German Castellanos stood inside his cozy San Pedro apartment, an acoustic guitar propped against the wall of the tidy living room and his 5-year-old daughter all smiles in her blue, polka dot dress.
The commotion of the Port of Los Angeles seemed far away on that shady stretch of Gaffey Place. Though the apartment is modest, Castellanos says he’s grateful for the current stability after he was cast into the chaos of the rental market in April.
The 36-year-old special education teaching assistant and single father is one of thousands of local renters who face high prices, low vacancy rates and a chaotic market. He moved from San Pedro to Long Beach in April 2015 after a divorce and found a studio apartment for $795 monthly rent in a neighborhood that was diverse and offered good access to amenities, he said.
But then his building was purchased and eviction notices started coming.
While most tenants got 60-day notices, Castellanos said he was told on April 1 to be out in 30 days.
“We had 30 days to clear out and find the right place,” he said. “It’s very expensive. If you’re living paycheck to paycheck, you’d be in debt right now. Every spot I looked at, there (were) at least five other people applying. I was turned down a couple of times.”
In the nick of time, Castellanos was approved for the apartment on Gaffey Place on April 28. He depleted his savings account during the move and now pays $1,200 a month in rent, about a third of his income.
Still, he said, “it’s kind of a happy ending.”
Steep costs
Castellanos’ experience is shared by many in the Southland, where the housing crunch is steep, by any economic measure. A database of housing affordability statistics created by The Associated Press shows the Los Angeles/Orange counties region consistently ranks among the U.S. markets that most stretch the household budgets of homeowners and renters. Data came from census figures through 2014, the latest available.
Among the 40 largest U.S. metro areas, census figures show L.A.-O.C. had the lowest homeownership rate, the most financially stressed owners and the highest percentage of middle-age households that were renters.
The problem has been three decades in the making. The region’s population and economic growth has outpaced local willingness to build more housing. For example, for every four jobs created in L.A.-O.C. and the Inland Empire from 2011-2014, only roughly one new housing unit was permitted.
All told, a shortage of housing options has boosted home prices and rents and essentially raised the entrance fee to Southern California living.
“It’s simple,” said Lucy Dunn, a former state housing chief who now heads the Orange County Business Council. “It’s about the supply.”
Renters feeling brunt
The Great Recession, while painful for most households across the region, has inflicted extra pain on renters.
Easy lending terms of the past decade’s boom allowed too many unqualified house hunters to buy homes. When the economy practically collapsed in 2009-10, many families lost their homes to foreclosure. It was a double-whammy: depressing home values and boosting the need for rentals to accommodate displaced households.
Cheap interest rates, used to stimulate the ailing economy, were a boon to the remaining homeowners. As a result, census stats show that from 2010 to 2014, the cost of owning a home dropped 10 percent in Los Angeles and Orange counties.
Renters were not as lucky.
Heavy demand for rentals pushed up already lofty costs by 3 percent in the region. By census math, the two counties had the third-highest share of renters spending more than 30 percent of their income on housing among the 40 largest markets, at 53 percent.
Price milestone
Locally, the South Bay Association of Realtors reported that the average price of a single-family home topped $1 million in May for the first time since the organization began tracking such records. That figure reflected a 16.7 percent increase over May 2015.
Sheri Fejeran, a Keller Williams Realtor in the beach cities, El Segundo and Torrance for more than 20 years, said she is seeing more people than ever having to lease when they intended to buy.
“Someone who was able to get a loan 10 years ago can’t get a loan now, because the rules and regulations have changed,” she said. “A lot of potential buyers can’t get a loan because they don’t meet some sort of criteria: They don’t have longevity in a job or they don’t have the down payment because of our rising prices.”
Coupled with the South Bay’s lack of housing inventory and space to build, Fejeran said, prices are skyrocketing, with even prospective tenants going head to head in bidding wars.
She estimates those who do sign leases in the South Bay end up spending half their monthly income on rent.
Nowadays, when Fejeran and other real estate agents ask tenants at seminars when they think they’ll be able to afford a home, they just don’t know.
“It’s no longer, ‘I just need to get this next job lined up,’ or ‘I need to get my salary increase,’ or ‘I just have to put one last kid through college,’ ” she said. “It’s more like, ‘Who knows?’ ”
Buying out of reach
Steep costs means some families can’t even grasp the bottom wrung of the ladder.
At 29, Torrance resident Monica Moreno has a bachelor’s degree in criminal justice, is married to the same sweetheart who took her to prom at North High School and is raising a 3-year-old daughter, Nevaeh.
But there’s one milestone of adult life she has not been able to attain: buying her own home. For the past five years, she and her husband, James Moreno, have been living with her grandparents under the same roof where she grew up near Alpine Village because they can’t find an affordable place they’d like to live in the South Bay.
That wasn’t the plan when James, a security dispatcher at the Port of Long Beach, moved in.
“We started looking and it was like, ‘Let’s try to save up,’ ” Moreno said.
Add Moreno’s nearly $900-a-month student loan debt and a child, and what was supposed to be a temporary arrangement became long term.
Months of actively checking Craigslist, apartment websites and even a paid local service turned into years. The family wants a two-bedroom apartment in Torrance or elsewhere in the South Bay that meets their checklist, but everything is at least $1,600, Moreno said.
With only one parent working at the moment, that’s too much, and they would rather stay with Moreno’s grandparents than somewhere “really unsafe and really sketchy,” she said.
