NELA Real Estate in 2018: High Rents Have Cast Nearly One in Five Californians into Poverty 

2018 Editions News November Real Estate

California prides itself on being a prosperous state. But California has the highest poverty rate of all the states, 19%, according to a measure by the U.S. Census Bureau that looks at the costs of living in each state and the federal aid available to help cope with those costs.

Over all, the census figures, known as the “supplemental” poverty rate, show that the West, dominated by California, now has a higher poverty rate than the South, historically the poorest region in the country. The West, which includes the 13 westernmost states, has a poverty rate of 15.1%, compared with 14.8% for the 16 states that make up the South.

How did it get this bad? The short answer is that California’s high poverty rate is driven mainly by high and unaffordable rents.

But how did rents run amok? One explanation is that for a long time now, the supply of apartments in California has not kept up with demand, which leads to ever higher rents.

Another explanation is that unaffordable rents are a consequence of rising income inequality. Incomes at the top of the economic ladder have grown, pulling up housing costs. But there has been no comparable growth in income for most working people, making it ever more difficult for them to afford places to live. Currently, about a third of Californians spend more than half their total family income on rent, according to the Stanford Center on Poverty and Inequality. The results are overcrowding, inability to afford other essentials, evictions, homelessness and other hallmarks of poverty.

Theoretically, laws and public policies are supposed to prevent or correct big economic imbalances like the ones behind California’s high housing costs. The state’s $15-an-hour minimum wage, intended to lift low wages, is one such policy. And Californians are now debating rent control, zoning changes and the construction of housing for seniors, veterans and the homeless. With a third of the population hard pressed to keep a roof over their heads and more than 100,000 people in the state already homeless, all possible solutions need to be on the table.

State-based solutions are also needed because adequate help from the federal government is not on the way. Congress recently went against President Trump’s wishes to approve a slight increase in funding for federal housing vouchers and new construction, but the increase is not enough to have a meaningful impact on the number of families that can’t afford the rent.

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