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Los Angeles 2011: State of the City is published by the Edmund G. “Pat” Brown Institute of Public Affairs,California State University, Los Angeles, 5151 State University Drive, Los Angeles, CA 90032-8261. Digital copies are available at www.patbrowninstitute.org

Publication date: November 2011© 2011 The Edmund G. “Pat” Brown Institute of Public Affairs

LOS ANGELES 2011:State of the City

A Publication of the Pat Brown Institute

Daniel Flaming and Patrick BurnsEconomic Roundtable

The Edmund G. “Pat” Brown Institute of Public Affairs2011

STATE OF THE CITY

TABLE OF CONTENTS

Introduction vJAIME REGALADO ALI MODARRES

State of the Economy 1DANIEL FLAMING PATRICK BURNS

The State of Rental Housing in the City of Los Angeles 16DANIEL FLAMING PATRICK BURNS

Walkable Neighborhoods with Affordable Housing and Public Transit 20DANIEL FLAMING PATRICK BURNS

Biographies 30

STATE OF THE CITY

ci

STATE OF THE CITY

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INTRODUCTION

November 2011

Dear Readers:

It gives us great pleasure to welcome you to our 2011 edition of Los Angeles: State of the City Report. As the

title implies, the publication is an annual enterprise of the Pat Brown Institute of Public Affairs.

Los Angeles is the nation’s second most heavily populated city. It has a formidable economy, albeit a trou-

bled one, that provides a financial base for the nation’s largest state economy, also heavily troubled. The city is

arguably one of the most culturally diverse in the nation and, indeed, the world. This remarkable place can be

described in many ways, and each perspective opens an exciting new window to the rich social, political, eco-

nomic, and cultural dynamics of the area.

Today’s hard times call for strong spirits and frank analysis of where we are and where we are going. For

Los Angeles to maintain its image of prosperity as the last stop on the highway to American Dreams, it must

face socioeconomic realities and challenges. For that reason, this year’s State of the City Report focuses on two

important issues: employment and housing.

Parting with our previous style of having multiple authors develop independent reports, this year we have

partnered with colleagues at the Economic Roundtable to produce the entirety of the report. The State of the

City Report is divided into three sections: state of the economy, state of rental housing, and importance of bal-

ancing transit-oriented development with affordable housing. The in-depth analyses contained herein paint a

bleak picture of our employment opportunities, allowing us to see the diversity of people facing hardship in the

job market. This situation is compounded by significant problems in the housing market that are making the re-

gion unaffordable to many. We believe that this report, in its entirety, functions as a wake-up call to our regional

decision makers, offering them an array of policy options that are equitable in nature and progressive in spirit.

We are proud and delighted to present you with this annual report. We hope that you find this and future

reports informative and useful.

Sincerely,

Jaime A. Regalado, PhD Ali Modarres, PhD

Executive Director Chair

Pat Brown Institute Department of Geosciences and Environment

STATE OF THE CITY

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STATE OF THE ECONOMYDANIEL FLAMING President of Economic Roundtable

PATRICK BURNS Senior Researcher

Figure 1. LA’s Underemployment Rate above 23% since July 2009

Sources: Unemployment rate for Los Angeles County from BLS monthly date underemployment rate for each month is a 3-month average of the current and 2 prior months.

HIGHLIGHTS 1. A quarter of LA’s labor force lacks sustaining work because it is un-

employed or underemployed. Over a third of LA’s households are

impacted by underemployment.

2. Unemployment and underemployment rates for Los Angeles’ resi-

dent labor force are 40% and 41% higher, respectively, than U.S. rates.

3. Underemployment among college-educated workers in Los Ange-

les County is 80% higher than the national rate.

4. African American workers have the highest underemployment rate

of any ethnic group. Rates of disconnection from work have risen in

2011. Less than half of young African American men under the age

of 25 who are not in school are employed.

5. Workers under 25 years of age have the highest underemployment

rate—36.1%. Long-term economic stability depends on strong job

connections for young workers.

6. LA’s economy does not have enough jobs to provide employ-

ment for all of its residents who must support themselves and

their families through work. Since 1990, Los Angeles’ population

has grown 19%, but the number of jobs in its formal economy has

declined 9%.

7. Slow, steady annual job growth is likely, with jobs in the formal

economy returning to the prerecession level in 2018, and total em-

ployment (including informal and self-employed workers) return-

ing to that level in 2016.

8. LA has opportunities to nudge its economy toward sustainable

long-term growth. The most important tools are local government’s

authority over land use, education, and the labor market. Success-

ful use of these tools depends on understanding LA’s strengths and

working in harmony with market forces to build on those strengths.

Figure 2. U.S. Underemployment above 15% since February 2009

Sources: Unemployment rate from BLS monthly date, underemployment rate for each month is a 3-month average of the current and 2 prior months.

LOS ANGELES 2011

2

OVERALL LABOR FORCE TRENDSA quarter of LA’s labor force lacks sustaining employment because

it is unemployed or underemployed. The inability of workers to earn a

living creates income insecurity and reduces the standard of living for

everyone in their households. Given that 59% of LA’s population is in the

labor force and that worker households have an average of 3.6 people,

damaging consequences from LA’s lack of jobs are likely to directly af-

fect over a third of Los Angeles’ population.1

The underemployment rate for LA’s resident labor force has been

above 23% for over 2 years, as shown in Figure 1.2 Underemployment is

about 80% higher than official unemployment rates, also shown in Fig-

ure 1. Underemployed workers include the officially unemployed who

are actively looking for a job, and also involuntarily part-time workers

who want full-time work but have to settle for part-time hours, and mar-

ginally attached workers who want and are available for work but are

not actively looking for a job.

The unemployment and under-employment rates for Los Angeles’

resident labor force are 40% and 41% higher, respectively, than the U.S.

rates shown in Figure 2.

UNDEREMPLOYMENT FOR WORKER GROUPSCollege Educated

One of the most disquieting findings is the high level of under-

employment in college-educated workers in Los Angeles County com-

pared with California and the United States (Figure 3). The underem-

ployment rate in LA was 70% higher than the national rate, and the

unemployment rate was 80% higher. This trend has been evident over

the past 2 years.

This hollowing out of knowledge-based employment raises seri-

ous questions about which industries will emerge from the recession

with robust competitive strength. The industry connections and em-

ployment status in 2009 of workers with a B.A. degree or higher are

shown in Figure 4. This labor force profile reflects industry contraction

and attrition of jobs for higher-educated workers during the first 2 years

of the recession.

Overall, in 2009, 6% of college-educated workers were unem-

ployed, and another 6% were discouraged workers. Rates of disconnec-

tion from work for these and other groups of workers rose still higher in

2010.3 The greatest absolute number of unemployed and discouraged

workers was among those formerly employed in Professional Services

(27,000), followed by Education (23,000), as shown in Figure 4.

Figure 3. High LA Underemployment for Workers with B.A. Degree

Sources: CPS records for noninstitutional, civilian population, age 25 and over. For adequate sample size, data for each month is a 3-month average of the current and 2 prior months.

Figure 4. Industry Connections of Workers with B.A. Degree, 2009

Sources: 2009 American Community Survey PUMS for Los Angeles County

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The highest rates of underemployment (unemployed plus discour-

aged workers) were in Temporary Employment Agencies and other

industries that provide business support services (18.2%), followed by

Entertainment (17.5%), Motion Pictures and Sound Recording (17.3%),

and Retail Trade (16.5).

Industry sectors in which the 2009 rate of underemployed workers

in Los Angeles County was at least 20% higher than in the United States

as a whole include:

• Professional Services 21%

• Utilities 23%

• Hotels and Restaurants 24%

• Information Excluding Motion Pictures 24%

• Transportation and Warehousing 37%

No High School Diploma

Underemployment rates for LA workers without a high school di-

ploma are 121% higher than those for workers with a B.A. degree (Fig-

ure 5). Labor market conditions are bleak for these workers throughout

the U.S. In LA, California, and the nation as a whole, under-employment

rates for the least-educated group of workers were above 25% by the

beginning of 2009 and have remained above that plateau ever since.

Overall, in 2009, 10% of workers without a high school diploma

were unemployed and another 11% were discouraged workers. The

greatest absolute number of unemployed and discouraged workers

was among those formerly employed in Construction (25,000), followed

by the business support sector that includes Temporary Employment

Agencies, Janitorial Services, and Security Guards (21,000), as shown in

Figure 6. The highest rates of underemployment were in Social Assis-

tance (29.7%), Retail Trade (21.4%), the business support sector of Tem-

porary Employment Agencies, Janitorial Services, and Security Guards

(20.6%), and Construction (20.5%).

Latinos

The share of adults without a high school diploma is more than 4

times greater among Latinos than among non-Latinos throughout the

United States (2009 American Community Survey).

Latinos account for 32% of all U.S. adults without a high school di-

ploma, 67% of California adults, and 76% of LA adults. Consequently, un-

deremployment trends for Latinos shown in Figure 7 have some resem-

blance to those in Figure 4 for the overall population without a diploma.

Underemployment among Latino workers is still high, above 25%

in LA and California, and above 20% nationally, but rates have dropped.

In LA, the current rate is almost a fifth lower than in early 2010.

Figure 5. High Underemployment for Workers with No H.S. Diploma

Sources: CPS records for noninstitutional, civilian population, age 25 and over. For adequate sample size, data for each month is a 3-month average of the current and 2 prior months.

