JOSE MARROQUIN lives with his mother, wife and four children in a tiny apartment in a rough part of town. It costs the seven of them $US1,080 a month: about two-thirds of their cash income, most of which comes from Mr Marroquin’s job as a forklift driver.
Steep rents for tiny spaces are the norm in dense cities like New York or San Francisco. But Mr Marroquin lives in Los Angeles, a city known for spacious homes and sprawl. Even in South Central LA, which is poor and gang-plagued, renting a place to live is expensive.
A new study by the University of California, Los Angeles concludes that LA has the least affordable rental homes in America, and other reports rate California as the worst state both for renters and mortgage-payers (see map). The UCLA study reports that tenants in LA spend on average 47% of their gross income on rent–a higher share than in any other city. (Academics typically deem rent “unaffordable” if it eats up more than 30% of a household’s income).
Median rents in LA have risen more than 25% since 2000, while median household income has fallen slightly. New York and San Francisco have slightly higher rents but much higher incomes: the annual median in LA is $US57,000 to San Francisco’s $US75,000 and New York’s $US64,000.
LA’s deep-rooted culture of NIMBYism makes matters worse. If developers could build more high-rise or high-density housing, rents would fall. But thanks to restrictive zoning laws, they find this extremely hard.
The zoning code hasn’t changed much since the 1940s. More than 78% of the city’s residential land is currently zoned for single-family dwellings, according to the LA Department of City Planning. By comparison, only 24% of San Francisco and 25% of New York City is zoned exclusively for one- and two-family homes.
Some of California’s green rules drive up rents–and hurt the environment, too. The California Environmental Quality Act (CEQA), signed by Governor Ronald Reagan in 1970, allows almost anyone to sue to block any development, and is used by the slow-growth lobby to thwart vertical expansion. “The irony is that CEQA is now preventing us from building high-rises near public transit, which would improve the environmental quality by allowing people to walk more and not use their cars,” says Richard Green of the University of Southern California.
Developers seeking to build in LA today find that they have to scale back their projects to get them built at all. Construction began on Ponte Vista, a cluster of 676 homes near the Port of LA, earlier this year. The original plans called for three times as many units, but the project was cut back after neighbours protested about the extra traffic it would bring.
In February a judge struck down what he called a “fatally flawed” plan to build taller, denser buildings in some parts of Hollywood, after community groups sued under CEQA, complaining that the plan would “Manhattanise” Hollywood.
Last year Takao Suzuki, a developer, finished a 45-unit affordable housing complex in LA’s Historic Filipinotown. The five-storey building was originally slated to contain 70 units, but after years of knocking heads with NIMBYists, Mr Suzuki agreed to build fewer. “We had no choice. NIMBYism has been institutionalised by the zoning code in Los Angeles,” says Mr Suzuki. He received more than 2,000 applications for 45 subsidised apartments.
A report by the California Housing Partnership Corp, a non-profit, claims that Los Angeles County faces the greatest shortage of affordable housing in California. The city needs nearly another half a million homes with below-market rents, it reckons. Until that happens, people like the Marroquins will be tempted to leave town.
Mr Marroquin says he has considered Riverside County, part of the Inland Empire, where jobs are scarce but rents are lower. “It can’t be worse than here,” he says.
Click here to subscribe to The Economist
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.