‘Sticker Shock’ in Los Angeles Housing

http://www.nytimes.com/2016/09/27/us/california-today-los-angeles-housing-costs.html?em_pos=large&emc=edit_ca_20160927&nl=california-today&nlid=4617603&ref=headline&te=1

by prostoalex • 10 years ago

65 134 10 years ago

nytimes.com

surfmike3• 10 years ago

When people say "30% of your income is spent on housing," do they usually mean pre-tax or post-tax?

The article claims you need $145K a year to afford a $2000/month apartment. But assuming that you lose 40% to taxes, you would still be left with $5,250 a month after housing. That sounds a lot higher than it should be for the lower limit of affordability.

If you assume 30% of pre-tax income, and $2000/month rent, you get a required income of $80,000 -- still high, but not as outrageous as the figure he comes up with.

wott2• 10 years ago

The first paragraph says how much a resident would need to make to spend 30 percent of earned after-tax income on rent for a two-bedroom apartment.

surfmike3• 10 years ago

It sounds like he's using a different standard than is commonly used (i.e. 30% pretax is the often cited standard)

ksenzee2• 10 years ago

Figuring this pre-tax isn't very useful. If you were in the (theoretical) 70% tax bracket and you spent 30% of your pre-tax income on housing, you'd starve.

surfmike3• 10 years ago

Sure except taxes aren't that high in California. 30-45% is a much more realistic range for income taxes (state + federal + payroll).

harmmonica• 10 years ago

The article says post tax but the standard is closer to what you're saying. For a landlord renting a property, for instance, the safe rule of thumb is typically for your tenant to have a gross annual salary of 40x the monthly rent (which for a 2k rental would be 80k gross salary). Using 145k is way too conservative. Similarly, when buying a house, the debt-to-income ratio is calculated on gross (pre tax) income as well and is 28% for housing costs (principal, interest, taxes and insurance), which lines up pretty well with the standard rental calculation.

irrational3• 10 years ago

Huh, maybe it's time for my family to move on up since my gross annual salary is 80x my current housing payment.

twblalock• 10 years ago

The scale changes as your income increases. As you pointed out, someone who makes $145k could easily spend 30%, or even 50%, of pre-tax income on housing and still have more left over than most peoples' entire monthly income.

On the other hand, someone making $40k per year who spends 30% of pre-tax income on housing is going to have a pretty tight budget.

So, these are all pretty rough guidelines, and the best thing to do is to spend an amount on housing that does not compromise your other financial goals, no matter what the percentage happens to be.

mixmastamyk4• 10 years ago

Yep, our days here are numbered. Every thread on our community FB group has a hordes of people fighting any new construction (including housing) tooth and nail, even on lots filled with stripmalls, decrepit crackhouses, or asphalt parking, keeping LA decidedly third-world--it boggles the mind.

Our rent went up 7% this year alone.

rcthompson• 10 years ago

I wonder if this is a general problem, where property owners in an area have both the power to influence the local government's land use policy and an incentive to limit new construction in order to create artificial scarcity and drive up the prices of their own property. Is this guaranteed to exacerbate any housing shortage anywhere'

spoonie• 10 years ago

Seems like a local governance 'problem'. Are homeowners more likely to vote than renters? Or do homeowners and landlords outnumber renters and get the rational outcomes they want?

adrr• 10 years ago

If you're property owner you want things to improve around you as it increases value. Problem is there an older class of people who vote and attend city council meetings that don't want things to move forward. They squash things like building high density housing right next to a metro stop. They fight things like extending metro lines and almost killed the purple line extension. In our case, they fought fiber(FIOS) in our neighborhood and won because they didn't want the streets dug up.

friendlygrammar3• 10 years ago

Direct democracy doesn't work.

mixmastamyk4• 10 years ago

Oddly I've noticed many of them are poor renters who have snagged a rent-controlled place, and it's "up yours" to those behind them in line.

geggam2• 10 years ago

LA is cheap

Come to the SF Bay area...

ksenzee2• 10 years ago

Let's not pretend because SF has problems that nobody else's problems are any big deal.

snerbles• 10 years ago

This is also known as the Fallacy of Relative Privation.

geggam2• 10 years ago

Relativity... its a thing ;)

jfoutz2• 10 years ago

Kind of a tangent, but isn't the Los Angeles area much more populous than the bay area?