Figure 6. Industry Connections of Workers with No H.S. Diploma

Sources: 2009 American Community Survey PUMS for Los Angeles County

Figure 7. High Latino Underemployment, some progress in 2011

Sources: CPS records for noninstitutional, civilian population, age 16 and over. For adequate sample size, data for each month is a 3-month average of the current and 2 prior months.

LOS ANGELES 2011

4

Overall, in 2009, 11% of Latino workers were unemployed and an-

other 7% were discouraged workers. The greatest absolute number of

unemployed and discouraged workers was among those formerly em-

ployed in Construction (45,000), followed by the business support sec-

tor that includes Temporary Employment Agencies, Janitorial Services,

and Security Guards (34,000), Repair and Personal Services (30,000), and

Hotels and Restaurants (30,000), as shown in Figure 8. The highest rates

of underemployment were in Construction (19.9%), Retail Trade (19.5%),

and Social Assistance (19.0%).

African Americans

African American workers have the highest underemployment

rate of any ethnic group. Furthermore, rates of disconnection from work

have risen in 2011, as shown in Figure 9.

Overall, in 2009, 15% of African American workers were unem-

ployed and another 9% were discouraged workers. The greatest ab-

solute number of unemployed and discouraged workers was among

those formerly employed in Retail Trade (16,000), followed by the busi-

ness support sector that includes Temporary Employment Agencies,

Janitorial Services, and Security Guards (11,000), as shown in Figure 10.

The highest rates of underemployment were in Hotels and Restaurants

(42.8%), the business support sector that includes Temporary Employ-

ment Agencies, Janitorial Services, and Security Guards (37.4%), Enter-

tainment (35.8%), Construction (35.7%), and Retail Trade (33.4%).

Employment rates among African American workers in Los Ange-

les rise with level of education and age and are higher for women, as

shown in Figure 11, using annual average data for 2009.

Less than half of young African American men under the age of 25

were employed in 2009, and employment rates have dropped in sub-

sequent years.

The scarcity of jobs for African American workers is not explained

by lack of education. Among persons 25 years of age or older, only 12%

of blacks did not have a high school diploma, 24% were high school

graduates, 41% had some college education, and 22% had a B.A. degree.

This is roughly similar to the overall educational profile of adults in Los

Angeles County.4

Figure 8. Industry Connections of Latino Workers in 2009

Sources: 2009 American Community Survey PUMS for Los Angeles County

Figure 9. African Americans have highest Underemployment Rate

Sources: CPS records for noninstitutional, civilian population, age 16 and over. For adequate sample size, data for each month is a 3-month average of the current and 2 prior months.

Figure 10. Industry Connections of African American Workers in 2009

Sources: 2009 American Community Survey PUMS for Los Angeles County

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Lack of labor force inclusion for black workers is a critical problem.

Sustaining employment is essential for economic survival. Extended

separation from work marginalizes workers and makes re-employment

increasingly difficult. This problem affects all under-employed workers

but is endemic for African American workers. There is an urgent need for

actions that bring more black workers into the labor force.

Under 25 Years of Age

Workers under 25 years of age have the highest underemploy-

ment rate of any labor force group—36.1% in LA, 35.8% in California,

and 30.6% in the United States (Figure 12).

Many of the youngest workers who are ready to join the labor

force have been shut out. Long-term economic growth and stability

depends on the success of young workers in finding footing in the

labor market. The emerging demographic profile of increasing num-

bers of retired workers and decreasing numbers of working age adults

makes it particularly important for young workers to build strong labor

force connections.

There is evidence that youth unemployment can leave a “wage

scar” in the form of a large and significant wage penalty that can con-

tinue into middle age.5

Workers 16–24 years of age who do succeed in finding jobs are

highly concentrated in Retail Trade and Food Services, which also left

many of these workers underemployed in 2009, as shown in Figure 13.

Overall, in 2009, 21% of workers 16–24 years of age were unem-

ployed and another 6% were discouraged workers. The greatest ab-

solute number of unemployed and discouraged workers was among

those formerly employed in Retail Trade (34,000), followed by Hotels

and Restaurants (20,000). The highest rates of underemployment were

in Construction (32.6%) and Transportation (28.1%).

Figure 11. Labor Force Status of African American Workers in 2009

Sources: American Community Survey 2009 Public Use Microdata Sample for Los Angeles County; Universe: all African Americans with work histories

Figure 12. Nationwide High Underemployment for Workers <25 Years

Sources: CPS records for noninstitutional, civilian population, under age 25. For adequate sample size, data for each month is a 3-month average of the current and 2 prior months.

Figure 13. Industry Connections of Worders 16-24 Years of Age, 2009

Source: 2009 American Community Survey PUMS for Los Angeles County

LOS ANGELES 2011

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Comparisons With U.S. Rates

Unemployment and under employment rates for labor force

groups in LA are compared with U.S. rates in Figure 14. In rank order,

the three groups of LA workers whose underemployment rates most

exceed national rates are as follows: workers with BA degrees (70%),

workers 45-54 years of age (67%), and workers with some college edu-

cation (59%).

LACK OF JOBSLos Angeles County’s economy does not have enough jobs to pro-

vide employment for all of its residents who must support themselves

and their families through work. Job growth in LA’s wage and salary

economy has not kept pace with population growth (Figure 15).

The collapse of aerospace following the end of the cold war in

1989 was a watershed for Los Angeles County. Roughly $70 billion in an-

nual defense procurements left the local economy, 1.1 million residents

migrated out of the county, and the economic progress of working poor

immigrants became the central challenge shaping the region’s future.

Since 1990, Los Angeles’ population has grown 19%, and the

number of jobs in its formal economy has declined 9%. Much of

the residual labor force finds employment in the informal economy,

where wages are low and paid under the table without benefits or

labor law protection.

This has meant that even in years with low-official unemployment

rates, such as in 2007 before the recession began, a significant number

of households have been on the losing end of competition for an inad-

equate number of sustaining jobs.

Figure 14. Los Angeles compared with U.S. Labor Market, August 2011

Sources: Unemployment rate for total labor force from BLS data for August 2011, rates for subgroups and all underemployment rates are 3-month averages for June–August 2011.

Figure 15. Los Angeles County Jobs and Population 1970-2011

Sources: U.S. Census Bureau, California Employment Development Department.2011 employment data for Los Angeles County is for June 2011.

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WHERE JOBS HAVE BEENFor the most part, Los Angeles is a place where workers provide

services for people or manipulate data and information. Less than one

fifth of jobs are in construction, manufacturing, transportation, or utili-

ties. Shifting now to data provided by employers that show jobs located

in Los Angeles (in contrast to previous data provided by workers that

show where workers live), the industrial profile for 2007 (at the height

of the last business cycle before the 2008 recession began) is shown in

Figure 16. Job distribution by industry supersector was as follows:

Figure 16. Los Angeles County Industry Employment Profile in 2007

Sources: Employment Development Department, Labor Market Information Division, March 2009 benchmark.

SUPERSECTOR PERCENTAGE OF TOTAL EMPLOYMENT

• Construction 4

• Durable manufacturing 6

• Nondurable manufacturing 5

• Transportation, warehousing & utilities 4

• Wholesale trade 6

• Retail trade 10

• Information 5

• Financial activities 6

• Professional and business services 14

• Leisure and hospitality 10

• Repair & personal services 2

• Education & health services 12

• Government 14

LOS ANGELES 2011

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WHERE JOBS HAVE BEEN LOSTThe greatest amount of job destruction following the onset of

the recession occurred in Construction (-53,000), followed by the Busi-

ness Support Services cluster (-45,000), then Durable Manufacturing

(-44,000), and Retail Trade (-41,000). This job change from 2007 to 2010

is shown in Figure 17.

Three industries have grown since the beginning of the recession:

Social Assistance, Private Education, and Health Care. This reflects grow-

ing needs for health and social services, as well as investments of work-

ers in their own human capital through their own education and train-

ing during a time of scarce employment.

The rate of job loss varied among industries. One indication of

industry resilience and competitiveness is the location quotient (LQ),

shown in Figure 18. This shows the share of Los Angeles County’s labor

force employed in an industry in 2010 compared with the share of the

U.S. labor force employed in the same industry.6 An LQ of 1.0 indicates

that the region is at parity with the nation in attracting and retaining that

industry. An LQ of less than 1.0 indicates below-average competitive

strength, and an LQ greater than 1.0 indicates above-average strength.

Based on location quotients, LA’s greatest competitive industry by

far is Motion Picture Production and Sound Recording, with a share of

the local labor force that is 11.3 times greater than this industry’s share

of the U.S. labor force.

The goods manufacturing and movement sector shows competi-

tive strength. This includes Nondurable Manufacturing (29% greater

share of the labor force than in the U.S.), Wholesale Trade (28% greater),

Transportation and Warehousing (9% greater), and Durable Manufactur-

ing (1% greater).

The leisure and hospitality sector, except for hotels, shows compet-

itive strength. This includes Arts, Sports, Entertainment, and Recreation

(23% greater than the U.S.) and Restaurants (2% greater). The location

quotient for Hotels shows that 24% less of the labor force is employed in

this industry in Los Angeles than in the United States as a whole. Given

Los Angeles’ identity as a tourist destination and the highly developed

entertainment sector, there may be as-yet-unrealized possibilities for

growth in the hotel industry.

Los Angeles has competitive strength in Professional, Scientific,

and Technical Services (14% greater than the U.S.) and Information, ex-

cluding Movies (4% greater), but it has below- average labor force con-

centrations in Financial Services (6% less), Health Care (12% less), and

Social Assistance (21% less).

