According to the guidelines typically used to determine affordability, those who are living in Los Angeles need to earn significantly more than the national average in order to live comfortably. As such, it is not surprising to learn that Forbes has recently ranked the city as one of the worst cities for renters.
Living Comfortably in LA
When determining how much a person needs to earn in order to live comfortably, most experts utilize the 50-30-20 rule for personal budgeting. According to this guideline, 50 percent of your income should go toward necessary costs such as housing and food. Another 30 percent should go toward discretionary spending, which includes things such as entertainment and going out. Finally, 20 percent of your income should go toward your savings.
Given these guidelines, a person living in Los Angeles needs to earn $74,371 per year in order to live “comfortably.” This breaks down to $37,185 to pay for necessities, $22,311 for fun and entertainment and $14,871 for savings each year.
Unfortunately for Angelenos, an income of $74,371 per year is about $24,000 higher than the city’s median income of $49,682. This means many residents are far from comfortable in their financial situation, with many who are unable to save for the future or pay their basic expenses.
Los Angeles is One of the Worst Places to Rent in the Country
For Los Angeles residents who are trying to cover the necessary costs of their budget planning, housing will surely take up a large portion. Not only are real estate prices steadily climbing, but Forbes has recently identified the city as one of the worst cities in the country for renting a home. In fact, Los Angeles took the number five spot of the worst places to rent, with the top five being rounded out by Manhattan, Oakland, San Francisco and San Jose. As such, the second through fourth place spots were also cities in California, specifically those located in the Bay Area.
To determine the worst cities for renters, Forbes utilized data gathered by Marcus and Millichap. The research included examining the average rent for the last quarter of 2015, the average share of household income spent on the rental of multi-family units, the vacancy rate and the year-over-year change in rent costs in 50 of the country’s largest metro areas. The researchers found that the average monthly rent in LA was $1,892 compared to an average household income of $58,023. As such, rent alone accounts for 39 percent of the average LA income.
In addition to the high rent costs in Los Angeles, the city also has a very small vacancy rate of just three percent combined with a 6.1 percent year-over-year increase in rent costs. Nonetheless, while rental costs are high, it is still about $700 cheaper to rent than it is to own in the city.
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(all data current as of 5/25/2017)
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