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4:52 pm
Sun June 15, 2014

Home, Food Or Health Care: A Choice Many Renters Can't Afford

Originally published on Mon June 16, 2014 1:56 pm

The mortgage crisis that devastated the economy has received endless attention, but it's not just homeowners who have suffered badly in this economy.

As of 2012, renters made up 35 percent of American households. Their numbers are growing, reversing a decades-long uptick in homeownership.

And in the past 50 years, the percentage of income they're spending on the rent has increased dramatically. A quarter of renters are spending more than half their income on rent.

Ymelda Alvarez, her husband and their two daughters live in a tiny one-bedroom apartment just east of downtown Los Angeles in a neighborhood called Boyle Heights. It's not a fancy or trendy area; it's a poor part of town with a lot of crime, and most of the schools are struggling.

Their apartment consists of a front living room converted to a bedroom, a small kitchen and a little room in the back with bunk beds for the kids. Other amenities include sagging ceilings, leaky faucets, doors that don't lock and pests like cockroaches and rats.

For this they pay $1,000 a month.

But it's currently their only option. Antonio, her husband, can't land a full-time job and only makes about $1,200 a month from stringing together part-time work at a school nearby.

"That would only be enough for the rent and some bills," Ymelda Alvarez says. She says they spend so much on rent, they have to cut back in other areas.

"I always think about the rent first, then about food. If it is not enough, we have to cut back on food," she says.

'We Have To Embrace Development'

Across Los Angeles, others like the Alvarez family are struggling. The city is now home to the highest proportion of renters of any major American city. A lot of people want to live there; it's almost always sunny, after all, and the beach is right there.

On a more somber note, in the past eight years, 143,000 new renters have entered the Los Angeles market — many of them displaced by the foreclosure crisis. But the construction of new apartments hasn't kept up with the increase in renters: There aren't enough places for them to live.

A big part of the problem, developers say, is that L.A. is a particularly difficult city to build in. The apartments that do get built tend to be pricey; meanwhile, the city faces a shortage of funds for affordable housing.

Beverly Kenworth, the head of the California Apartment Association, says it's fundamentally an issue of supply and demand.

"If we really want to address this housing crisis — because it is a crisis — we have to really be much more forward-thinking," she says. "We have to embrace development; we have to embrace the growth that's happening."

Kenworthy says developers have to navigate a city zoning code that is almost 70 years old. All but the biggest, best-funded builders have simply given up — including members of her organization.

"Some of them build, and some of them look to build here in L.A.," she says. "I have others who simply won't do it anymore because it's just too hard and too uncertain, and it's too costly."

Developer Carl Lambert says there's a phrase used in the industry to describe the agony of getting a project approved: "brain damage."

He says before he could break ground on a recent building, he needed 33 separate sign-offs. It's not uncommon for it to take three years from when he buys a piece of land to when he can start construction.

"Now I've experienced all this wonderful pain over the years and I am now open, and do you think I'm going to want to go out and give everybody deals, or give them a $600 a month apartment with an ocean view?" he asks. "No, it's going to be fair market value."

And therein lies the problem. Apartments are being built in L.A. — at levels not seen since before the recession — but most are top-of-the-line.

Funding Cuts Hamper Affordable Housing Efforts

When it comes to affordable housing, there's a shortfall of almost half a million units in L.A. County, and it's only getting worse.

That's because there is half a billion dollars less available in state and federal funding for affordable housing in the county than there was before the recession.

"We focus on creating jobs here in Los Angeles for people who live outside the city, and we don't focus on building housing for people so that they can live near where they work," says L.A. City Councilman Gil Cedillo.

In April, Cedillo led a "Renter's Day" to highlight the problem of affordability. There was a modestly attended rally, but as for action? That will have to wait.

New York City Mayor Bill de Blasio recently announced an $8.2 billion plan to build and maintain 200,000 affordable housing units over the next decade.

"I really admire what those people do in New York because they really move aggressively on these problems," Cedillo says. But in L.A., a city that's trying to balance its budget, the money simply isn't available. "We don't have those types of resources to commit to housing," he says.

Cedillo has been lobbying for a state bill that would raise $500 million a year for affordable housing by charging a fee on real estate transactions, but the measure seems unlikely to pass.

That means that now, for the first time in three decades, there are virtually no state funds available for affordable housing in California.

Bad Everywhere

Los Angeles is one of the most expensive rental markets in the country, but the problem isn't just in California. Across the country, rental prices have risen as wages have stagnated.

Chris Herbert is the director of research at Harvard's Joint Center for Housing Studies. Just last December they released a report on rental housing in the country. He says the situation is bad everywhere, and it's just a question of how bad.

"About 50 percent of renters are paying more than 30 percent of their income for monthly housing costs," Herbert says. "At last count, more than a quarter of households were spending more than 50 percent of their income for housing."

