Most Los Angeles Apartments Require More Than The Annual Median Income To Rent
Anyone looking for a home or renting an apartment knows it is nearly impossible to find something that you can afford and also love. The cost of living has been consistently rising and even with recent efforts and attention towards increasing the minimum wage, it’s just plain difficult to meet the minimum income requirements to buy or rent a home.
According to the most recent Census’ American Community Survey, median annual household income for Los Angeles County is $61,388. This means that 50% of the Los Angeles population is making more than this, but also 50% is making less. If you’ve been wondering where you can afford to live, RentHop’s data science team has done the math for you.
Some of our key findings this year include:
- Of the zip codes we had data for, 54% had median 2-bedroom rents exceeding half of the median household income.
- The median rent for a two-bedroom in Los Angeles is $2,838 per month, and will require $113,520 to secure. That’s about 185% of the LA median household income. With $61,388 a family could afford rent of just $1,535 per month; just a handful of LA neighborhoods.
- The zip code 91436 (Encino) tops the affordability list, requiring only 24% of the annual household income. This is largely influenced, however, by the high median household income relative to the median 2-bedroom rental price.
- In the zip code 91316, however (also in Encino), the affordability numbers are significantly different, highlighting the vast income discrepancies even in adjacent zip codes. While zip code 91316 ($2,500) and zip code 91436 ($2,800) have median 2-bedroom rents that are somewhat comparable, the disparity in the household incomes in zip code 91316 ($66,128) vs. zip code 91436 ($137,683) has a large impact on affordability.
- It should come as no surprise that the most expensive neighborhoods to rent an apartment were near the coast in the neighborhoods North of Montana (zip code: 90402), Eastern Malibu (zip code: 90265), and Pacific Palisades (zip code: 90272).
The 40x Rule
To calculate what is and isn’t affordable, we used the 40x rule. This is the rule of thumb for most landlords in pretty much every major city. This guideline says that the household income must be at least 40 times the monthly rent. For example: the median rent for a two-bedroom in Los Angeles is $2,838 per month, and will require $113,520 to secure. That’s about 185% of the LA median household income. With $61,388 a family could afford rent of just $1,535 per month; just a handful of LA neighborhoods.
There are exceptions to this rule: If you have vast savings or a guarantor whom makes 80 times the rent, a landlord is likely to let you slide without meeting the income requirements. It’s also not unheard of for a landlord to request last month’s rent in addition to the first month and security deposit for those with below average credit / income. Our “how much can I afford” guide can give you a little more info on these rules and some ways to overcome them.
So how much DO you need in order to live in a Los Angeles neighborhood?
The Map Below Shows the Affordability of 2-Bedroom Apartments in Los Angeles Based on Zip Code
The map above shows the cost of a two-bedroom in neighborhoods across Los Angeles County. We used our rental data for the past 6 months as of June 1, 2018 to calculated the median asking rent and multiplied that by 40 to calculate the customary income requirement to rent an apartment in the table below. Median household income by zip code is according to the Census American Community Survey 2016, table S1903.
This could lead you to believe that no one can afford to live in Los Angeles, but as we know, many people make significantly more than the median income, many other are retired and own their homes, and certainly many people have been locked in rent at a much lower rate years ago. This map and data represents a current market snapshot and what it costs to find a new apartment today.
What Are the Least Affordable Places to Live in Los Angeles?
It should come as no surprise that the most expensive neighborhoods to rent an apartment were near the coast in the neighborhoods North of Montana (zip code: 90402), Eastern Malibu (zip code: 90265), and Pacific Palisades (zip code: 90272). In the neighborhood North of Montana, median rent for 2-bedrooms hover around $6,300 per month, requiring $252,000 per year in household income.
From an income unaffordability standpoint, however, neighborhoods such as South Park ($3,421), Gallery Row ($2,900), and Central Hollywood ($3,928) top the charts. With median incomes of $25,143 for South Park (zip code: 90017), $23,580 for Gallery Row (zip code: 90014), and $35,729 for Central Hollywood (zip code: 90028), median 2-bedroom rents are astronomically high, requiring over 130% of annual household income for each of the aforementioned neighborhoods.
The Table Below Displays All Two-Bedroom Median Asking Rents
It also shows the income required to live there for all neighborhoods that we had sufficient data. You can sort by “Zip Code”, “Income Required to Rent (40x rule),” “Median 2BR Price,” or “% of Income Required for Median 2BR Rent,” or type in a neighborhood name or zip code to search for yours.
If you click “% Income Required for Median 2BR Rent” to re-sort the table above it’ll show that stat in ascending order. This shows us Encino and North Redondo Beach at the top of the list of affordable neighborhoods relative to median household income. Neighborhoods in south LA and far north LA were significantly less expensive than Central and Western LA. Westmont, South Central, and North Holywood North East ranked top 3 in affordable neighborhoods from rent-only perspective (i.e. ignoring median household income).
The table can also be sorted alphabetically or searched using the name of the neighborhood you’d like to look up. If your neighborhood isn’t found, we may not have data for it.
What Does This Mean For You?
While these stats aren’t the be all and end all of the housing market, they definitely paint a picture of what to expect when hunting for your next home. We encourage you to entertain all options when finding a new apartment, including having as many income-earners in the household as possible and looking at apartments with more bedrooms to bring down the average cost per bedroom.