Figure 17. Industry Job Change 2007-2010

Sources: American Community Survey 2009 Public Use Microdata Sample for Los Angeles County

Figure 18. Strengths of LA’s Industry base compared with the U.S. in 2010Los Angeles County Industry Location Quotients

Sources: Employment Development Department, Labor Market Information Division, March 2009 Benchmark.

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Figure 19. Los Angeles County’s Job and Industry Trajectory 2007-2010Number of Jobs Represented by Size of Circle

Sources: California EDD LMID for employment, US BEA for wages; formal wage and salary employment shown in graph

INDUSTRY RESTRUCTURING FROM THE 2008 RECESSION

Each recession tests the industrial strengths of the economy, alter-

ing the number and type of jobs available in the labor market and quite

possibly the wages offered for those jobs. LA’s economic trajectory for

wage and salary jobs in the formal economy from 2007 to 2010 (the peak

of the last business cycle to the most recent data) is shown in Figure 19.

Only three industries grew during this period, and only two of those pay

a sustaining wage, which for this report is pegged at average industry

earnings of at least $44,000 a year, that is at least double the poverty

threshold for a family of four. The two industries that have grown since

the onset of the recession and that pay sustaining wages are Private

Education and Health Care. The average wage paid in the third growing

industry, Social Assistance, is only 64% of a sustaining wage.

Government agencies, hotels, and restaurants have experienced

only 3% job loss since the recession began. Other sectors have experi-

enced job losses ranging from 6% in Motion Pictures and Sound Record-

ing to 34% in Construction.

Four industries with above-average location quotients, sustaining

wages, and the capacity to export goods and services to a global mar-

ket, but that have significant job losses since the recession started are

as follows:

• Durable Manufacturing 17% job loss

• Nondurable Manufacturing 16% job loss

• Information Excluding Motion Pictures 13% job loss

• Professional, Technical, and Scientific Services 10% job loss

Because these industries are important for the public balance

sheet and for sustaining employment of the region’s labor force, they

merit mindful attention.

LOS ANGELES 2011

10

INCREASED DEPENDENCE ON PUBLIC ASSISTANCEFrom December 2007 to December 2010, the public assistance

caseload grew 13%. This is directly attributable to growing unemploy-

ment that followed the onset of the recession at the beginning of 2008.

This is shown in Figure 20.

The cash aid program for families, CalWORKs, grew 27%.

The cash aid program for destitute adults, General Relief, grew 75%.

Although a comparatively small program with 107,000 recipients at the

end of 2010, costs are paid by the county’s general fund, making this

growth a significant burden for the county’s budget.

The Medi-Cal Only program, providing public health insurance for

low-income adults and children who do not receive cash aid, grew 5%.

The Food Stamp program, which subsidizes food purchases for

low-income individuals and families, most of whom are also enrolled in

one of the previously mentioned three programs, grew 53%.

DECREASE IN TAXABLE SALES AND SALES TAX REVENUE

Consumer spending decreases in recessions for at least two rea-

sons. First, aggregate income for making consumer purchases declines

as workers become unemployed or under-employed and have less in-

come. Second, many households reduce expenditures because of un-

certainty about the security of their job or other sources of income, thus

spending less of the income they do have. These spending reductions

compound the original causes of a recession by further decreasing the

output of goods and services that is required to satisfy market demand,

with corresponding elimination of the jobs that would otherwise be

needed to produce those goods and services.

Taxable sales in Los Angeles County, measured in constant dollars,

were 19% lower in 2010 than in 2007, the year before the onset of the

recession. Going back a year, from the pre-recession peak in 2006 to the

trough in 2009, sales declined 22%. This results in corresponding reduc-

tions in sales tax revenue for city, county, and state governments.

Figure 20. Los Angeles County Public Assistance Caseload

Sources: Los Angeles County Department of Public Social Services

Figure 21. Los Angeles County Taxable Sales in 2010 Dollars

Sources: California State Board of Equalization, Research and Statistics Section. Taxable sales in 2010 are estimated based on second quarter data.

STATE OF THE CITY

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RECOVERING FROM THE RECESSIONJob losses from the 2008 recession are almost as severe as losses

from the 1990 recession, as shown in Figure 22. Three years after the

onset of the 1990 recession, total employment (which includes the in-

formal economy) had declined 8.2% and wage and salary employment

in the formal economy had declined 10.4%.

Three years after the onset of the 2008 recession, in 2010, total em-

ployment had declined 7.9% and wage and salary employment in the

formal economy had declined 8.7%.

In the 1990 recession, the labor market scrapped along sideways at

the bottom of the employment trough during the fourth year after the

onset of the recession. This also appears to be happening in 2011, the

fourth year after the onset of the 2008 recession.

There was slow but steady annual job growth during the recovery

phase of the 1990 recession, with recovered jobs in the formal economy

reaching a plateau 10 years after the onset of the recession that was

below, and still remains below, the 1990 level. If this pattern holds true in

the recovery from the 2008 recession, it will be 2018 before the number

of jobs in the formal economy returns to the 2008 level.

Total employment returned to the pre-recession level 8 years after

the onset of the 1990 recession and peaked 11 years after the onset. If

this pattern holds true in the recovery from the 2008 recession, it will be

2016 before the total number of jobs returns to the 2008 level.

Figure 22. Los Angeles County Employment Change in the 1990 and 2008 Recessions

Sources: Bureau of Labor Statistics for household survey data from the Current Population Survey and California Employment Development Department for data reported by employers in Unemployment Insurance payroll reports.

ACTIONS TO SUPPORT ECONOMIC RECOVERY AND JOB GROWTH

The following are ten actions Los Angeles can take to support eco-

nomic recovery and promote long-term job growth:

1. Understand industry strengths and monitoring trends in key in-

dustries.

2. Make land use decisions that support growth of key industries.

3. Foster attentive, informed interaction with key industries.

4. Preserve a stable and competitive environment for key industries.

5. Intervene in measured ways to avert decline in key industries.

6. Use government purchasing power to support growth in key in-

dustries.

7. Prioritize infrastructure improvements to help key industries.

8. Use strategic assets such as the ports to leverage local value-added

activity and jobs.

9. Take measured, efficient steps to make business capital available to

targeted industries in targeted communities.

10. Help residents get good jobs through training and employment

initiatives.

How much impact can Los Angeles have on its economy? Will

local government be picking losers and winners? The short answers

are that at best Los Angeles will give gentle nudges to its economy. If

these nudges are judiciously targeted and consistent, they can have

a modest long-term effect in helping steer the economy in the right

direction. Los Angeles is not in a position to pick industry winners and

losers. Its challenge is to achieve a discernable and constructive im-

pact on the economy.

LOS ANGELES 2011

12

The resources of local government are not large enough to control

or even have a near-term influence on LA’s economy (Figure 23). Los

Angeles County has roughly

• $1 trillion in assessed property

• $890 billion in annual industry output

• $450 billion in local value created annually

• $270 billion in annual compensation to workers

• $220 billion in annual business income

In contrast, all local governments in Los Angeles County spend

roughly $1.3 billion annually for activities typically associated with eco-

nomic development – job training, economic development, and rede-

velopment. These direct outlays for economic development and revi-

talization are less than .1% of LA’s economic output. They are too small

to be discernable in the overall economy. The most important tools of

local government for shaping the economy are indirect but potentially

powerful. Local government’s authority over land use, education, and

the labor market can have a powerful long-term influence in shaping

the largest components of the economy, such as the following:

• Land value ($1 trillion in assessed property)

• Worker productivity ($450 billion in value added)

• Worker compensation ($250,000 billion in wages and benefits)

Given this view of the public sector’s modest capabilities to influ-

ence the economy and yet the urgent need to improve LA’s economic

trajectory, what are the next steps? What tools are at LA’s disposal to im-

prove its economy? What types of risks create hazards for public invest-

ments in workers and the economy? How can those risks be weighed

against potential benefits that might result from public investments?

What are the guidelines for identifying reasonable public strategies that

are appropriate for different industries?

INDUSTRY RISKAll industries are not equal. Five key questions can be asked to as-

sess the level of risk for public funds if they are invested to support job

growth in a particular industry. Data are available to answer all of these

questions, both at a regional level and at a community level. The follow-

ing questions might be asked:

1. Cost of Job Creation—How much does it cost to create a job in the

industry?

2. Wages—What is the average wage level in the industry?

3. Industry Concentration—Does the industry show evidence of be-

ing attracted to the target community based on an above-average

concentration of jobs in the community?

4. Recent Employment Change—Has the industry grown or declined

in the past 2 years?

5. Long-term Employment Change—What overall trend of growth or

decline has the industry shown over the past 20 years?

Any job training or economic development program involves risks

to both funders and workers. The risk to funders is that improvements in

employment outcomes will not be commensurate with the funds that

are expended. The risk to workers is that they will invest their time, ef-

fort, and hopes in trying to become self-sufficient but remain in poverty.

Given what is at stake, prudent risks are well worth taking, but everyone

benefits if these risks are understood and minimized.

Figure 23. Tools for Changing Los Angeles County’s Economy

Sources: IMPLAN input-output model for Los Angeles County; public budget data, 2009

STATE OF THE CITY

13

PUBLIC TOOLS FOR STRENGTHENING THE LABOR MARKET

Public tools for increasing employment and worker earnings fall

into four categories:

• Worker training focuses directly on helping individuals become

competitive in the labor market and obtaining fair compensa-

tion for their skills.

• Business expansion among existing employers is often the most

feasible and effective strategy for job creation.

