Yep, our days here are numbered. Every thread on our community FB group has a hordes of people fighting any new construction (including housing) tooth and nail, even on lots filled with stripmalls, decrepit crackhouses, or asphalt parking, keeping LA decidedly third-world--it boggles the mind.
I wonder if this is a general problem, where property owners in an area have both the power to influence the local government's land use policy and an incentive to limit new construction in order to create artificial scarcity and drive up the prices of their own property. Is this guaranteed to exacerbate any housing shortage anywhere'
When people say "30% of your income is spent on housing," do they usually mean pre-tax or post-tax?
The article claims you need $145K a year to afford a $2000/month apartment. But assuming that you lose 40% to taxes, you would still be left with $5,250 a month after housing. That sounds a lot higher than it should be for the lower limit of affordability.
If you assume 30% of pre-tax income, and $2000/month rent, you get a required income of $80,000 -- still high, but not as outrageous as the figure he comes up with.
The article says post tax but the standard is closer to what you're saying. For a landlord renting a property, for instance, the safe rule of thumb is typically for your tenant to have a gross annual salary of 40x the monthly rent (which for a 2k rental would be 80k gross salary). Using 145k is way too conservative. Similarly, when buying a house, the debt-to-income ratio is calculated on gross (pre tax) income as well and is 28% for housing costs (principal, interest, taxes and insurance), which lines up pretty well with the standard rental calculation.
The scale changes as your income increases. As you pointed out, someone who makes $145k could easily spend 30%, or even 50%, of pre-tax income on housing and still have more left over than most peoples' entire monthly income.
On the other hand, someone making $40k per year who spends 30% of pre-tax income on housing is going to have a pretty tight budget.
So, these are all pretty rough guidelines, and the best thing to do is to spend an amount on housing that does not compromise your other financial goals, no matter what the percentage happens to be.
Figuring this pre-tax isn't very useful. If you were in the (theoretical) 70% tax bracket and you spent 30% of your pre-tax income on housing, you'd starve.
I love living in Los Angeles as a single, 20 something, but the thought of trying to raise a family here terrifies me. The median price of a 3 bedroom home is $865,000 which would mean that a large portion of my long term net worth would end up tied to a single asset. When it comes time to put down roots, I'll head to cheaper pastures.
Cost of living and real estate prices are what keep me away from living in California again, even though I grew up there. Grew up in Thousand Oaks (due north of Malibu), but got married and started my family in Oak Park (west of Chicago). We'd be happy to have you here! Take all the money you would otherwise spend on a house in L.A. and instead, spend it on extending your startup's runway, and/or 3D printers, Arduino, and making robots. It worked for me! With O'Hare airport nearby, you're always a frequent, direct flight away from the coasts if needed.
Georgia welcomes you with open arms. I moved from the DC area where I was spending $1,800/mo for a 2 bed 2 bath 30 miles outside of DC. I came south and bought a 3,200 sq ft home, 12 miles from downtown Atlanta, for $200,000. I've got a nice backyard, two car garage, it's quiet, costs are low, and the weather is nice.
Nominal interest rates are zero. We are living through the largest debt bubble in history. How is it surprising that assets are all incredibly overpriced?
But what would cause it to pop? There is still insane demand in popular areas, in large part because that's where the jobs are. I could only see that becoming more true in a down market.
As someone who has been in LA for a while, I think the "sticker shock" isn't coming from the housing cost so much as from the salaries that aren't keeping up with it. If you want to live in a nice location with a short commute then you're going to be paying over 1600/mo for a 1 bedroom. But if salaries were at Bay Area level that would be a bargain, especially given the weather, beach access, night life, etc. that LA offers compared to other cities. Unfortunately, salaries here are not great, even in the small tech scene on the west side.
Its a silly attitude to deny development. There is plenty of room for more people, on the planet, in LA.Just get organized.I live in Venice but friends in Hollywood I see maybe 4 times a year because driving is numbing. Robocars are gonna improve things greatly.That said, LA is full of itself.You will pay through the nose for property that shouldvbe torn down, yet you are not allowed to. I am a Euro transplant and I have travelled the U.S.for the past dozen years and there is hardly a bad spot anymore.You get great food, culture, people many many places. Madison WI, Bozeman, Raleigh, Detroit even, even Texas. Lot of people are stuck in LA molasses.
> What does it take to be middle class in Los Angeles? That was the question Ross DeVol started out asking himself when he began calculating how much a resident would need to make to spend 30 percent of earned after-tax income on rent for a two-bedroom apartment in Los Angeles County.
I disagree with the author that this is middle class. A two bedroom apartment is the very definition of impoverished lower class loser, just above homeless.
Middle class means a detached 3 bedroom in the suburbs, with biweekly maid service, two financed cars, health care to the point you don't need to worry about it at all, and buying whatever you want at the supermarket.
What middle class does not include is any one of: a mansion, live in staff, a yacht, full time nannies instead of occasional baby sitters, swiss boarding school for the children, a groomsman for the horse, a pool boy, a cabana, a private plane, or zero income tax.
This is what skilled factory workers and teachers had in the 1960s, 1970s, and 1980s. Above them, designers, engineers and lawyers, comprised the upper class, or upper middle class.
>Middle class means a detached 3 bedroom in the suburbs, with biweekly maid service, two financed cars, health care to the point you don't need to worry about it at all, and buying whatever you want at the supermarket.
This to me is the very definition of upper middle class.
Middle class (for a family) to means a 2-3 bedroom house in the suburbs, at least two cars (with one likely under financing), health care to the point you don't need to worry about it at all, and food shopping on a very large, but not unlimited budget. Plus the ability to take a vacation at least once a year to a regional destination.
