California Rental Armageddon: Nearly half of Los Angeles adults doubling up, working class moving out, or you have the option of simply living in poverty.

Guest Post by Dr. Housing Bubble

California like the rest of nation has gained a large number of rental households.  Many of these households were formed from the ashes of the 1 million completed foreclosures.  Over the last ten years the nation has lost 1 million net homeowner households and has gained a whopping 10 million rental households.  L.A. County with roughly 10 million residents is predominately a renter county.  Over the last ten years the large gain in California households has come in the form of rentals.  Maybe you find living with roommates deep into your 30s and 40s as awesome or maybe you enjoy living a Spartan lifestyle just so you can pay your monthly rent while hearing helicopters overhead in your hipster neighborhood.  Every piece of research simply shows that people are being pushed into spending more money on housing.  Some say move out.  Well guess what?  Many middle class Californians are doing just that.  The rental and housing market has gone into full on financial Armageddon mode yet in typical California fashion, the sun keeps glowing brightly.  Ironically over time people think it is normal to dump every nickel you have into housing.  Let us look at three trends impacting the rental market in California.

Moving out

The urge to buy real estate is a deeply rooted American concept, although Millennials might be changing their tune.  For the majority of the country, buying a home is a simple endeavor.  With your typical house costing $200,000 and with low interest rates, simply having the median household income is good enough to not have your home consume every penny of your income.  But in California, we have $700,000 crap shacks that look as if a two-year old developed it in their first art experiments.  In the last couple of years, there is a vocal group saying “hey, if you can’t make it in California get out!”  Apparently some people are listening to this:

MigrationOut2013

Based on Census data on state-to-state migration, nearly a quarter million more workers left California between 2007 and 2013 than arrived.  Nearly all of those leaving made less than $50,000 a year.  Then you have your low six-figure income crowd buying crappy properties and pretending that somehow they are part of the Malibu or Newport crowd.  The gap is widening and even with rentals, more money is being consumed in housing.  But maybe leaving is not an option.  How about finding a roomie or moving in with mama and papa?

Doubling up and living with parents

In Los Angeles nearly half of adults are living with roommates and this isn’t your spouse or partner:

doubled up housing

Source:  Zillow

This is defined by Zillow as at least two working-age, unmarried or un-partnered adults living together.  So how can someone afford a $4,000 apartment in Santa Monica?  Easy, just have two other people living with you and the rent then becomes “affordable” or at least that is the pitch.  For many, even finding a roommate is too expensive.  Many adults are moving back home:

california adults at home

Over 3.4 million adult “children” live at home in California.  The vast majority are living at home because of economic reasons.  They are not making big bucks saving their income to buy that $700,000 crap shack.  Many in this group can’t even afford a home with a roommate.  So how are others making it?  Another option is simply living in flat out poverty.

Living in poverty

Based on Census figures nearly a quarter of Angelenos lived in poverty during the last few years.  The poverty rate varies across states but the Census gives us an example of a five-member household with three adults and for this household to be categorized as being in poverty, household income would need to be $28,087 per year or lower.  Good freaking luck getting by in L.A. on that income.  You can drive around any lower income neighborhood and you will see multiple cars parked in front reflecting this dynamic of multiple income streams under one roof.  In fact, in the last article we highlighted one of the benefits of buying the home included additional “parking” spaces almost understanding this deeper trend.  Yet somehow these are the areas that will gentrify into the next Pasadena.  Not going to happen and certainly is not going to happen while you are still young and thinking that Taco Tuesday is a hip thing to do.

While the economy pushes along, many are feeling an apocalypse on their pocketbooks largely driven by real estate.  You have the option of buying from the limited inventory out in the market and locking into a 30 year crap shack matrimony or continue getting it from every way with rentals.  This is California baby!  This is boom and bust central.  What did you expect from the land of make believe and fairy tales?

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Westcoaster
Westcoaster

I have a 35 yr old kid who is trying to live in Santa Barbara (by himself, squirrel-cage size apt), go to college, and wait tables to support himself. Not working out so well.

IndenturedServant

If I was just starting out or trying to scrape by or even struggling to pay my mortgage (rent the house out to save it) I’d live in a fully self contained RV/travel trailer while working my ass off and saving my pennies. Matter of fact, if I were single I’d probably live the rest of my life in one. You get your own, private home with minimal financial outlay compared to renting an apartment or house. You’ll be highly mobile and have little room for acquiring “stuff”.

Llpoh

The idea of young adults not living at home is fairly new. Communal family living was the norm, and should be again.

Families used to take dare of their members. Now the govt is expected to do it. We need to return to a family based system, rather than a system where the govt extracts charity at the point of a gun.