• Business creation is important in communities where there is a

scarcity of employers providing sustaining jobs.

• Business attraction is a tool for enabling existing businesses to

expand or relocate on under-utilized sites that offer locational

advantages for them.

Fifteen public tools within these four categories are listed next, be-

ginning with the most cautious forms of public engagement and pro-

gressing to the most aggressive.

Worker Training

1. Upgrade training to support mobility to other industries—for

workers with bleak job prospects in their current industry.

2. Occupation-based training—generic skill training for stable or

growing occupations that pay sustaining wages.

3. Upgrade training to support advancement within an industry—

equip workers who have low-paid but stable employment to ad-

vance to better-paid jobs within their industry.

4. Employer-based customized recruitment and training—classroom

or on-the-job training designed to meet the needs of a specific em-

ployer.

Business Expansion

5. Targeting public services to improve the business environment—

improve the quality or availability of existing public services, for ex-

ample public safety or transportation, to make a community more

efficient and attractive for businesses.

6. Assistance with regulatory issues—provide timely, coherent, and

reliable resolutions for regulatory issues, thereby improving the sta-

bility and efficiency of the business environment.

7. Publicly owned land—provide fully entitled, developer-ready sites

for businesses in targeted industries, thereby reducing develop-

ment time and cost.

8. Infrastructure improvements—use public sector financing of

roads, parking, drainage, utility improvements, or other infrastruc-

ture to make a location more attractive to businesses in targeted

industries.

9. Public sector loans, grants, or investments—provide financial capi-

tal to businesses in targeted industries.

10. Public sector purchasing power—use goods or services procured

by public agencies as a tool for negotiating agreements to hire tar-

geted workers.

Business Creation

11. Micro-enterprise loans or grants—support individuals in undertak-

ing entrepreneurial initiatives.

12. Worker-owned cooperatives—support the income-generating

efforts of a group of workers who are committed, energized, and

prepared to invest extra effort when needed.

13. New business start-ups—use any of the tools described here to

support growth of businesses in targeted industries.

Business Attraction

14. Businesses recruitment—advertise the locational advantages of a

site or community to prospective employers.

15. Relocation incentives—use any of the tools described here as in-

centives to encourage businesses to locate at a targeted site or

community.

MATCHING RISK LEVELS WITH PUBLIC STRATEGIESThere is a hierarchy of risks in job creation and economic develop-

ment, and industry data can be used to identify, rank, and manage these

risks. Higher levels of risk suggest a need for more cautious public sec-

tor engagement. Every industry should receive effective public services,

but social venture capital for training workers or creating jobs should be

invested judiciously.

Industries with the Fewest Risks and the Greatest Benefits are the

most promising targets for all forms of economic development assis-

tance, including job creation investments and job training. Approxi-

mately 15% of LA’s labor force is employed in industries that meet these

criteria. This means that broad and effective job creation efforts neces-

sarily entail engaging industries that have uncertain pay-offs for eco-

nomic development investments, and providing business support for

those industries that balance risks and benefits.

LOS ANGELES 2011

14

The resources available for improving labor market outcomes are

very small in comparison with market forces. The strategies recom-

mended in this article are based on understanding LA’s strengths and

working in harmony with market forces to build on those strengths. It

is not realistic to expect that public resources will reverse or fundamen-

tally alter LA’s economic trajectory. It is realistic, however, to expect that

thoughtful program strategies can provide slight but consistent nudges

toward retaining and expanding industries that strengthen the econo-

my and provide sustaining employment for residents.

An economic strategy is not a panacea, but without it, Los Angeles

will face increased risks of economic stagnation and growing poverty.

A successful strategy will require a continuing flow of reliable local eco-

nomic information, a broad-based public decision-making processes, a

coherent long-term vision, and perseverance.

ENDNOTES1. The 2009 American Community Survey Public Use Microdata Sam-

ple shows a total population of 9,847,607 in Los Angeles County, with

5,704,108 or 58% of these individuals being currently employed, having

worked in the past 5 years, or being currently unemployed and look-

ing for a job. There was a slight variation in the number of persons per

household based on labor force status: civilian employed, at work, 3.6

persons per household; unemployed, 3.9 persons per household; not

in labor force (discouraged workers), 3.5 persons. The overall weighted

average is 3.6 persons per household.

2. The resident labor force is made up of people who live in Los An-

geles, with some working in Los Angeles and some commuting to work

in other areas. Data about this labor force are captured through house-

hold surveys, including data from the Current Population Survey and

the American Community Survey used in this report. These data include

workers employed in the formal wage and salary economy where labor

laws are observed and payroll taxes are paid, as well as workers in the

informal economy who carry out lawful and productive work activities

but are paid under the table. A second type of labor force data used

later in this report comes from employer payroll tax reports. These data

differ from data about the resident labor force in at least three respects:

(1) it is about workers who are employed in Los Angeles but may live in

another area, (2) it includes only workers in the formal wage and salary

economy, and (3) industry classifications are more precise because they

are determined by government agencies and confirmed by employers,

rather than derived by coding workers’ survey descriptions of their work

and employers. Data provided by workers are useful for understanding

labor market conditions for groups within the labor force. On the other

hand, data provided by employers provide more accurate information

about conditions in specific industries.

The Economic Roundtable uses monthly Current Population Survey

(CPS) records to compute local, state, and national unemployment and

underemployment rates the same way as the Bureau of Labor Statistics

(BLS), with results that are identical to monthly BLS national seasonally

unadjusted unemployment rates (http://www.bls.gov/webapps/leg-

acy/cpsatab1.htm) and underemployment rates (http://www.bls.gov/

webapps/legacy/cpsatab15.htm). There is a time lag of roughly 6 weeks

in releasing CPS data.

Unemployment rates for states, the District of Columbia, Los Angeles

County, and New York City are computed by the BLS using CPS records,

with small adjustments made using time series data in a “signal-plus-

noise” model (http://www.bls.gov/lau/laumthd.htm) to smooth out

data anomalies. In a typical month, this model-based adjustment results

in unemployment rates for Los Angeles County and California that are

0.3% percentage points higher or lower than the rate obtained using

CPS records alone. The Economic Roundtable uses the official BLS sea-

sonally unadjusted monthly unemployment rate for Los Angeles Coun-

ty and California in its reports on labor force conditions. The national

unemployment statistics produced by the Economic Roundtable using

CPS records are identical to BLS national unemployment statistics.

Underemployment data are not produced for California or Los Ange-

les County by either the BLS or the California Employment Development

Department. The Economic Roundtable produces these data using CPS

records of persons in the civilian noninstitutional population 16 years

of age and over who are employed, unemployed, and marginally at-

tached to the labor force. Underemployed workers include three types

of persons: (1) unemployed workers, (2) involuntarily part-time workers

who want full-time work, but have to settle for part-time hours, and (3)

marginally attached workers who want and are available for work, but

are not actively looking for a job.

The size of the CPS sample varies slightly from month to month, but

typically includes 68,640 records for the United States, 5,730 for Califor-

nia, and 1,570 for Los Angeles County. Each record is weighted so that

the sample can be expanded to represent the entire population. When

the sample for Los Angeles County is divided into groups based on, for

example, level of education, and then divided again into subgroups

based on labor force status, the record count becomes small. A 3-month

moving average of the current month and 2 prior months is used to in-

crease sample size and reduce month-to-month fluctuations that result

from small samples. This 3-month average is not needed to stabilize U.S.

results; however, to make the data comparable, 3-month averages are

used at all levels of aggregation—county, state, and nation.

Unemployment and underemployment figures for subpopulations

are derived from the Economic Roundtable’s analysis of Current Popula-

tion Survey (CPS) records and use a 3-month moving average. Unem-

STATE OF THE CITY

15

ployment and underemployment breakouts by educational attainment

include persons 25 years of age and older. Other breakouts include per-

sons 16 years of age and older.

3. These data are from the 2009 American Community Survey (ACS),

which uses a sampling frame and question structure that is similar to,

but not identical with, the Current Population Survey (CPS). The CPS asks

more questions about employment status than the ACS, and it produc-

es more carefully delineated information than the ACS. However, ACS

employment data correlate closely with annual average CPS data. The

larger sample of respondents in the ACS makes it possible to break out

the population into finer-grain groups than is possible with the CPS. For

purposes of this report, respondents to the ACS who are 16–64 years of

age and have worked in the past 5 years, but are not currently employed

or officially unemployed (that is, actively looking for a job) and also not

enrolled in school, are defined as discouraged workers.

4. The 2009 American Community Survey Public Use Microdata

Sample shows that among all Los Angeles County residents 25 years

of age or older, 24% do not have a high school diploma, 21% are high

school graduates, 26% have some college education, and 29% have

B.A. degrees.

5. Gregg, P., & Tominey, E., (2004). The Wage Scar from Youth Un-

employment. CMPO Working Paper Series No. 04/097. The University

of Bristol.

6. Location quotients are calculated by dividing the percentage of

Los Angeles County’s labor force that is employed in an industry by the

percentage of the United States labor force employed in the same in-

dustry. If the value is greater than one, it indicates that a larger share of

Los Angeles’ labor force is employed in that industry.

LOS ANGELES 2011

16

THE STATE OF RENTAL HOUSING IN THE CITY OF LOS ANGELESDANIEL FLEMING President of Economic Roundtable

PATRICK BURNS Senior Researcher

OVERVIEW Los Angeles residents rent their homes at about double the

national rate; 62% are renters, a rate that is comparable to other cities

such as Chicago and New York that make up the urban center of major

metropolitan areas. Rental housing is most concentrated in the oldest

areas of the city. In Central Los Angeles, 82% of units are rented, whereas

in the North San Fernando Valley, 40% are rented (Figure 1).