Herbert says 30 percent is the standard amount people should pay for housing out of their budget to still have enough left for life's necessities. So if you're spending significantly more than that, like the Alvarez family, the odds of having enough for other basic needs, like food, health care and any sort of retirement savings, are severely diminished.

"The trade-offs people are making are not trade-offs between going to the movies or going out to eat, but basically ... nutrition, basic health care and saving for their future," he says. "Those are really important trade-offs people are making in trying to find affordable housing."

As bad as things are, it looks like they'll be getting worse. The Harvard study projects that 4 to 5 million more people will start renting over the next decade.


Ben Bergman is a business reporter for Southern California Public Radio.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

ARUN RATH, HOST:

It's ALL THINGS CONSIDERED from NPR West. I'm Arun Rath. The mortgage crisis that devastated the economy has received endless attention but it's not just homeowners who have suffered badly in this economy. As of 2012, 35 percent of American households are rentals. Their numbers are growing, reversing a decades-long uptake in homeownership. And in the last 50 years, the percentage of income they're spending on the rent has increased dramatically. A quarter of renters are spending more than half their income on rent. We wanted to spend some time with the family that has to apply that math to their lives. The rental crisis is our cover story today. A few days ago, Imelda Alvarez gave us a tour of her tiny one- bedroom apartment just east of downtown Los Angeles and a neighborhood called Boyle Heights.

(Speaking Spanish.)

RATH: The tour takes all of 40 seconds. The front living room has been converted into a bedroom for Imelda and her husband. There's a tiny kitchen attached to the room with tables and chairs crammed in. And there is the recomerita (ph) - that's the little room in back with a bunk bed for her kids.

: (Through translator) There is me and I have two daughters and my husband. So four in total.

RATH: Imelda and her family are paying a thousand dollars a month for this tiny place but they don't have other options. Her husband, Antonio, can't land full-time work - let alone a job that could pay for a better apartment. He's been stringing together part-time work at a school nearby. Bringing home biweekly checks of 5-or-$600 a time.

: (Through translator) Most checks would be $600, so he would make around $1,200 a month and that would only be enough for the rent and some bills.

RATH: Imelda says they spend so much on rent they have to cut back in other areas.

: (Through translator) Sometimes we have to start to think about what else we can cut back on to make ends meet. I always think about the rent first, then about food. If it's not enough we have to cut back on food.

RATH: It's not like they're paying a thousand dollars a month for a tiny apartment in a trendy area. Boyle Heights is a poor part of town. There's a lot of crime and most of the schools are struggling. It's hard to accuse the Alvarez's of living beyond their means when you see the state of their apartment. Sagging ceilings, leaky faucets, doors that don't lock and pests - cockroaches and rats. The bathroom floor is wet because...

(Speaking Spanish.)

RATH: The toilet has come loose from the floor. Imelda had been staying home to watch their own youngest daughter, who has an intellectual disability. But she's been with looking for work now and can't find anything. And now that school is out for the summer for the next couple of months they'll be deprived even of Antonio's part-time income.

: (Through translator) You know how we made ends meet this time? With our tax return. Everything was overdue and it wasn't until our taxes came back that I could pay everything. I have nothing to pay with.

RATH: Across the city families like the Alvarez's are struggling. But why is it so tough to find affordable housing in the city as big as Los Angeles? We asked reporter Ben Bergman of member station KPCC to find out.

BEN BERGMAN: The reason rent is so high here in LA is that lots of people want to live here. It's almost always Sunny. You can go to the beach. But there aren't enough places to live.

BEVERLY KENWORTHY: I think in simple terms, it's an issue of supply and demand.

BERGMAN: Beverly Kenworthy is head of the California Apartment Association.

KENWORTHY: If we really want to address this housing crisis - because it is a crisis - we have to really be much more forward thinking and we have to embrace development. We have to embrace the growth that's happening.

BERGMAN: Kenworthy says developers have to navigate a city zoning code that is almost 70 years old. All but the biggest, best funded builders have simply given up.

KENWORTHY: I have members of my organization who - some of them build and some of them look to build here in LA. I have others who just simply won't do it anymore - because it's just too hard and too uncertain and it's too costly.

CARL LAMBERT: We call it brain damage.

BERGMAN: Carl Lambert says that's the phrase developers like him use to describe the agony of getting a project approved. Lambert says before he could break ground on a recent building he needed 33 separate sign offs. It's not uncommon for it to take three years from when he buys a piece of land to when he can start construction.

LAMBERT: Now I've experienced all this wonderful pain over the years and I am now open. And you think I'm going to want to just go out and give everybody deals? or give them a $600 a month apartment with an ocean view? No, it's going to be fair market value.

