California Serves 3 of Most Unaffordable Rental Markets as Policymakers Take Action
California is home to some of the most unaffordable housing markets. In fact, the top three, based on rent-to-income ratios, are Los Angeles (34.2%), San Diego (32.8%) and Riverside (30.3%), according to updated Markerr data.
For context, ratios above 30 percent indicate that renters in the area are rent-burdened. Historically, Riverside served as a relief valve for the coastal Southern California cities — but now that's changed.
Meanwhile, the three most affordable markets in California are San Jose (24.6%), Sacramento (23.6%), and Chico (19.6%).
San Jose is particularly interesting because rent is quite expensive (~$3,300), yet the average household income exceeds $160,000. But still, even the more affordable California markets remain expensive compared to the rest of the United States.
Policymakers Try to Assist Those Rent-Burdened
The growing number of households that are rent-burdened has put a spotlight on housing costs, leading policymakers to implement programs aimed at producing more affordable housing, according to Doug Ressler of Yardi Matrix.
The federal tax bill signed into law this spring, for example, permanently increases funding for the Low-Income-Housing Tax Credit (LIHTC) program by 12%, providing $14 billion in tax credits to be allocated among the states, including California, on an annual basis.
The Golden State's housing market, particularly in metros such as Los Angeles, San Diego and San Francisco, is characterized by high market-rate rents that are generally not competitive with fully affordable housing options.
For instance, Los Angeles' average market rate rent of $2,653 is significantly higher (70.5%) than its average affordable rent of $1,556.
“This lack of competitiveness is influenced by factors such as the absolute level of market rents, limited supply growth compared to the national average, and the concentration of newer, higher-quality (discretionary and upper mid-range) apartment stock,” Ressler said.
“These factors contribute to high occupancy rates in fully affordable units within these less competitive California markets.”
Source: GlobeSt/ALM