Llpoh

IS is on the right track. Young folks should spend their time working, and if they did, they would find a tent was more than sufficient for their needs. Anything more than a place to sleep is excess to their requirements.

El Coyote
El Coyote

It was only a few years ago that the old bosses would while away their remaining time on the job shooting the shit about retiring in Arizona. I would look at them like they were out of their mind. Tucson is nothing more than a suburb of El Paso. Phoenix is a traffic nightmare. Yet here were two California natives with bad grammar, poor spelling and a piss poor grasp of geography and theology talking about becoming Zonies overnight. These guys are trapped in a time warp where just being from California could get you laid. Today, being from California can get your ass kicked in Oregon and Washington for running up the house prices.

stanley
stanley

“Families used to take dare of their members.” True.

……..

But in the last 50 years of divorce, multiple marriages, free range choice, and unmarried parents – who is family anymore? I’m not even sure.

Right now we are being squeezed. Our mature millennia underemployed kids still in the house, our 80 something parents are broke and falling apart. And out of a couple dozen people only three or four of us have decent full time jobs (we retirement age boomers). Many of these family members have multiple marriages with multiple sort-of related children from multiple partners.

To bear my soul:

My parents were divorced when I was a teen in the late 1960’s. Both of my parents remarried other people who already had other children, 6 in total, I barely recognize or know these people. I married a spouse who was divorced and had two children from the previous marriage. I already had one child, and together we had another child in our marriage. (don’t get lost yet)

Spouse’s two children from the previous marriage have had multiple marriages, multiple divorces, and multiple children from multiple spouses – maybe 6 kids or so total (our grandchildren). My boomer spouse has three boomer brothers who have a total of about six or seven children. Those children have all been married, unmarried, remarried, and have perhaps 10 children between them (these would be the boomer brother grandkids). The boomer grandkids, such as they are now, are generally between the ages of one to ten, and I think they number somewhere in the range of 15 total boomer grandkids. I have never set eyes on any of ‘our’ alleged grandchildren.

So looking at the above paragraph, and being an impatient math challenged person, we’re somewhere in the range of about 40 people mostly of three generations, those 40 people live all over the place, they largely have never met one another, and are only sort-of related.

Who of these people, are my family????

Three generations of half-kids, step kids, unwed mothers, divorces, and highways.

This is the America that has emerged since the second half of the 20th century. We love, we live, we reproduce, then we drive away. Democracy and civil rights and all that.

*The family* in this country has become a rats nest of freedoms, roving opportunities, equal rights, and an ungodly mess of tangled relations.

And that is why it is failing so miserably.

card802
card802

There is nothing wrong with young adults still living at home, this helps them financially and helps the parents cope with getting older. I may reverse that and have my parents move in with me, dad didn’t do very well planing for his golden years, pretty much out of money.

Or as IS mentioned, living in a trailer, or as my son is planing, living on a 40′ sailboat.

While his friends all struggle to maintain the large house with a pool, the two cars, the new furniture, the entertainment costs, they purchased a small house that he paid off last year.
His boat will be paid for in five more years. Married, one child and one more on the way, he will sell his company, have started a new company he can run by himself, and sail away.

card802
card802

Is it just me or are others having trouble with the site today?

Site was down about two hours for me today and three times since last night I tried to post a comment I was directed to a site to type a captcha and leave the admin a message as a security measure.

hardscrabble farmer

Stanley said-

“Who of these people, are my family????”

“A man was going down from Jerusalem to Jericho, when he was attacked by robbers. They stripped him of his clothes, beat him and went away, leaving him half dead. A priest happened to be going down the same road, and when he saw the man, he passed by on the other side. So too, a Levite, when he came to the place and saw him, passed by on the other side. But a Samaritan, as he traveled, came where the man was; and when he saw him, he took pity on him. He went to him and bandaged his wounds, pouring on oil and wine. Then he put the man on his own donkey, brought him to an inn and took care of him. The next day he took out two denarii[c] and gave them to the innkeeper. ‘Look after him,’ he said, ‘and when I return, I will reimburse you for any extra expense you may have.’

“Which of these three do you think was a neighbor to the man who fell into the hands of robbers?”

bb

Don’t know if I would want to live in California right now. Saw a report last night about water levels. If this report was right parts of southern California will run out this summer. That’s probably as bad if not
Worse then electricity going out.It would be a nightmare in real time. Scary.

Welshman
Welshman

The farmers that need ditch/surface water south of Stockton Dealta are in a world of hurt. They can only use 25% of their ag well water due to brackishness and there is no ditch water available, due to lack of snow. Row crop farmers don’t have to plant, but orchard farmers have to irrigate even in the winter, if there is no rain.