BERGMAN: And there in lies the problem. Apartments are being built in LA - at levels not seen since before the recession. But most are top-of-the-line. When it comes to affordable housing, there's a shortfall of almost half a million units in LA County and it's only getting worse. That's because there is a half billion dollars less available in state and federal funding for affordable housing in the county than there was before the recession. LA Councilman Gil Cedillo finds that troubling.

GIL CEDILLO: We focus on creating jobs here in Los Angeles for people who live outside of the city. And we don't focus on building housing for people so that they can live near where they work.

BERGMAN: In April, Cedillo lead a renter's day to highlight the problem of affordability. There was a modestly attended rally - but as for action, that will have to wait. In New York, Mayor Bill de Balsio recently announced an $8.2 billion plan to build and maintain 200,000 affordable housing units over the next decade. Cedillo says as much he'd like to do something similar here with the city trying to balance it's budget, there's simply no money available.

CEDILLO: You know, I really appreciate and admire those people do in New York because they really move aggressively on these problems. We don't have those types of resources to commit to housing.

BERGMAN: Cedillo has been lobbying for a state bill that would raise $500 million a year for affordable housing by charging a fee on real-estate transactions. But the measure's passage seems unlikely. That means for now, for the first time in three decades, there are virtually no state funds available for affordable housing in California. For NPR News, I'm Ben Bergman in Los Angeles.

RATH: As Ben just said, renters looking for affordable housing aren't getting much relief in Los Angeles - which is one of the most expensive rental markets in the country. But the problem is not just in California. Across the country, rental prices have risen as wages have stagnated. Chris Herbert is the Director of Research at Harvard's Joint Center for Housing Studies. Just last December, they released a report on the rental housing in the country. He says the situation is bad everywhere. It's just a question of how bad.

CHRIS HERBERT: You know, it's a little bit about trying to separate the miserable from the awful when you try to break it down. It is worse along the coast. I mean, areas where San Francisco, LA, New York, Boston - where you have very high housing costs. But the same time it's bad in the heartland too. And it's bad in the heartland not so much because housing costs are so high - but because incomes are so low.

RATH: Are there any places in the country where it's not a problem?

HERBERT: You know, I'm hard-pressed to come up with one where it isn't. The - nationally about 50 percent of renters are paying more than 30 percent of their income for a monthly housing cost. And that's the standard measure, what people ought to devote out of their monthly budget and still have enough left over to meet life's necessities. When we look across the country, at different metropolitan areas, there are very few less than say 35 percent of people who are struggling too make their ends meet that way. So it's - I can't point to any place where it's not an issue.

RATH: Your study talks about those who are rent burdened and those who are severe rent burdened. Can you break down that distinction?

HERBERT: So the standard measure of housing affordability has been whether people are spending more than 30 percent of their income for housing - which is an old rule of thumb. That it should be a weeks wages for your monthly rent. But over time, what's happened is that so many people were failing to meet that standard that the - a new standard was introduced. That was referred to as a severe rent burden - where people are spending more than 50 percent of their income for housing. There's not necessarily a rule of thumb that would suggest that that is an appropriate level of spending but it's just one that had become so common that it became a new measure of saying, well how severe is this extent of this problem? So if you look back over time and say 1970, roughly a quarter of households were spending more than 30 percent of their income on housing. Well, last count more than a quarter of households were spending more than 50 percent of their income for housing. So we're really on a new level of affordability than we've ever been before.

RATH: Can you talk about why it's a problem in terms of when people are spending this much more on their rent?

HERBERT: Well, you know, it's such a big part of the household budget. If you're spending 50 percent of your income on housing - and we're talking about before tax income - it doesn't leave a lot left over for life necessities. We find that they spend 39 percent less on food. They spent 65 percent less on health care. They also spent less on retirement savings. And so the trade-offs that people are making are not trade-offs between going to the movies or going out to eat - but basically basic nutrition, basic healthcare and saving for their future. So these are really important trade-offs people are making in trying to find affordable housing. And that's not to mention what they also do in terms of housing quality. So when we look at people who are facing a choice of trying to find housing that they can afford. One of the ways they make that trade-off is they settle for lower quality housing. And they're more likely to in dangerous neighborhoods where crime is more prevalent.

RATH: That's Chris Herbert of Harvard. Chris, thank you.

HERBERT: My pleasure.

RATH: What Chris just said describes Imelda Alvarez and her family exactly. Back in Boyle Heights they're out of options. Even if they could find a cheaper apartment, they wouldn't be able to move.

: (Through translator) We don't have enough for a deposit or rent. And we don't really want to leave because we have our roots here. The girls have their school here. It would be something hard for them. But it's mostly about money. It costs more to move.

RATH: It looks like more people will be experiencing what the Alvarez's have gone through. The Harvard study projects that around 4 -to-5 million more people will start renting over the next decade. Transcript provided by NPR, Copyright NPR.

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