Sure the problem might not be quite as severe as SF, but it affects 2.5x the number of people.

s0uthPaw88• 10 years ago

I love living in Los Angeles as a single, 20 something, but the thought of trying to raise a family here terrifies me. The median price of a 3 bedroom home is $865,000 which would mean that a large portion of my long term net worth would end up tied to a single asset. When it comes time to put down roots, I'll head to cheaper pastures.

nawtacawp• 10 years ago

Colorado is calling.

costatus• 10 years ago

Colorado is full thank you to move somewhere else and transform some other state into california.

santaclaus• 10 years ago

I dunno the Denver and Portland trains as cheap and fun urban areas sailed a few years ago (the cheap part). I'm waiting to see what the next rad yet cheap city is... Nashville maybe?

smrtinsert2• 10 years ago

Just back from Boulder. Could live there and work there. Denver is like a typical blue collar town, but Boulder has that utopian walkable thing that techies crave so much. The bookstores in Boulder are incredible.

Weather was great this time of year at least.

Overtonwindow• 10 years ago

Georgia welcomes you with open arms. I moved from the DC area where I was spending $1,800/mo for a 2 bed 2 bath 30 miles outside of DC. I came south and bought a 3,200 sq ft home, 12 miles from downtown Atlanta, for $200,000. I've got a nice backyard, two car garage, it's quiet, costs are low, and the weather is nice.

jonathankoren7• 10 years ago

Ive been to Atlanta. I wouldn't describe the weather, especially the summers, as "nice". 90 F with 100% humidity[0], isn't "nice." I grew up with it. It sucked.

Also, I don't really think the Confederacy is a welcoming place.

[0] https://www.wunderground.com/history/airport/KPDK/2015/9/26/...

hugs• 10 years ago

Cost of living and real estate prices are what keep me away from living in California again, even though I grew up there. Grew up in Thousand Oaks (due north of Malibu), but got married and started my family in Oak Park (west of Chicago). We'd be happy to have you here! Take all the money you would otherwise spend on a house in L.A. and instead, spend it on extending your startup's runway, and/or 3D printers, Arduino, and making robots. It worked for me! With O'Hare airport nearby, you're always a frequent, direct flight away from the coasts if needed.

toomuchtodo4• 10 years ago

Funny enough, I recently moved from Schaumburg (having lived most of my life in the Chicago suburbs) to St Petersburg, FL to get away from the high cost of living in Illinois (and the winters!).

No income tax (helpful in high earning years), much lower property taxes, and I'm 15 minutes from one of the top rated beaches in the country.

shostack4• 10 years ago

Lived in Chicago most of my life and moved to the bay a couple years ago.

What you might gain in affordability you lose in weather and employment options. Also, corporate culture in the Midwest is typically as dated and conservative as it gets.

gjolund2• 10 years ago

The sooner you leave LA, the sooner you can start saving for the things you want to do.

I lived there for 6 years, now I do remote work for an LA based company and travel. Best decision I ever made.

droithomme2• 10 years ago

What does it take to be middle class in Los Angeles? That was the question Ross DeVol started out asking himself when he began calculating how much a resident would need to make to spend 30 percent of earned after-tax income on rent for a two-bedroom apartment in Los Angeles County.

I disagree with the author that this is middle class. A two bedroom apartment is the very definition of impoverished lower class loser, just above homeless.

Middle class means a detached 3 bedroom in the suburbs, with biweekly maid service, two financed cars, health care to the point you don't need to worry about it at all, and buying whatever you want at the supermarket.

What middle class does not include is any one of: a mansion, live in staff, a yacht, full time nannies instead of occasional baby sitters, swiss boarding school for the children, a groomsman for the horse, a pool boy, a cabana, a private plane, or zero income tax.

This is what skilled factory workers and teachers had in the 1960s, 1970s, and 1980s. Above them, designers, engineers and lawyers, comprised the upper class, or upper middle class.

Aloha• 10 years ago

Middle class means a detached 3 bedroom in the suburbs, with biweekly maid service, two financed cars, health care to the point you don't need to worry about it at all, and buying whatever you want at the supermarket.

This to me is the very definition of upper middle class.

Middle class (for a family) to means a 2-3 bedroom house in the suburbs, at least two cars (with one likely under financing), health care to the point you don't need to worry about it at all, and food shopping on a very large, but not unlimited budget. Plus the ability to take a vacation at least once a year to a regional destination.

For someone single different rules apply.

x3n0ph3n3• 10 years ago

I disagree with the author that this is middle class. A two bedroom apartment is the very definition of impoverished lower class loser, just above homeless.

Apparently I'm an impoverished loser who makes more than 10% of the US population.

wott2• 10 years ago

That's the point.

cryptoz• 10 years ago

A two bedroom apartment is the very definition of impoverished lower class loser, just above homeless.