“Now that we have a daughter, we can’t just move anywhere,” Moreno said. “We have to think about her.”
Scouring the market
The search for an affordable place often requires a relentless effort. It can seem like a second job — one with no foreseeable payoff.
Dorothy Veliz spent her 33rd wedding anniversary last week the same way she has each day since learning in May that her landlord was selling the Wilmington home she and her husband have rented for the past 16 years: She desperately scours apartment listing apps on her smartphone, drives through neighborhoods in search of “for rent” signs and has even been exploring rental markets as far as Riverside, Lancaster or Houston, Texas, where she has relatives.
Veliz, 51, and her husband, 58, pay $1,075 a month to rent their 2 1/2-bedroom home, which has a large backyard and a garage. They wanted to buy it from the landlord, but their monthly payment would have skyrocketed to $2,400, she said.
“Now that we got a 60-day notice to vacate starting Monday, everything’s changed,” she said. “We just can’t find anything.”
Veliz is looking for a two- or three-bedroom apartment in the South Bay, Harbor Area or Long Beach that will accept her two dogs for no more than $1,600 a month.
But so far, everything that meets her criteria is well above $2,000, she said, and that’s more than her husband makes in one paycheck as a mechanic at a chassis company in Gardena.
Veliz said she is unable to work because of health problems, including severe anxiety and depression, but she does not qualify for disability benefits.
She briefly worked for a ride-hailing app, but had to stop because of the anxiety and because the low pay wasn’t worth it.
Now, Veliz has resorted to selling belongings, including her van. She tried to buy a mobile home, but couldn’t get a loan.
“I wish I could turn my mind off,” Veliz said. “Every minute of the day, every second — I just can’t shut it down.”
Doubling, tripling up
Housing’s steep financial toll isn’t just a simple pocketbook issue.
It has forced people to cram into residential units — or take long commutes — to save money. That crowds neighborhoods and freeways and puts extra wear and tear on the region’s infrastructure.
To combat financial strain, local renters doubled up in pricey units. In 2014, L.A.-O.C. had the second-most crowded rentals among the 40 largest U.S. markets, with 2.9 people per unit, census data shows.
It’s a trend Fejeran is increasingly seeing in the South Bay.
“We have a lot of beach properties where it’s three single women who are working or going to school and they are sharing rent because they can’t afford it on their own,” she said.
Shima Razipour, a Realtor at Keller Williams in Torrance, said potential tenants now face almost the same level of vetting that buyers do.
She recently helped a couple from Lawndale in their late 30s find a place in Harbor City. They had just about given up after getting denied six times for other apartments in Torrance and Gardena.
When they got denied a seventh time, Razipour figured out why they lost to other tenants.
“I don’t know what happened the previous six times, but this landlord was very particular and it was that they don’t have amazing credit,” Razipour said. “It was very discouraging to have to tell them that. Landlords are becoming more picky and that’s a huge challenge.”
Hopefuls who work in sales or are unmarried face additional scrutiny because landlords question their stability, she said.
Too much good stuff
In many ways, the housing crunch is an outgrowth of a solid economic recovery.
Economist Chris Thornburg doesn’t see a housing affordability problem, noting a decent pace of home-buying after the recession. Rather, there’s a huge imbalance between the success of the region’s job market growing rapidly out of the Great Recession and residential construction.
“Demand is driven by a hot economy and one of the most sublime living environments in the world,” said Thornburg of Beacon Economics. “Supply is constrained because we refuse to take any real actions. We’re becoming a country club region. We are squeezing the little people and keeping the place for the more well-heeled.”
From 2010 to 2014, the L.A.-O.C. region added 349,000 jobs, 6.7 percent growth that easily topped the 3.9 percent growth seen in the nation’s 40 largest metro areas combined, government job stats show.
But developers were scarred from recessionary losses and limited by skittish lenders unwilling to fund much new construction. As a result, construction of new homes and apartments stalled to a pace that’s no more than half of what was considered necessary to house the region’s new workers.
In Long Beach, the mismatch means only roughly 2 percent of apartments are empty, said Spencer Pabst of the Pabst Kinney brokerage. A new rental listing will quickly draw two or three applications without those apartment seekers ever seeing the unit.
“If there’s demand, it’s going to increase prices,” Pabst said.
Thornburg fears the housing crunch is pushing middle-income workers out of the region.
“We’ve ended up with a critical labor shortage in what I’ll call ‘midskill’ jobs,” he said. “Need a machinist or a construction worker? Good luck finding one.”
Postscript
The regional housing crunch hasn’t abated in the past two years.
Consider that homes have appreciated far faster than local paychecks. That shows up in one measure of home affordability from the National Association of Home Builders, which reflects home gains outstripping raises by at least 5-to-1 in two years.
By the association’s math, just 15.6 percent of homes sold in Los Angeles in the first quarter met “affordable” standards. That’s down from 17.7 percent in 2014.
It’s a dilemma that’s nudging the public, especially in the Western U.S., to believe that an affordable roof over their head — owned or rented — might be a dream.
A recent MacArthur Foundation survey found 77 percent of those polled in Western states agreed it is harder today to have stable, affordable housing than it was for previous generations. That’s the highest share of housing angst of any U.S. region and above the 68 percent who felt the same nationwide.
Rebecca Naser of Hart Research, which conducted the survey, said that despite an overall improving economy and real estate markets, “People look at the (positive) economic indicators and don’t see that in their own lives. People had to go into the red in wake of the housing crisis, and they haven’t caught up.”