The rental housing market is a key benchmark of well-being in Los

Angeles because renters typically have lower family incomes than own-

ers (median incomes of $33,600 vs. $81,600 in 2010) and typically pay a

larger share of their income for housing costs (median of 36% for renters

vs. 30% for owners in 2010).

Inadequate housing takes different forms, all of which are detri-

mental to the well-being of families and individuals.

The most prevalent problem is housing that costs more than

households can afford to pay. The causes include a housing inventory

that has grown slightly less than the population and renter incomes that

have increased much less than the cost of housing.

Figure 1. Owner- and Renter-Occupied Housing Units in 2010

Sources: 2010 American Community Survey, Public Use Microdata Sample

Figure 2. City of Los Angeles Housing and Population 1970-2010

Sources: U.S. Census Bureau, American Community Survey

Figure 3. Median Renter Household IncomeCity of Los Angeles, Rent Adjusted to 2010 Dollars

Sources: U.S. Census Bureau, American Community Survey

STATE OF THE CITY

17

When households pay more than they can afford for the shelter

they occupy, they must skimp on other necessities, including health

care, transportation, food, and clothing. Their hold on housing is tenu-

ous. Difficulty paying rent may result in eviction or in moving to a small-

er, less expensive unit that is not large enough to accommodate the

household, creating overcrowding.

Over the past 40 years, the population of the City of Los Angeles

has grown 35%, the total housing inventory has grown 32%, slightly

lagging the population, and the inventory of rental housing has grown

39%, exceeding overall population growth (Figure 3).

The city’s rental housing inventory has grown 8% since 2007,

largely because owner-occupied property that has been foreclosed

and unsold since the start of the 2008 recession has been converted to

rental use until the for-sale housing market recovers. In the near term,

this increase in the size of the rental inventory is good news for renters.

It increases housing choices and diminishes rent increases.

The bad news is that the incomes of renter households have been

declining since 1990. The median income of renter households over

the past decade, adjusted to 2010 dollars, is shown in Figure 3. There is

year-to-year fluctuation in the median income of renters, but the overall

trend is downward; about a fifth of a percent a year since 2000.

Rents continue to rise despite the limited budgets of renter house-

holds. In large part, this is because it is expensive to buy land and build

housing in Los Angeles.

The average gross rent (rent plus utilities), adjusted to constant

dollars, increased 28% from 2000 to 2010, and the median gross rent

increased 26%, as shown in Figure 4.

When incomes are overlaid on rent levels, we see that over the past

decade, median rent as a share of median income of renter households

has increased from 29% to 36%, as shown in Figure 5.

Over the past decade, rent as a share of income has shifted from

being barely affordable to predominantly unaffordable for renters. The

benchmark for affordability is 30% of income.

Figure 4. Gross Rent in the City of Los Angeles, 2010 Dollars

Sources: U.S. Census Bureau, American Community Survey

Figure 5. Median Rent as a Percentage of Median IncomeRenter Households in Los Angeles City, 2000-2010

Sources: U.S. Census Bureau, American Community Survey

LOS ANGELES 2011

18

RENT BURDENThe majority of renters living in the City of Los Angeles are rent

burdened, paying over 30% of their income for rent, and roughly a third

are severely rent burdened, paying half or more of their income for rent.

This dynamic between the price renters pay for their housing and their

household income has worsened following the recession that began in

2008 (Figure 6).

The third of renter households paying over half of their income for

rent are forced to make radical economies in other areas of their lives.

This may include foregoing needed medical treatment and eating low-

er-cost food with low nutritional value.

Sixty-one percent of renter households are either rent burdened or

severely rent burdened. This is in large measure the result of long-term

income stagnation for a large share of these households, compounded

by increased unemployment and underemployment since the onset of

the 2008 recession.

Long-term economic growth that increases productivity and wag-

es in the Los Angeles region is needed to reverse this trend. There is also

an urgent need to build more affordable housing and to preserve the

existing inventory of affordable housing.

OVERCROWDINGIn 2010, 20% of renter-occupied units in the City of Los Angeles

were overcrowded (Figure 7). Overcrowded housing is an ongoing con-

cern in Los Angeles, where a fifth of renter households currently live in

overcrowded conditions with more than one occupant per room and

a tenth live in severely overcrowded conditions with more than 1.5 oc-

cupants per room.1

The good news is that a dramatic decline in overcrowding has oc-

curred during the past decade. There has been a 56% decrease in severe

overcrowding. This is in large measure a result of smaller, older rental

units being replaced by newer bigger units. The construction of a sub-

stantial number of new units during this decade has also helped.

Figure 6. Share of Renter Households that are Rent Burdened City of Los Angeles, 2000-2010

Sources: Census 2000 Summary File 3 Detailed Tables; 2005, 2006, 2007, 2008, 2009 and 2010 American Com-munity Survey 1-Year Estimates Detailed Tables

Figure 7. Overcrowded Rental UnitsCity of Los Angeles, 2000-2010

Sources: U.S. Census Bureau, American Community Survey

STATE OF THE CITY

19

VACANCY RATESFrom April 1999 through March 2009, the rental vacancy rate in the

City of Los Angeles was under 5%, indicating a tight housing market for

renters (Figure 8).

From March 2009 through September 2010, the vacancy rate rose

above 5%, indicating that renters had more viable opportunities for

finding housing.

From October 2010 through August 2011 (the most recent data),

vacancy rates have again dropped below 5%, ending at 4.5% in Au-

gust 2011.

Over the past decade, 84% of the time the vacancy rate has been

below 5%, indicating a scarcity of available housing for renters over

most of the decade.

RECOMMENDATIONSNew funding and development strategies are needed to provide

affordable housing units for Los Angeles renters who cannot afford mar-

ket rate housing. High land and development costs, coupled with low

vacancy rates, place upward pressure on housing costs, leaving a large

share of residents overburdened by rent and living in overcrowded con-

ditions. Given the difficulty of financing affordable units and a bleak eco-

nomic climate, public initiatives must drive the production of needed

affordable units. The following recommendations are put forward for

increasing the production of affordable housing:

1. Streamline entitlement processes to reduce carrying costs for af-

fordable housing projects.

2. Identify “nontraditional” land that has the capacity to be developed

into housing.

3. Focus development interest by providing information about par-

cels that the City is most interested in seeing developed.

4. Streamline the condemnation and eminent domain processes for

blighted properties to provide incentives for current landowners to

either sell their property or clean and redevelop the property in a

timely fashion.

5. Use public funds to purchase affordable units with covenants on

the brink of expiration and to incentivize owners of these units to

continue providing their units at affordable rent levels.

6. Develop an affordable housing land bank.

7. Promote mixed-income and mixed-use projects in which internal

cash flows create subsidies.

8. Establish development fees for residential, commercial, and indus-

trial construction projects that increase the demand for affordable

housing.

ENDNOTE1. Housing is overcrowded when there is more than one occupant

per room. It is severely overcrowded when there is more than 1.5 oc-

cupants per room. An example of calculating overcrowding is a one-

bedroom unit, which has three rooms: a bedroom, a living room, and

a kitchen. If four people live in this unit, it is considered overcrowded

(4 people / 3 rooms = 1.33 per room). If five people live in this unit,

it is considered severely overcrowded (5 people / 3 rooms = 1.66

people per room).

Figure 8. Vacancy Rate for Rental HousingCity of Los Angeles

Sources: Department of Water and Power, U.S. Census Bureau, and American Community Surveys

LOS ANGELES 2011

20

WALKABLE NEIGHBORHOODS WITH AFFORDABLE HOUSING AND PUBLIC TRANSITDANIEL FLEMING President of Economic Roundtable

PATRICK BURNS Senior Researcher

BALANCING THE COST OF HOUSING AGAINST TIME SPENT COMMUTING

Workers and their families must carefully balance costs for trans-

portation, housing, healthcare, education, childcare, and other critical

needs with income from the jobs that sustain their lives. For some, this

means longer and more time-consuming commutes to access jobs or

secure desirable housing arrangements. For others, this means paying

higher costs for housing or renting overcrowded or unrepaired apart-

ments to be closer to employment opportunities. This balance is par-

ticularly difficult for low-income households to achieve, as lower levels

of income limit their ability to obtain adequate and affordable housing

and to access jobs.

In the City of Los Angeles, 62% of all worker households that rent

their homes are either overcrowded or rent burdened (13% are over-

crowded and rent burdened, 12% are only overcrowded and 37% are

Figure 1. Overcrowding and Rent Burden Rates for Renter Households in the City of Los Angeles based on Income

Sources: U.S. Census Bureau, 2005–2007 American Community Survey

only rent burdened), as shown in Figure 1. A disproportionate share of

worker households with incomes below the median for the Los Angeles

region (the Area Median Income or AMI)1 are inadequately housed, fac-

ing extremely high rates of overcrowding and rent burden. This is not

a surprise given that worker households with low incomes also have

fewer workers to share the burden of paying for rent, and have more

household members to support and house. Ninety-five percent of ex-

tremely low-income (0%–30% of AMI) worker households and 89% of

very low-income (31%–50% of AMI) worker households are either over-

crowded or rent burdened. These rates are 52% and 43% higher, respec-

tively, than overall rates for worker households in the City.