Stop trolling. This is the rudest thing I've seen anyone say in a long time and it certainly doesn't belong on HN (but also, it's weirdly classic HN to read things like that here). Socioeconomic class is not defined by who you think is a loser or what kind of dwelling you choose to live in. I would never live in a house like you describe if I were middle class. I would always choose the 2 bedroom apartment. That makes me a loser, just above "homeless"? No, it doesn't.

Stop the insulting nonsense.

WaxProlix• 10 years ago

I think you're misreading OP's intent. I read it as, "don't be contented and call yourself 'middle class' when by standards of days past you're struggling to get by" or something of the sort. Hyperbole, but not malicious.

I could be wrong though. Some people are just assholes.

applecore• 10 years ago

By your definition of the middle class, a healthy U.S. economy would need approximately 4,000,000 domestic maids to satisfy the biweekly maid service requirement.

droithomme2• 10 years ago

It is a lot of good jobs that pay fairly, do not require skilled labor, post-secondary education, or high IQ, and is not difficult, strenuous or dangerous work.

I have certainly done this same work myself. It is an excellent position for people without many skills and/or the desire to pursue education. And it is not an appropriate use of time for those of us who do have more skills. Therefore it is highly reasonable and efficient to outsource these tasks to those unable to make things or to design things, and/or not motivated for whatever reason to seriously pursue and master such tasks.

kcanini2• 10 years ago

Or it would require a family to be able to support itself on one full-time income instead of two, so the other spouse can maintain the house.

jaggederest• 10 years ago

I'm not sure there's much of an overlap but the 8,000,000 people in the transportation industry who will shortly be underemployed might be in the market for that.

gnopgnip• 10 years ago

Middle class means you work for your money. Upper class means you have money regardless of how much you work. A family of two lawyers earning $500k a year are still middle class.

seanmcdirmid2• 10 years ago

Working class means you work for your money. It's even in the name.

Middle class falls between working class and upper class, the bourgeoisie so to speak.

segmondy• 10 years ago

I don't have biweekly maid service, I guess I'm almost there. In my opinion, middle class is earning enough to live in a relatively safe number, pay all your bills, your own house, rent/buy, car, health care, feed your kids and be able to SAVE some. Maybe not much, but say saving 10% of your after tax income.

If you have all of the above and no savings or borrowing on Credit cards, you are a fool.

seattle_spring• 10 years ago

biweekly maid service

This is the most shockingly spoiled thing I've ever read on HN. Tops even that dude (Timr?) who said that $250k in SF was near-poverty.

happytrails• 10 years ago

I'm looking to buy in LA and everything is old as shiz and over 800k :(

Oh well, at least I can rep the 323 and shout tupac lines

seanmcdirmid2• 10 years ago

Bargain hunting in Compton?

gjolund2• 10 years ago

My friend just bought a 2 bedroom in Compton for $600k.

I didn't have the heart to tell him his mortgage will be underwater in a couple years.

chrisseaton• 10 years ago

everything is old

What's wrong with old? In Europe houses are regularly hundreds of years old and it's not a problem.

carsongross2• 10 years ago

Nominal interest rates are zero. We are living through the largest debt bubble in history. How is it surprising that assets are all incredibly overpriced?

Yes, of course it will end in tears.

shostack4• 10 years ago

But what would cause it to pop? There is still insane demand in popular areas, in large part because that's where the jobs are. I could only see that becoming more true in a down market.

atemerev• 10 years ago

You have answered your own question — it will pop when jobs stop growing.

sv7n• 10 years ago

B-build A-absolutely N-nothing A-anywhere N-near A-anything

Simaramis• 10 years ago

Its a silly attitude to deny development. There is plenty of room for more people, on the planet, in LA.Just get organized.I live in Venice but friends in Hollywood I see maybe 4 times a year because driving is numbing. Robocars are gonna improve things greatly.That said, LA is full of itself.You will pay through the nose for property that shouldvbe torn down, yet you are not allowed to. I am a Euro transplant and I have travelled the U.S.for the past dozen years and there is hardly a bad spot anymore.You get great food, culture, people many many places. Madison WI, Bozeman, Raleigh, Detroit even, even Texas. Lot of people are stuck in LA molasses.

mdorazio• 10 years ago

As someone who has been in LA for a while, I think the "sticker shock" isn't coming from the housing cost so much as from the salaries that aren't keeping up with it. If you want to live in a nice location with a short commute then you're going to be paying over 1600/mo for a 1 bedroom. But if salaries were at Bay Area level that would be a bargain, especially given the weather, beach access, night life, etc. that LA offers compared to other cities. Unfortunately, salaries here are not great, even in the small tech scene on the west side.

taternuts• 10 years ago

Having just moved to the Playa Vista area, $2,000 for a 2 bedroom seems like a steal

‘Sticker Shock’ in Los Angeles Housing

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