There has been no more water storage dams built in California in the last 30/40 years due to tree huggers. When I was born 72 years ago there were 8 million people in this state, today we have 37 million. Where I live in N. California we get 26.6 inches of rain per year, most of the state is lucky to get half that.

I’m sure rents will keep rising when you go to the tap and the water is not there.

a cruel accountant
a cruel accountant

IndenturedServant

Is this you?

Day 1: Finding a place to live

Chicago999444
Chicago999444

It would actually be very easy to resolve the dire water situation in CA and the rest of the West if only this one little thing were done:

CHARGE MARKET RATES FOR WATER.

STOP SUBSIDIZING IT. STOP WAXING THE TAXPAYERS AT LARGE TO SPEND $400 AN ACRE-FOOT TO PROCESS, TRANSPORT, STORE, AND DELIVER WATER TO GROWERS AT $4.50 AN ACRE FOOT.

Another thing that our august policy makers could do is stop paying farmers to NOT GROW water-guzzling crops in places like Louisiana and Alabama, and stop subsidizing them to grow these crops in drought prone places like the Central Valley of CA.

Start charging market rates for water out there, and the population of CA will quickly be reduced to sustainable levels, which I figure is about 10 m people throughout the state. And other, even more arid settlements in the west would dry up and blow away. No more estates in places like Rancho Mirage with 20 acres of Hawaii type landscaping.

Stop subsidizing the water, and places like Detroit, St Louis, Pittsburgh, Philly, Cincinnati, Cleveland and all the other eastern and midwestern cities will come roaring back to life and prosperity… all the liveable cities and rich, fertile moist farm country in the midwest and mid-Atlantic regions that we trashed and abandoned after taxing them to death to pay for watering the west, so that we could pretend we could turn a desert into a Garden of Eden.

Chicago999444
Chicago999444

Welshman, the main reason no more dams have been built in CA is that all the decent sites, and many sites that are not quite decent, already have dams sitting on them.

Another reason is that the cost/benefit does not favor more.

CA is already using water from everywhere else it can get it from. All the rivers in CA have at least one dam, and most rivers have several. The Hoover Dam was actually built for the benefit of Los Angeles, which has first claim on its water- not Las Vegas, as is popularly believed.

There is nothing left to tap, really, that any other state wants to give up.

IndenturedServant

Nope. Not me.

When I first moved to my current location we lived in an 18′ travel trailer for 8-9 months. We had a dog which made it tough to rent and the dog was/is as important to us as kids are to others. I found a really nice self contained trailer that was actually being re-built when I went to see it. I could easily see it was being done correctly. One payment of $1500 and it was mine. We found a space in an RV park near the center of town and our lot rent of $200/month included sewer, water, electric, phone and basic cable. Our only other expense was laundry and there was a real nice coin laundry in the RV park. Once I bought the house we sold the trailer for more than we paid for it so that effectively lowered our expenses even further.

So including the cost of the trailer, our total expenses for shelter and utilities was less than $400.month compared to $600-$800 for rent PLUS utilities which we could afford but why?

I worked 12-14 hours 5-6 days every week and did odd jobs on weekends so the trailer met my eating, sleeping and hygiene needs perfectly. All of our personal belongings were being stored by the USAF for up to a year so it was a near perfect option that allowed us to live comfortably on our terms while house hunting. There were several college kids living a similar existence while they attended college.

Untold thousands of snowbirds live decades of their lives that way. Pick a new destination each year and spend your entire retirement exploring the continent!

El Coyote
El Coyote

bb,
I took a landscaping course some 30 years ago with Neal Weisenberger, he taught xeriscape and other less conservative planting methods. It was a novel approach to home landscaping. Most folks bought houses with sod as they had a jealous view of San Diego. But we live in the desert, there is no sense in denying that.
The first place I had here still has the rock cover I installed (along with boulders from Lytle creek), my current home has cement pavers covering the backyard with a small planter against the fence and in front of the patio slider. I ripped out the lush grass my wife used to water until it was soggy as a swamp. I smothered half the lawn in the front yard (no Round Up) and outlined a small portion where I allowed the cheap wild grass to stay. It will green up someday soon, I am not going to waste time fertilizing it, I will water it at times but i’m not using sprinklers, I ripped a few out of the ground when i was planting cactus and Oleander.
My wife likes flowers, I bought some mail-order Canna lilies and put those in pots, they are starting to come back now, I was afraid they’d freeze in the patio. She has 4 or 5 rose bushes in pots. The damn Hollyhock has taken over the bare spot in the front yard and this summer we will see oodles of pink, red and maroon paper-thin flowers. The twiggy saltbush will also flower and we will see 1 maybe 2 cactus flowers. Meanwhile, my neighbors will spend lots of money, time and water to keep their lawn green.

