Los Angeles Tops Our List Of The Worst Cities For Renters In 2018

The City of Angels tops our 2018 list of the worst for renters.

From a tenant’s perspective, the reasons for L.A.’s poor showing are many. In the last quarter of 2017 the average monthly price to rent an apartment there was $2,172, two-third higher than the national average. That rent eats up 41% of the local median household income--the second largest income share across the 46 cities analyzed for this ranking. Meanwhile, vacancy is low, allowing landlords to raise rents at a much faster pace than in most of the rest of the cntry and employment and population growth is currently lagging behind the national average. 

Sure, the city is best known for high earning actors and musicians, but the median household income is just $63,600. That’s a touch higher than the national norm, but close to half the median earnings in San Francisco, which takes no. 2 on our list of renter woe this year. Moreover, the substantial wealth in Los Angeles and San Francisco only add to the challenge for people who don’t earn much. Overall vacancy in the L.A. is 3.8%. But for less costly class C apartments the rate drops to 2.4%. 

In San Francisco, a stalwart on this list, the last quarter of 2017 the average monthly price to rent an apartment was $3,288, the second highest of the cities analyzed. That rent eats up 35% of the local median household income. Overall vacancy in The City by the Bay is 3.7% and drops to 2.7% for class C units. Similarly reliable Manhattan is No. 3, but scores dead last on three of the six metrics we used to rank cities this year. Its $3,493 average rent and 52% share of income are the nation’s highest. Vacancy of just 2.7% is its lowest, with a large spread between vacancy rates for costly class A units (4.7%) and more affordable class C units (1.6%).

The Big Apple’s saving grace? Rent growth has been slow, just 0.37% between the fourth quarter of 2016 and the fourth of 2017. In fact that’s the slowest in the nation. (Orlando had the fastest rent growth in the nation at 9.5%.) This means New York renters are more likely to be able to afford to stay put for another year and landlords are more likely to fight to keep them in order to avoid the costs of bringing in a new tenant. (Commercial brokerage Marcus & Millichap, which provides the data for this list each year, estimates it costs landlords between $300 and $550 to turnover a unit on average—not including long term expenses like new appliances or lost rent for time a place sits empty.)

So what’s causes a city to end up on this list? In L.A. buildable land is scare, what' s available is expensive and getting permission to build on it is challenging. Meanwhile, many buildings are also being retrofit to better withstand earthquakes, sapping many construction dollars and workers from new building projects. All of this makes the cost of building high and pushes developers to focus on luxury buildings where they can charge a higher prices per square foot. L.A.’s sprawl also means that you may be able to find an affordable place on the fringes, but its infamous traffic and lack of substantial public transit infrastructure means your commute to work might be painful. 

However, some residents argue, compared to other high cost cities, you get a lot for your money in L.A. For instance, a friend who moved there from New York says that while she pays slightly more for her L.A. apartment, she gets more space and amenities--she even has a parking space and backyard. Her one-bedroom costs $2,000 a month. 

Meanwhile, experts say strained sales markets across the country are putting significant pressure on rental prices. “For-sale inventory is tight, and with home prices continuing their rapid climb, it’s becoming more and more difficult for renters to become owners, forcing them to rent longer than they otherwise would have,” notes Zillow senior economist Aaron Terrazas in a new report that finds rents were up 2.7% year-over-year in February, the fastest pace in almost two years. In other words, long term renters are creating more demand and increasing rental prices.

So what’s a weary renter to do? Despite rising for sale prices, in some cities your best bet may be to give up and buy. Zillow finds that, nationally, people still come out ahead financially after just 1.8 years of homeownership. That time horizon tends to be longer in big cities where homes are more expensive, but not always by much. In New York, the current breakeven point is 2.1 years. Unfortunately, for our friends out west, in San Francisco it’s 4.6 years. In Los Angeles it’s 4.3.

Learn more at Forbes

Elana AlipingL.A., economics