By your definition of the middle class, a healthy U.S. economy would need approximately 4,000,000 domestic maids to satisfy the biweekly maid service requirement.
> I disagree with the author that this is middle class. A two bedroom apartment is the very definition of impoverished lower class loser, just above homeless.
Apparently I'm an impoverished loser who makes more than 10% of the US population.
Middle class means you work for your money. Upper class means you have money regardless of how much you work. A family of two lawyers earning $500k a year are still middle class.
I don't have biweekly maid service, I guess I'm almost there. In my opinion, middle class is earning enough to live in a relatively safe number, pay all your bills, your own house, rent/buy, car, health care, feed your kids and be able to SAVE some. Maybe not much, but say saving 10% of your after tax income.
If you have all of the above and no savings or borrowing on Credit cards, you are a fool.
> A two bedroom apartment is the very definition of impoverished lower class loser, just above homeless.
Stop trolling. This is the rudest thing I've seen anyone say in a long time and it certainly doesn't belong on HN (but also, it's weirdly classic HN to read things like that here). Socioeconomic class is not defined by who you think is a loser or what kind of dwelling you choose to live in. I would never live in a house like you describe if I were middle class. I would always choose the 2 bedroom apartment. That makes me a loser, just above "homeless"? No, it doesn't.
[+] [-] mixmastamyk|9 years ago|reply
Our rent went up 7% this year alone.
[+] [-] rcthompson|9 years ago|reply
[+] [-] surfmike|9 years ago|reply
The article claims you need $145K a year to afford a $2000/month apartment. But assuming that you lose 40% to taxes, you would still be left with $5,250 a month after housing. That sounds a lot higher than it should be for the lower limit of affordability.
If you assume 30% of pre-tax income, and $2000/month rent, you get a required income of $80,000 -- still high, but not as outrageous as the figure he comes up with.
[+] [-] harmmonica|9 years ago|reply
[+] [-] wott|9 years ago|reply
[+] [-] twblalock|9 years ago|reply
On the other hand, someone making $40k per year who spends 30% of pre-tax income on housing is going to have a pretty tight budget.
So, these are all pretty rough guidelines, and the best thing to do is to spend an amount on housing that does not compromise your other financial goals, no matter what the percentage happens to be.
[+] [-] ksenzee|9 years ago|reply
[+] [-] s0uthPaw88|9 years ago|reply
[+] [-] hugs|9 years ago|reply
[+] [-] Overtonwindow|9 years ago|reply
[+] [-] gjolund|9 years ago|reply
I lived there for 6 years, now I do remote work for an LA based company and travel. Best decision I ever made.
[+] [-] nawtacawp|9 years ago|reply
[+] [-] sv7n|9 years ago|reply
[+] [-] carsongross|9 years ago|reply
Yes, of course it will end in tears.
[+] [-] shostack|9 years ago|reply
[+] [-] mdorazio|9 years ago|reply
[+] [-] Simaramis|9 years ago|reply
[+] [-] happytrails|9 years ago|reply
Oh well, at least I can rep the 323 and shout tupac lines
[+] [-] seanmcdirmid|9 years ago|reply
[+] [-] chrisseaton|9 years ago|reply
What's wrong with old? In Europe houses are regularly hundreds of years old and it's not a problem.
[+] [-] taternuts|9 years ago|reply
[+] [-] geggam|9 years ago|reply
Come to the SF Bay area...
[+] [-] ksenzee|9 years ago|reply
[+] [-] droithomme|9 years ago|reply
I disagree with the author that this is middle class. A two bedroom apartment is the very definition of impoverished lower class loser, just above homeless.
Middle class means a detached 3 bedroom in the suburbs, with biweekly maid service, two financed cars, health care to the point you don't need to worry about it at all, and buying whatever you want at the supermarket.
What middle class does not include is any one of: a mansion, live in staff, a yacht, full time nannies instead of occasional baby sitters, swiss boarding school for the children, a groomsman for the horse, a pool boy, a cabana, a private plane, or zero income tax.
This is what skilled factory workers and teachers had in the 1960s, 1970s, and 1980s. Above them, designers, engineers and lawyers, comprised the upper class, or upper middle class.
[+] [-] Aloha|9 years ago|reply
This to me is the very definition of upper middle class.
Middle class (for a family) to means a 2-3 bedroom house in the suburbs, at least two cars (with one likely under financing), health care to the point you don't need to worry about it at all, and food shopping on a very large, but not unlimited budget. Plus the ability to take a vacation at least once a year to a regional destination.
For someone single different rules apply.
[+] [-] seattle_spring|9 years ago|reply
This is the most shockingly spoiled thing I've ever read on HN. Tops even that dude (Timr?) who said that $250k in SF was near-poverty.
[+] [-] applecore|9 years ago|reply
[+] [-] x3n0ph3n3|9 years ago|reply
Apparently I'm an impoverished loser who makes more than 10% of the US population.
[+] [-] gnopgnip|9 years ago|reply
[+] [-] segmondy|9 years ago|reply
If you have all of the above and no savings or borrowing on Credit cards, you are a fool.
[+] [-] cryptoz|9 years ago|reply
Stop trolling. This is the rudest thing I've seen anyone say in a long time and it certainly doesn't belong on HN (but also, it's weirdly classic HN to read things like that here). Socioeconomic class is not defined by who you think is a loser or what kind of dwelling you choose to live in. I would never live in a house like you describe if I were middle class. I would always choose the 2 bedroom apartment. That makes me a loser, just above "homeless"? No, it doesn't.
Stop the insulting nonsense.