Welshman
Welshman

Chicago999444,

Most of the proposed holding dams would not be on rivers, but in the coast range in large canyons.
The water would be pumped in and when the water was released, it would generate electric power.

I do agree we should pay more for water, as we waste alot of water in California.

Chicago999444
Chicago999444

Welshman, the comment section of this blog is not the best place to do a cost: benefit on every water project that ever was built in the West, for that would take many 600 page tomes.

Suffice it to say that the power generated by these dams, though it sure as hell helps, does not offset the cost of pumping said water over mountain ranges… let alone pay back the cost of the dams. So many of these structures simply could not justify themselves even in the money collected by the power generated, so great is the cost of the structure, and of moving the water to where it is desired.

I am not a dam-hater, now… far from it. I believe that a well-sited dam, built for the right reasons, after a very honest cost-benefit analysis, is a wonderful thing, especially if it produces electricity… and they should all be built to produce electricity or they are a waste of money and space.

Moreover, I am an architecture and infrastructure freak, and as such, just plain am dazzled by the beauty and engineering genius of such structures as the Hoover, the New Bullard’s Bar, the Marrows, and other beautiful dams we’ve built in this country, and elsewhere. Almost every dam in Europe as well as the U.S. was built with the assistance of Bureau of Reclamation engineers. At the same time, I have to be appalled at the huge number of badly sited and flatly uneconomical and unjustified water projects built just to satisfy a few politicians, small-town Chambers of Commerce, and handful of farmer-beneficiaries, to the sacrifice of the taxpayers at large, and every other constituency displaced or otherwise negatively affected.

My rule of thumb is this: could the structure be financed by the beneficiaries- the water and electricity users- and/or by the local tax base? Will the money the water and power sells for offset the cost of the dam, and keep the thing from being a burden on taxpayers who do not benefit? And is the thing even necessary, or is it just pork for the local politicians to bring home?

Westcoaster
Westcoaster

@Stanley: Thanks for sharing your “family tree”. I think we all have similar challenges in our families.

bb

El Coyote , I don’t know much about landscaping except they are busy where I live especially this time of year .It’s March but they are getting ready for summer months.The guys that run these companies have about 4 or 5 employees but they will add more as we get closer to summer. Mostly a young person field of work .At least where I am.I ask one of the owners how much he paid.He said 15 an hour or more starting out.That not bad money for an 18 year old.

IndenturedServant

Welshman said:
“Most of the proposed holding dams would not be on rivers, but in the coast range in large canyons.”

What they ought to do is dam up all those canyons filled with uber expensive homes that the state spends a billion dollars fighting fires in every year. Kill two birds with one stone! Naw! The firefighters union would never allow the job losses that would cause.

Mark
Mark

Landlords in California are all too happy to stack 10 Mexicans in a room and drive out the Middle Class with high rents and high property taxes to support schools for Mexicans.

Eventually, property taxes will have to go north in an attempt to keep the government services up.

To which I say , fuck the landlords and all property owners in Califorinia especially Los Angelianas.

El Coyote
El Coyote

Mark, you need to change your tampon. Stacking Mexicans 10 to a room is not the norm, though it was practiced in Phoenix before the 2007 crash. I have heard of illegals renting apartments where they share the rent. And it is true there were several living in a unit meant for no more than 2+1 but these were working adult men, not families with school age kids.
I have seen landlords build a second house in the backyard of an old house in East LA and in the Pico-Union area. They rent out the rooms to individuals and smallish families. A cook in Ventura told us his landlord had offered to sell them the house he and several others rented at around $500K.
I have seen this room rental practiced up here in Lancaster as well; the homeowner supplements his income by renting out his spare rooms to single people, this in Hispanic and White households.
I have seen a huge (3000 sq foot) house dedicated to room rental in the AV College area. Here in the AV, landlords were buying new houses to rent to section 8 folks from down Compton way, this may be the argument you make concerning building schools for the new students, most of which are black or latinos from LA. This once bedroom community is now a full fledged suburb of LA and it is definitely full of traffic.
On a side note, folks up here were in general nice small town folk. Now we see asshole behaviour from the big city folk, white, black and brown. The beautiful blonde commented to the crew chief, ‘there were 3 porch monkeys sitting in lawn chairs up on Sierra Highway (in Rosamond) and I thought to myself, is this what people first see whe they come to my little town; 3 porch monkeys sitting by the side of the road?’

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