One consequence of these adverse housing conditions is that

many workers do not live in the same city where they work. At a given

point in time, roughly half of workers employed in the City of Los Ange-

les are estimated to live outside of City boundaries (Table 1). While some

STATE OF THE CITY

21

of this movement of workers is attributable to short-distance commutes

across adjacent municipal boundaries, reducing the number of workers

who commute long distances is better for them and the environment.

Stable, decent, and affordable housing located near workers’ jobs is likely

to reduce the frequency of worker turnover and result in significant cost

savings for employers. Increasing affordable housing options across the

City will provide employers with access to workers who live in healthier,

safer, and more permanent housing that is closer to work sites and will

increase retention rates for trained, productive workers.

Labor Shed: Commute Shed: Where workers live who are employed in the City of LA Where workers are employed who live in the City of LA Count % Count %Worker Employed in City of LA 1,384,032 100% Workers Living in City of LA 1,273,398 100%

Living in: Working in:

City of LA 636,693 46% City of LA 636,693 50%

Other Cities in LA County 491,647 36% Other Cities in LA County 444,569 35%

Other Counties Outside LA County 255,692 18% Other Counties Outside LA County 192,136 15%

Table 1. Work-Residence Dynamics in the City of Los Angeles

Sources: U.S. Census Bureau, LED OnTheMap Origin-Destination Database, Beginning of Quarter Employment, 2nd Quarter 2008.

Figure 2. Metro Transit Lines and Stations in the City of Los Angeles

Sources: U.S. Census Bureau, LED OnTheMap Origin-Destination Database, Beginning of Quarter Employment, 2nd Quarter 2008.

REDUCING COMMUTES THROUGH TRANSIT-ORIENTED DISTRICTS

Transit-Oriented Districts (TODs) integrate “land use, transporta-

tion and urban design, and prioritize walkable neighborhoods with

well-integrated connections to the regional transit network.”2 They are

compact developments of housing and employment in half-mile zones

surrounding subway and light-rail stations, a comfortable walking dis-

tance for accessing the City’s public transit.3

LOS ANGELES 2011

22

Given Los Angeles’ historically low-population density relative to

other large U.S. cities4 as well as its chronic housing shortage,5 devel-

oping TODs is a strategy to bring residents closer to public transit sys-

tem stations (Figure 2) and closer to their jobs. The City of Los Angeles

encourages the development of more housing (especially affordable

housing) not just on properties adjacent to Metro stations but also

throughout the half-mile zone surrounding each station.6

To test the case for TODs, we quantify the benefits of more efficient

work-residence dynamics that result from locating affordable housing in

TODs. We also analyze the adverse impacts of displacing residents from

existing affordable or rent-stabilized housing located near public transit

access points.7 Lastly, we explore whether there is a greater demand for

affordable housing in TODs than elsewhere.

AFFORDABLE HOUSING IN TRANSIT-ORIENTED DISTRICTS

As Transit-Oriented Districts develop in the City of Los Angeles, one

concern is their potential for displacing lower-income residents due to

rising rents and housing values in these districts.8 Nationwide, transit

use is more common among renter households in general and low-

income households in particular,9 groups that are susceptible to dis-

placement. Preserving and expanding affordable rental housing within

Transit-Oriented Districts is therefore critical for enabling the income

earners in these households to achieve more efficient work-residence

transportation dynamics, that is, reducing the time and cost required for

them to commute to work.

In Los Angeles, although TODs are still emerging and under

development, the City has prioritized the construction of afford-

able housing units near many Metropolitan Transportation Authority

(MTA) transit stations (Figure 3). Co-locating affordable housing with

public transit is pursued to enable lower-income residents to access

low-cost public transit—leveling the playing field for access to jobs,

boosting their potential to make economic progress, and maintain

self-sustaining livelihoods. Preserving and expanding affordable

housing in neighborhoods surrounding public transit stations will

build on this opportunity.

MORE EFFICIENT WORK-RESIDENCE DYNAMICS THROUGH TRANSIT-ORIENTED DISTRICTS

Los Angeles’ poorest households have fewer cars, making it more

difficult for their employed members to get to jobs (Table 2). Among Los

Angeles households whose incomes are 80% or less of the Area Median

Income, 20% have no vehicle, while another 46% have access to just

one vehicle. Given that many of the City’s working poor families rely on

more than one income earner,10 and that buying, maintaining, and us-

ing a private vehicle is expensive, locating affordable housing in TODs

creates efficiencies for these households, reducing the disadvantage of

having less access to private vehicles.

Figure 3. Affordable and Rent-Stablized Housing Surrounding the MTA Red-Line Stations in Hollywood

Sources: Economic Roundtable; Red-Line shape files and logo courtesy of the Los Angeles Metropolitan Transit Authority.

STATE OF THE CITY

23

Public transit is the most efficient form of transportation for house-

holds in low-AMI bands. By using public transit to commute to their

jobs, workers can save an estimated $831 per month, or $9,967 per year,

in transportation costs tied to automobile use, including operating and

workplace parking costs.11 Addressing the low-income housing short-

age by incentivizing the construction of more affordable housing units

near MTA stations is a reasonable approach for enabling residents to

realize the benefits of more efficient work-residence dynamics.

Additional benefits that can result from locating affordable hous-

ing within TODs include the following:

• Improving access to public transit.12

• Reducing traffic congestions on roadways and freeways, as well

as accompanying tailpipe emissions.13

• Supporting greater residential density, as housing around MTA

stations is built upward, alleviating some of the need for land as

the City’s housing unit shortage is addressed.14

• Centralizing consumer-oriented businesses (grocery stores, doc-

tors’ offices) and public services (health clinics, public safety and

assistance offices) near large numbers of residents.15

• Supporting land-use patterns that make it efficient for employ-

ers to locate near transit stations and make TODs the places of

work for growing numbers of people.16

RISK OF DISPLACING RESIDENTS FROM HOUSING LOCATED NEAR PUBLIC TRANSIT ACCESS POINTSAffordable Housing Located Near Public Transit Stations

The City of Los Angeles is seeking to encourage development of

more housing—especially more affordable housing—within walking

distance of public transportation nodes. The Transportation Element

calls specifically for stimulating17 development of more affordable hous-

ing units that low- and moderate-income residents can rent within

Transit-Oriented Districts.18

Table 2. Households by Number of Vehicles and AMI Band, City of Los Angeles

Sources: U.S. Census Bureau, 2005–2007 American Community Survey; Economic Roundtable Analysis. Note: Worker households are assigned to HUD AMI bands by family size and family earnings.

Households by AMI Band Vehicles per Household Total 0 1 2 3 4 5 6

0%–30% 28% 47% 19% 4% 1% 0% 0% 100%

31%–50% 13% 47% 29% 8% 2% 1% 0% 100%

51%–80% 6% 43% 33% 13% 4% 1% 1% 100%

81%–120% 4% 39% 35% 14% 5% 1% 1% 100%

121%–150% 2% 36% 37% 16% 6% 2% 1% 100%

151%–200% 1% 28% 45% 16% 6% 1% 1% 100%

201% or more 2% 23% 48% 18% 6% 2% 1% 100%

Total 13% 39% 33% 10% 3% 1% 1% 100%

Lowest 3 AMI bands 20% 46% 24% 7% 2% 0% 0% 100%

Table 3. Average Annual Shortfall in Earnings for Affording Market-Rate Housing based on Household Income

Sources: U.S. Census Bureau, 2005–2007 American Community Survey; Economic Roundtable Analysis.

Household Income as Percentage of Area Median Income 0%–30% 31%– 50% 51%– 80% 81%– 120% 121%– 150% 151%– 200%

Average Annual Earned Income for Worker Households (2009$) $12,805 $27,674 $43,538 $65,158 $88,055 $112,497

Average Annual Rent for an Apartment in City of LA (2009$) $14,297 $14,297 $14,297 $14,297 $14,297 $14,297

30% of Average Annual Earned Income (2009$) $3,842 $8,302 $13,061 $19,547 $26,416 $33,749

Average Annual Earned Income Shortfall (2009$) -$10,455 -$5,994 -$1,235 (No Deficit) (No Deficit) (No Deficit)

LOS ANGELES 2011

24

The impact on household budgets that accrue from living in af-

fordable housing vary based on household income. To quantify these

savings for the City of Los Angeles as a whole, we calculate the earned

income shortfall for worker households in different AMI Bands (Table 3).

The earned income shortfall is the difference between the average rent

for an apartment in the City of Los Angeles and the amount of earned

income that workers can pay for rent without becoming rent burdened

(i.e., 30% of earned income). Households in the three lowest AMI bands

have earnings that typically require them to pay more than 30% of their

income for market-rate rental housing, resulting in an earned income

shortfall for being able to afford market-rate housing. There are three

income bands highly vulnerable19 to becoming rent burdened:

• Extremely Low-Income Households (up to 30% of AMI) = $10,455

annual deficit

• Very Low-Income Households (31%–50% of AMI) = $5,994 an-

nual deficit

• Lower-Income Households (51%–80% of AMI) = $1,235 annual

deficit

For households in all six AMI bands, we calculate the financial im-

pacts of displacing residents from affordable housing units located in

Los Angeles’ TODs by adding up the value for households in the follow-

ing ways:

1. Housing costs: rent savings from being in affordable housing

compared with market rate housing based on the average annual

earned income shortfall in Table 3.

