City Report Shows More than Half of WeHo Residents Are ‘Rent-Burdened’

In West Hollywood, where renters make up almost 80% of the population, more than half of them are “rent burdened,” meaning they spend 30% or more of their income on rent and thus may face challenges paying for food, clothing, transportation and medical care.

The number of rent-burdened residents is one piece of data from the 2016 Housing Report recently released by the City of West Hollywood’s Rent Stabilization and Housing Division. The report paints a picture of a city with a small pool of households inhabited by moderate-income residents (17%) and a much larger number of very-low and low income households (41%) and of more relatively affluent households (43%). Those with very-low and low incomes earn less than $29,616 or $47,386 a year, respectively for a one-person household. Those with moderate incomes earn $59,232 a year. Those with above-moderate incomes earn $71,000 or more.

The West Hollywood data reflect a similar situation across California and especially in greater Los Angeles, which in 2015 had the lowest rate of new housing built in the nation.

“Not enough new housing is built in California,” the report states. “Nationally, outside of California, production of 5+ unit buildings has been at the highest level since 1987. This new supply has led to increased vacancy rates in many regions. In Southern California, however the situation is different. Features that are unique to California’s housing market alter the supply-demand balance and keep the markets tight. One factor is that there is the constriction of overall housing supply that comes from regulatory and zoning controls. A result of constraints on housing production is that the Los Angeles region in 2015 had the lowest rate of housing production in the nation.”

“This shortage threatens to push many families into poverty,” the report states. “While the state’s overall poverty rate is 16%, when high housing costs are included in the calculation, that rate increases to 21%. Affordability is especially challenging in Los Angeles County, where inflation-adjusted housing prices have risen 27% in the last 13 years while inflation adjusted wages have declined 7%.”

“In the regional context, West Hollywood is a small real estate market that contributes a small number of units to the overall housing stock in the Los Angeles region,” the report notes. “Therefore, the cost of both for-sale and rental housing in West Hollywood is subject to regional pressures as well as those within the borders of the city … “

What It Costs to Rent in West Hollywood

The report notes that the market rent for non-rent stabilized apartments in West Hollywood last year averaged $3,070 per unit (a calculation that includes everything from studios to three-bedroom units). While that calculation is an average, newly opened apartment buildings such as the Domain and the Avalon West Hollywood are marketing apartments with rents as high as $4,410 for a one-bedroom apartment at the Avalon and $4,390 at the Domain. The average market-rate rent in 2016 increased 1.9% from the year before.

The average rent for newly available rent-stabilized apartments in 2016 ranges from $1,590 for a studio apartment to $1,977 for a one-bedroom, $2,576 for a two-bedroom and $3,753 for a three-bedroom unit. On average, rents for newly available rent-stabilized apartments have climbed 28% since 2013 according to the report.

Those who have been living in the same rent-stabilized apartments before 1976 have seen their rents climb only slightly to average levels of $848 a month for a studio, $928 a month for a one-bedroom, $1,238 a month for a two-bedroom and $1,642 a month for a three-bedroom unit. That lower rent is because of a city law that restricts annual rent increases to 75% of the annual Consumer Price Index increase.

But when a tenant leaves a rent-stabilized apartment, a state law known as Costa-Hawkins specifies that the owner can increase the rent to the current market rate. The report notes that since the passage of Costa-Hawkins in 1996, 64% of the city’s rent-stabilized apartments have had at least one vacancy. The average increase in an apartment’s rent following a tenancy’s vacancy has soared from $129 in 2010, when the city and the nation were still suffering from the Great Recession, to $468 last year. Reflecting that increase in rents is a major decline in turnover of residents as illustrated in the chart below.

How Much Do You Have to Earn to Rent in West Hollywood?

The average rent for a non-rent stabilized unit cited in the report is  $3,070 a month, meaning one would have to earn at least $122,760 a year to follow  standard financial advisor recommendations that one spend no more than 30% of one’s income on rent or mortgage payments.

When it comes to rent-stabilized units in West Hollywood, the city report shows a big difference in the household income needed in 2016 by a new tenant in a rent-stabilized apartment as opposed to one who has been in the same apartment since before July 1976, when rent-stabilization took effect. The average income required for a new tenant of a one-bedroom apartment (one-bedrooms make up 53% of the city’s rent-stabilized apartments) is $79,080 compared to the $36,040 that a long-term tenant would have to make to afford the rent

Rent-Stabilized Housing Units

How many rent-stabilized housing units are there in West Hollywood?

The report notes that 75% of the more than 24,039 housing units in West Hollywood are rent-stabilized. Those 16,784 rent-stabilized apartments and houses were built before July 1, 1979, and, as noted above, under city law landlords can raise the annual rents of the tenants occupying them only by a percentage increase in the Consumer Price Index. The authorized increase this year was 1%.

How many rent-stabilized buildings and apartments have been removed under the Ellis Act?

A total of 764 units in 203 buildings, or 4.6% of WeHo’s rent-stabilized housing units, have been removed from the rent-stabilized market since 1986, when the Ellis Act took effect. The Ellis Act is a state law that allows a building owner to go out of the rental business. Property owners invoke the Ellis Act for a variety of reasons including a decision to inhabit the property themselves, to change a building’s use (perhaps by converting it to a condo building) or for new construction of a condo building.

As of Oct. 12, 105 of the buildings removed under the Ellis Act in the past 32 years have been converted to single-family homes or aren’t being rented at all. Thirty-seven of those buildings, with a total of 96 units, have been replaced by 45 houses. The sixty-eight buildings that remain off the market contain 186 un-rented apartments.

Sixty-six buildings with a total of 281 units have been replaced with 471 apartments already built and another 298 proposed, all of which are likely to be condominiums. Sixteen were returned to the rental market and another 16 were converted to a commercial use or used as a bed & breakfast or converted to affordable housing.

In sum, the 764 rental units removed from the WeHo rental market under the Ellis Act have been replaced with 391 units for rent with another 298 in the pipeline.

Affordable and Inclusionary Housing

Since 1986, shortly after the city was incorporated, 322 “inclusionary” housing units have been built in West Hollywood. An additional 99 are under construction or have been approved.

City law requires that a developer of a project of 10 or more units must make at least 20% of those available to tenants whose household income is below the average median household income. That median in Los Angeles County is $54,450 for a one-person household and $62,200 for a two-person household. Recent years have seen a large increase in inclusionary units in West Hollywood, with 214 added between 2014 and 2016 and 99 projected for this year and next.

The city also has worked with non-profit organizations (primarily the West Hollywood Community Housing Corporation) to build affordable housing. The city’s Affordable Housing Trust Fund provides funding to non-profit developers such as the West Hollywood Community Housing Corp. to build projects where at least 60% of all units are affordable for low- and moderate-income households. While the report doesn’t discuss it, one issue is how that money actually can be used. West Hollywood is ranked as the 17th most densely populated city in the nation, which means there is limited land for construction of new projects and local opponents of new development push hard against demolishing smaller existing apartment buildings to replace them with larger affordable-housing buildings.

The report notes that “most new residential development in West Hollywood is out of reach to low and moderate wage households.” Furthermore, 54% of the new construction consisted of two- to ten-unit condo buildings whose owners took advantage of the option to donate money to the city’s Affordable Housing Trust Fund rather than add affordable units to their projects.