The High Cost of Housing in Southern California: A Growing Mismatch Between Income and Shelter Costs

The high cost of housing in Southern California is driving some of the region’s biggest challenges, with income not keeping pace with housing costs for at least two generations. The problem of unaffordable shelter shows no signs of letting up, as highlighted by a metric called “housing burden” that tracks the growing mismatch between income and shelter costs in Los Angeles County over the last 50 years.

In 1979, UCLA land experts Leo Grebler and Frank Mittelbach established a rule of thumb that house prices in a community should not exceed 2 to 2½ times the annual income of its residents. However, the median home price in Los Angeles County last month was a staggering $980,000, far exceeding what a typical household with the median income of $98,200 could afford.

The imbalance between income and housing costs can be traced back to the 1970s when a combination of factors, both local and global, changed the housing market landscape. The first cohort of baby boomers reaching home-buying age, the 1973 oil crisis, inflation, and social-demographic shifts all contributed to the spike in housing prices outpacing income growth.

Additionally, Proposition 13, slow-growth policies, and the housing bubble driven by global finance structures further exacerbated the housing affordability crisis in Los Angeles. The lack of housing supply relative to population growth and the influx of global capital into the real estate market all played a role in driving up prices.

Looking ahead, solutions to the housing affordability crisis must address both the supply of housing and the need for higher wages to make housing more affordable for residents. Policies that protect individual buyers from corporate competitors, ensure the production of affordable housing, and guard against gentrification are crucial.

Ultimately, the struggle to match income to the cost of shelter in Los Angeles is a pressing issue that requires swift and conscientious action from policymakers, employers, and community stakeholders. The data collected on demographics and housing trends in the region provide valuable insights into the root causes of the housing burden and can inform future efforts to address this critical issue.