2. Transportation costs: savings that result from taking public transit

(MTA metro and bus) compared with private transportation (pri-

vate or pooled car), assuming that affordable housing residents liv-

ing within TODs rely solely on public transit. If one household that

currently uses public transit for all its commuting, shopping, and

other public transit needs is displaced from housing in a TOD, that

household is likely to incur $9,967 in additional annual transporta-

tion costs from switching to private transportation.20

Sources: U.S. Census Bureau, 2005–2007 American Community Survey; Economic Roundtable Analysis. Note: The second row of this table is the cost of private transportation cost above and beyond the cost of public transit.

Table 4. Savings from Housing with Affordability Restrictions located in Transit-Oriented Developments

AMI Bands 0%– 30% 31% 50% 51%– 80% 81%– 120% 121%– 150% 151%– 200%

Mean Annual Earned

Income Deficit (Housing Subsidy) $10,455 $5,994 $1,235 $0 $0 $0

Cost of Private Transportation $9,967 $9,967 $9,967 $9,967 $9,967 $9,967

Total Value $20,422 $15,961 $11,202 $9,967 $9,967 $9,967

Table 5. Housing Units with Affordability Restrictions developed by the Housing Department Units Inside and Outside Half-Mile Transit-Oriented Districts (TODs) surrounding each Station

Sources: City of Los Angeles Housing Department and Community Redevelopment Agency. Note: Affordable housing units located outside of TODs are shown next to the closest MTA line.

Housing Dept. Affordable Housing Units Inside and Outside TODs

Inside TODs Outside TODs TotalNearest MTA Station Line Units % Units % Units %

Metro Blue Line 899 31% 2,041 69% 2,940 100%

Metro Red/Purple Line 5,490 34% 10,507 66% 15,997 100%

Metro Green Line 280 14% 1,692 86% 1,972 100%

Metro Orange Busway Line 402 4% 9,351 96% 9,753 100%

Metro Gold Line NE 602 40% 890 60% 1,492 100%

Metro Gold Line East LA 338 24% 1,070 76% 1,408 100%

Metro Silver Line NE 86 22% 300 78% 386 100%

Metro Silver Line South LA 337 11% 2,640 89% 2,977 100%

Metro Harbor Services 322 35% 599 65% 921 100%

Total 8,756 23% 29,090 77% 37,846 100%

Housing Units with Affordability Restrictions developed by the Community Redevelopment Agency (CRA) Units Inside and Outside Half-Mile Transit-Oriented Districts (TODs) surrounding each Station

CRA Affordable Housing Units Inside & Outside TODs

Inside TODs Outside TODs TotalNearest MTA Station Line Units % Units % Units %

Metro Blue Line 1,310 38% 2,175 62% 3,485 100%

Metro Red/Purple Line 4,000 47% 4,443 53% 8,443 100%

Metro Green Line 1 <1% 215 100% 216 100%

Metro Orange Busway Line 260 32% 560 68% 820 100%

Metro Gold Line NE 227 48% 244 52% 471 100%

Metro Gold Line East LA 871 54% 745 46% 1,616 100%

Metro Silver Line NE 14 23% 47 77% 61 100%

Metro Silver Line South LA 198 25% 590 75% 788 100%

Metro Harbor Services 0 0% 99 100% 99 100%

Total 6,881 43% 9,118 57% 15,999 100%

STATE OF THE CITY

25

The total estimated value accrued by households residing in hous-

ing units with affordability restrictions located within TODs is broken out

by household income bands in Table 4, showing the annual financial

impact if residents are displaced from these housing units.

Households with incomes in the lowest three AMI bands accrue

the greatest cost benefits from their access to affordable housing. This

is because only households in the lowest three AMI bands are likely to

have to pay more than 30% of their income for rent to afford market-rate

housing. Households in the highest three AMI bands, if displaced, would

pay more to rent an average market-rate, nonsubsidized apartment, but

they probably would not become rent burdened. Households in all six

AMI bands accrue benefits related to their transportation costs by virtue

of living within TODs. This assumes that all household members utilize

public transportation for their commuting, shopping, and leisure trips

and forego use of private automobiles.

Two City of Los Angeles agencies in particular, the Housing Depart-

ment and the Community Redevelopment Agency, finance and moni-

tor the majority of affordable housing units in the City.21 There is a signifi-

cant number of affordable units located in TODs (Table 5, see also Figure

3), and it is possible to project the per-household financial impact of dis-

placement onto Los Angeles’ overall affordable housing inventory. The

Los Angeles Housing Department monitors 37,846 affordable housing

units, of which 8,756 (23%) are located in TODs. The Community Rede-

velopment Agency monitors 15,999 affordable housing units, of which

6,881 (43%) are located in TODs. The residents of these 15,637 affordable

housing units located in the City’s TODs are at risk of displacement if the

restrictions that make their units affordable expire, or if some other in-

terruption of their tenancy occurs. Where this does occur, the lost value

of affordable units and proximity within TODs can be estimated using

Table 4.

RENT-CONTROLLED HOUSING NEAR PUBLIC TRANSIT STATIONS

Rent-controlled housing can help low- and moderate-income

residents afford to live in the City of Los Angeles.22 The City’s Rent Sta-

bilization Ordinance (RSO) covers over 638,000 rental housing units,23

with 18% of these located within a Transit Oriented District – the half-

mile radius around MTA Stations (Table 6). Sixty percent of RSO housing

units in TODs are close to MTA Red/Purple-Line Stations, located in the

Wilshire Corridor and Hollywood neighborhoods. The San Fernando Val-

ley’s Metro Orange Busway Line captures the next highest share, with

14,330 units, or 12% of the total located within a half-mile or MTA sta-

tions. The TODs with the fewest number of RSO housing units within

them are along the Metro Silver Line (northeast of Union Station sec-

tion), the Metro Green Line, and the Metro Harbor Services.

Table 6. Rent-Controlled Units by Nearest MTA Station Units Inside and Outside Half-Mile Transit-Oriented Districts surrounding each Station

Sources: City of Los Angeles Housing Department; Economic Roundtable analysis. Note: Affordable housing units located Outside TODs are assigned to the closest MTA line.

Rent-Controlled Units and Transit-Oriented Development

Inside TODs Outside TODs TotalMTA Station-Line Group Units % Units % Units %

Metro Blue Line 7,611 23% 24,895 77% 32,506 100%

Metro Red/Purple Line 70,982 24% 218,749 76% 289,731 100%

Metro Green Line 2,375 5% 46,252 95% 48,627 100%

Metro Orange Busway Line 14,330 11% 120,601 89% 134,931 100%

Metro Gold Line NE 6,884 22% 24,935 78% 31,819 100%

Metro Gold Line East LA 7,142 44% 8,978 56% 16,120 100%

Metro Silver Line NE 1,224 17% 5,880 83% 7,104 100%

Metro Silver Line South LA 4,722 9% 49,576 91% 54,298 100%

Metro Harbor Services 2,261 10% 20,719 90% 22,980 100%

Total 117,531 18% 520,585 82% 638,116 100%

We measure the adverse impacts of displacing residents from

rent-controlled housing located in Transit-Oriented Districts by using

these housing unit figures in combination with the $9,967 per year cost

avoided by using public transit in Los Angeles. If these households are

displaced from RSO housing into newer, non-RSO rental housing at mar-

ket-rate rents, their housing costs will rise by $150–$199 per month, or

$1,800–$2,388 annually.24 If the households displaced from RSO housing

in TODs do find RSO housing elsewhere, their new housing costs will

not be much lower than it would be for market-rate housing, since the

rent for RSO-housing units can return to prevailing market levels, or “de-

control,” whenever they become vacant. Thus, the adverse impacts of

displacing residents from rent-stabilized housing located in Transit Ori-

ented Districts can amount to $11,767–$12,355 annually,25 taking into

account households’ transportation ($9,967) and rent costs. The cost

avoided by all 117,531 RSO households located in Los Angeles’ Transit

Oriented Districts—assuming all rely solely on public transit—adds up

to $1.38–$1.45 billion annually.26

CONCLUSION: A MEASURED NEED FOR BUILDING AND PRESERVING AFFORDABLE HOUSING IN TODs

It is important to preserve affordable and rent-controlled housing

units in TODs because of the severe impacts for low-income households

if they are displaced from their housing in these districts. If more market-

rate residential and commercial development occurs within Los Ange-

les’ TODs, there is potential for displacing low- and moderate-income

residents from existing housing units with expiring affordability restric-

tions or under rent control in those TODs. This displacement would

LOS ANGELES 2011

26

add significantly to those households’ transit costs, as documented

earlier (Table 4), assuming those households use public transportation.

Given that low- and moderate-income residents have less income with

which to pay for commuting to work and other transportation needs,

their potential displacement from housing in TOD’s —especially from

housing units with affordability restrictions or under rent control—rep-

resents a larger impact on their overall budgets than for higher-income

households. The City of Los Angeles acted wisely in preserving afford-

able housing in TODs. The value obtained from living in TODs is more

significant for the budgets of low- and moderate-income households

than for higher-income households. In addition, ready access to public

transit has a large impact on the ability of lower-income households to

maintain employment and earnings.

As land values rise around MTA stations, TODs will attract more

market-rate residential and commercial redevelopment, resulting in a

need to build and preserve affordable housing in these districts (Table

7).27 Our comparison of affordable housing demand in Transit-Oriented

Districts with the demand in the balance of the City shows four major

points:

1. Median household incomes in Transit-Oriented Districts are signifi-

cantly lower than in the balance of the City or the overall County,

with the exception of the incomes of households around MTA Or-

ange Line stations in the San Fernando Valley.

