Families at various levels
feel the housing pinch

Housing dominates a family’s basic needs. It is the single most costly item, the fundamental element of economic and social stability. Home ownership has become the benchmark of achievement in this country. In California, a housing crisis grows.

In Los Angeles — which already had a deficit of 60,280 new housing units between 1998 and 2005 or 8,000 units a year, according to the Southern California Association of Governments — the poorest families lost a major source of assistance this year. In February, the Bush administration cut discretionary spending and the Housing Authority of the City of L.A., the city agency that disperses federal housing subsidies for extremely low-income households, had to cancel the Section 8 vouchers of 1,500 families. The vouchers had allowed them to pay no more than 30 percent of their income for market-rate apartments. In 2005, as many as 5,000 more households are in danger of losing their vouchers and the program will require Section 8 recipients to pay 40 percent of their income toward rent, instead of 30 percent.

Steve Renahan, former director of the Los Angeles housing authority, stepped down during the Section 8 controversy. “There are cuts in all HUD programs. Subsidies for public housing and all major HUD programs are under assault. Since Section 8 started in 1974, the budget for HUD has increased every year. The only years it has been cut were when Congress changed hands in 1995 and 2003 and 2004, when it was controlled by Republicans.”

During the 1990s, while housing conditions and income improved for Americans across many income levels, the gross domestic product grew at a strong 4.3 percent rate and unemployment was at 3.9 percent, a historic low. Housing problems became more concentrated among the poorest renters and worsened regionally in California, a study by the National Low Income Housing Coalition in Los Angeles, based on 2000 Census data, concluded.

Among extremely low-income households, those earning 30 percent or less of their area’s median income, 75 percent had at least one housing problem and 56 percent paid more than half of their income for rent.

The Census identifies a housing problem as crowding (more than one person per room), lack of complete kitchen or bathroom facilities, or housing costs of more than 30 percent of the household’s income.

In California, 82 percent of extremely low-income households, or those with annual incomes below $18,000 (1/3 of median income), had at least one housing problem in 2000; among households earning $18,600 to $30,000 a year, 87 percent had a housing problem; among households earning $30,600 to $48,000 a year, two-thirds had a housing problem.

The Los Angeles area is one of the most expensive places to live in the United States, primarily because costs of housing keep going up while mid-level earners’ salaries do not. The average rent for a two-bedroom apartment in L.A. County was $1,259 in the third quarter of 2003, 7.3 percent higher than in 2002. That is, if you can find one; the county has a 96 percent occupancy rate.

Based on the Department of Housing and Urban Development’s guideline of households spending no more than 30 percent of their income on housing costs before taxes, a household would have to earn $4,196 a month, $26.25 an hour, or $50,350 a year, to afford the average apartment. In comparison, Los Angeles’ living wage ordinance requires city divisions and contractors to pay workers $7.72 to $8.97 an hour, about $18,700 per year.

Middle class, and even some better-off families who have incomes well above average, may find themselves unable to afford to purchase a home, something considered a right since the 1950s, unless they are willing to commute long distances to their jobs. The median home price in Los Angeles County hit $358,000 by December 2003, 23 percent higher than a year earlier. It raises the question of how many people got a 23 percent pay increase this year.

One reason for the lack of affordable housing, according to Michael Teitz, program director of the economy program at the Public Policy Institute of California, a think tank researching the state economy, is that it is simply economically infeasible to build market-rate housing for the 15 percent of the population with the lowest incomes in California. “You just can’t do it. Compared to the numbers of people pouring in, and the incomes at which they find themselves, there are nowhere near enough subsidies.

“And over the last 100 years, we’ve constructed a system of building standards, quality expectations for what’s decent for people to live in. That and strict environmental standards make construction too expensive. We don’t build sub-standard housing here.

“Now people are getting to be homeowners later in life. The savings period takes longer. More people work, both parents work. You can’t buy a house anymore in a one-income household.”

A new report released by the Public Policy Institute disputes the common impression that there is a statewide housing crisis.

“The housing crisis is a much more nuanced thing. You need to take into account the high number of immigrants coming into California, who receive relatively low incomes,” Teitz said. “They are renters. That makes the rental market tighter but not homeownership. When you factor them into the demand with what you can expect in homeownership, the rate of home ownership is not so bad as it appears.

“It’s primarily a phenomenon of a limited number of areas in the state, it’s highly geographically concentrated,” he said. “The housing prices by national standards in the Bay Area, parts of the Central Coast, San Diego and L.A., are very high. But on the flip side, housing there has for some time been supported by historically low mortgage interest rates in areas where a lot of people want to live. People want to live there because the environment is attractive, and there are jobs. They have a very substantial boost in real assets in the form of capital gains tax advantages, tracing back to Proposition 13 in 1978.”