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Report: LA is the nation’s most unaffordable housing market—and prices will keep rising

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The report argues that housing demand is increasing faster than supply

Aerial view of houses in LA
The study finds that LA’s ratio of cost of housing to income is the highest nationwide.

Home prices in Los Angeles have never been higher, and rents are increasingly unaffordable for many residents. Sadly, a new report from the UCLA Anderson Schoolf of Management predicts the situation is unlikely to change in the near future.

The report finds that three of the six most unaffordable cities for homebuyers nationwide are in Southern California and that Los Angeles is the single most unaffordable city for both renters and buyers. Though the cost of housing is higher in other cities, median income in LA is low enough that more residents will struggle to make monthly rental payments or save to buy a home.

The report notes that rental rates and home prices are closely tied—and both are likely to continue rising, in part because of a relatively sluggish pace of new housing development. Between 2014 and 2016, job creation vastly outpaced the construction of new housing in Los Angeles, San Diego, Orange County, San Jose, and San Francisco—not coincidentally some of the most expensive urban areas in both California and the U.S.

The study predicts that housing prices will increase as long as demand continues to rise faster than supply.

A quarterly report from UCLA released earlier this year found that, while the pace of housing development statewide is underwhelming, the luxury rental market may now be oversupplied.

Prices in high-end units may start coming down as a result, which should be good news for middle and upper middle class renters, but probably won’t make much difference for lower-income earners. The quarterly report also notes that developers may hesitate to build new luxury projects as a result, further contributing to the slow rate of development.