The housing market in California is well known for being one of the most expensive in the U.S. and during the recent economic crisis the situation has become worse. According to a new report by the California Housing Partnership Corporation, Los Angeles County needs up to at least 490,340 more units of affordable housing to meet the growing needs of the poorest residents in the area. This report connects to the broader report made a few months ago by the same group saying that California as whole needs up to 1 million units of affordable housing for the entire state. The report made by the CHPC shows the drastic problems that the financial crisis created. People who used to own have now become renters and are making less wages now based on inflation. This along with the fact that rents rose by 25 percent during the period form 2000 to 2012 as incomes fell by 9 percent during those years has created a dire situation.
In Los Angles there are almost a million people who made less than half of the U.S. median income of $37,950 last year and within the current situation only enough units of affordable housing for roughly half of them. Within the current market the people of Los Angeles need to make about $55,920 annually to be able to afford to rent a standard two-bedroom apartment along with their other living costs. Renting is proving to be more and more expensive and for many the notion of buying is simply not an option. The average wage of a renter is about $17.99 and for that person to be able to consider to rent something larger like a single family home, they need to work 66 hours a week.
Furthermore if a person making that wage would like to buy real estate they would have to spend more than 60 percent of their income to pay for the home, that is assuming that they could qualify for a 4.5 percent interest rate and put 10 percent down. Obviously putting 60 percent of your income towards your housing is not a viable option for most people, so owning is merely a dream. If prices were to go down or income was able to go up it would help the situation greatly, but this is a hard thing to control. California is in the process of raising the minimum wage to $10 an hour, but even this doesn’t guarantee a fix to the issue as CHPC points out, “The gap between housing cost and income is so great that just raising the minimum hourly wage by a few dollars will not significantly reduce the shortfall of affordable homes in most counties.” Therefore it would suggest that prices would have to go down drastically while incomes increase to see more affordability. Unfortunately it looks like this pricing issue will remain for some time with the CHPC criticising the state saying that not enough is being done to create affordable living situations for workers.
This is on top of the fact that the funding to build affordable housing has dropped by 79 percent since the start of the crisis. There are some roads to take to help improve the situation as the CHPC recommends that more funds should be put towards affordable housing and the state should make it easier for cities to do their own fundraising for housing projects. If something is not done in the near future we will see more and more people and families cramming into smaller and smaller places just to get by.