renter, but rather the person earning a median income in Los Angeles.
A comparison was likewise made by Zillow between 1985 and 2000, when the average Los Angeles renter spend only 35.6 of his income for his place.
Economists suggest that only one third of a person's income should go to housing, and that people should ignore other expenses if it goes beyond that share.
Matt Schwartz, President and Chief Executive of the California Housing Partnership, which advocates for affordable housing, said that a resident needs to earn at least $33 an hour or $68,640 a year, to be able to afford the typical apartment in Los Angeles County.
This amount is based on the average L.A. County apartment rental priced at $1,716 a month, which came from USC's 2014 Casden Multifamily Forecast. An apartment is considered affordable when one spends less than 30 percent of his salary on the payment of its rental.
A more logical thing to do then is to save enough for the down payment so you can buy a place of your own to live in. But then again, this also appears unaffordable as the average L.A. homebuyer needs to save 39.9 percent of his income to mortgage payment, and provided that a 20 percent down payment was earlier made.
The bigger question is -- can one really save for an initial payment if half of his income goes to his monthly rental? Zillow's Chief Economist says that it is a definite no. "Our research found that unaffordable rents are making it hard for people to save for a down payment and retirement, and that people whose rent is unaffordable are more likely to skip out on their own healthcare," said the economist.
It shouldn't be a surprise then that while Los Angeles owns the record for having the highest residential rental fee, it also has the lowest rate of homeownership in the country.