2. The percentage of rent-burdened and severely rent-burdened

households living within TODs is comparable to or greater than for

the City of Los Angeles as a whole, also with the exception of the

MTA Orange-Line stations

3. The percentage of families and households in poverty is much high-

er inside Transit-Oriented Districts than outside of them, again with

the exception of those surrounding MTA Orange-Line Stations.

4. Transit-Oriented Districts have a higher proportion of renter-occu-

pied households than the City or County of Los Angeles.

These findings demonstrate a greater demand for affordable hous-

ing in TODs than outside of them, given the lower cost of transporta-

tion and better access to transportation in TODs. These assets provide

the greatest benefit for lower-income residents. Preserving and building

more affordable housing units within TODs will reduce overall housing-

plus-transportation costs for lower-income households, protect them

from rent burden, and strengthen their prospects for remaining em-

ployed.

ENDNOTES1. The Economic Roundtable examined worker households using

HUD-defined income limits, which are used by federal, state, and lo-

cal agencies to assess households’ ability to pay for housing and de-

termine eligibility in a variety of housing programs. HUD estimates

the median family income for an area and adjusts that amount for

different family sizes and housing costs so that family incomes may

be expressed as a percentage of the Area Median Income (AMI). We

refer to these income breakouts as AMI bands.

Table 7. Characteristics of Residents in Transit-Oriented Districts in the City of Los Angeles

Sources: U.S. Census. 2005–2009 American Community Survey, 5-Year Estimate, Census Tract-level data.

Median Household % Rent % Severe % Families % Households % RenterMetro Group Income, 2009 $ Burden Rent Burden In Poverty in Poverty Occupied

California $60,392 56.6% 26.1% 9.8% 10.6% 38.6%

Los Angeles County $54,828 57.8% 27.7% 12.5% 13.0% 48.5%

City of Los Angeles $48,570 59.2% 28.8% 15.8% 15.8% 56.8%

Metro Blue Line $25,896 68.5% 33.4% 39.6% 36.3% 68.1%

Metro Gold Line East LA $31,898 57.8% 26.3% 24.9% 25.9% 70.7%

Metro Gold Line NE $41,246 63.5% 30.6% 23.1% 22.3% 61.6%

Metro Green Line $29,788 70.2% 42.4% 31.4% 30.7% 56.4%

Metro Harbor Services $36,093 59.6% 28.1% 21.0% 18.2% 68.4%

Metro Orange Line $54,927 55.5% 25.6% 10.4% 10.7% 57.2%

Metro Red Line $36,317 59.1% 27.2% 21.6% 20.0% 81.1%

Metro Silver Line NE $32,703 63.4% 31.3% 27.2% 26.9% 69.7%

Metro Silver Line So LA City $33,036 69.8% 42.6% 30.3% 30.1% 61.5%

STATE OF THE CITY

27

2. “Creating Successful Transit-Oriented Districts in Los Angeles: A

Citywide Toolkit for Achieving Regional Goals, Executive Summary”

February 2010. Center for Transit-Oriented Development, pages

16–17.

3. “Creating Successful Transit-Oriented Districts in Los Angeles: A

Citywide Toolkit for Achieving Regional Goals, Executive Summary”

February 2010. Center for Transit-Oriented Development. Materi-

als obtained online at: http://latod.reconnectingamerica.org/ A

half-mile radius around a station point produces an area of 1.24957

square miles, with a circumference of 3.12301 miles.

4. As of 2009, the City of Los Angeles’ population density is 8,205/

sq mi (3,168/km2), compared with other major cities:

5. In 2009, 20% of renter-occupied units in the City of Los Angeles

were overcrowded, with RSO units more likely to experience over-

crowding than non-RSO units. Also, 59% of renter households in the

City were rent-burdened, paying 30% or more of their income for

rent. The City’s apartment vacancy rate has been at 5% or below for

the past decade; tens of thousands of residents are homeless. Eco-

nomic Roundtable. 2010. “Update on Renters in the City of Los Ange-

les” (new information on the condition of renter residents, including

the 2009 American Community Survey. Housing tenure, vacancy,

overcrowding, rent cost and rent burden are reviewed, updating the

“Economic Study of the RSO and the Los Angeles Housing Market”

study released in 2009). Los Angeles Homeless Services Authority,

“2009 Greater Los Angeles Homeless Counts.”

6. The City of Los Angeles Planning Department’s vision for its

Transportation Element of the General Plan includes the follow-

ing statement: “By the year 2010, Angelenos are traveling to work,

to school, to visit friends and shopping by way of the newly-built

mass transit system. Surrounding the transit stops are high-activity,

liveable, pedestrian-oriented neighborhoods that are linked to oth-

er neighborhoods via rail, bus and other modes of transportation.

These pedestrian-oriented neighborhoods are identified by com-

pact development that provides for a full range of economic and so-

cial services, including housing, ground-floor retail, community and

entertainment facilities, grocery stores and cafes. Moreover, these

areas contain safe and clean environments with attractive settings

for living and working. By integrating life around transit, the City of

Los Angeles has the opportunity to reduce automobile congestion

and consequently to better the City’s air quality, provide a more ef-

ficient land-use pattern and create a better quality of life for all Los

Angeles residents.” Source: City of Los Angeles, Department of City

Planning. 1999. “Transportation Element of the General Plan,” Appen-

dix F, page 2.

7. This unintended outcome can arise where public transit invest-

ments and surrounding streetscape improvements raise property

values, gentrifying neighborhoods and displacing working families.

8. Stephanie Pollack, Barry Bluestone, Chase Billingham. 2010.

“Maintaining Diversity in America’s Transit-Rich Neighborhoods:

Tools for Equitable Neighborhood Change,” Dukakis Center for Urban

and Regional Policy, Boston, MA. “Creating Successful Transit-Orient-

ed Districts in Los Angeles: A Citywide Toolkit for Achieving Regional

Goals, Executive Summary” February 2010. Center for Transit-Orient-

ed Development, pages 18–19.

9. Fifty-eight percent of those who report that they commute

to work using public transportation are renters, according to the

2006–2008 American Community Survey. Stephanie Pollack, Barry

Bluestone, Chase Billingham. 2010. “Maintaining Diversity in Amer-

ica’s Transit-Rich Neighborhoods: Tools for Equitable Neighborhood

Change,” Dukakis Center for Urban and Regional Policy, Boston, MA,

page 14.

10. The City of Los Angeles has 1.6 workers per household, exclud-

ing households comprising only retirees or other cases in which no

one works.

11. American Public Transportation Association, “Transit Savings

Report,” December 2009, accessed November 2010 (http://www.

apta.com/mediacenter/pressreleases/2009/Pages/091209_Decem-

ber_Savings.aspx). This report contains data specific to the Los An-

geles region.

12. “Creating Successful Transit-Oriented Districts in Los Angeles:

A Citywide Toolkit for Achieving Regional Goals, Executive Summa-

ry” February 2010. Center for Transit-Oriented Development, pages

36–43.

13. “Creating Successful Transit-Oriented Districts in Los Angeles:

A Citywide Toolkit for Achieving Regional Goals, Executive Summa-

ry” February 2010. Center for Transit-Oriented Development, pages

36–43.

14. “Creating Successful Transit-Oriented Districts in Los Angeles:

A Citywide Toolkit for Achieving Regional Goals, Executive Summa-

ry” February 2010. Center for Transit-Oriented Development, pages

25–35.

15. “Creating Successful Transit-Oriented Districts in Los Angeles:

A Citywide Toolkit for Achieving Regional Goals, Executive Summary”

City Population 2009 Area Sq Miles Population Density

New York City 8,391,881 303.31 27,667.67Chicago 2,853,114 227.13 12,561.59Philadelphia 1,547,901 135.09 11,458.29San Francisco 815,358 46.69 17,463.23Boston 645,169 48.43 13,321.68Miami 433,136 35.67 12,142.87Los Angeles 3,833,995 469.10 8,173.09

LOS ANGELES 2011

28

February 2010. Center for Transit-Oriented Development, pages 60-

65. Hank Dittmar and Gloria Ohland. 2004. “The New Transit Town:

Best Practices in Transit-Oriented Development,” Washington, DC:

Island Press, pages 57–82.

16. “Creating Successful Transit-Oriented Districts in Los Angeles:

A Citywide Toolkit for Achieving Regional Goals, Executive Summary”

February 2010. Center for Transit-Oriented Development, pages 83-

85. Hank Dittmar and Gloria Ohland. 2004. “The New Transit Town:

Best Practices in Transit-Oriented Development,” Washington, DC:

Island Press, pages 57–82.

17. Los Angeles Department of Planning. “City of Los Angeles Gen-

eral Plan: Transportation Element.” 2006–2014 Housing Element of

the General Plan. Chapter VII. Implementation Programs & Invest-

ment Strategies: Ordinances: page 8: “Establish incentives to stimu-

late development and desired uses (e.g., mixed use, community facil-

ities, affordable housing) in centers and districts as identified in the

Community Plans and adjacent to transit stations/corridors” http://

planning.lacity.org/cwd/gnlpln/transelt/

18. Los Angeles Housing Department. 2009. “City of Los Angeles

General Plan: Housing Element, 2006–2014.” Policy 2.2.4 “Promote

and facilitate a jobs/housing balance at a citywide level.” Programs “A.

Congestion Management Program Land Use Strategy” and “B. Jobs/

Housing Balance Incentives: Residential Exemptions in Transporta-

tion Specific Plans,” pages 6–63.

19. “Highly vulnerable” to becoming rent burdened refers to the situ-

ation of low- and moderate-income households living in housing units

with affordability restrictions. These families’ annual incomes place them

in the lowest three AMI bands, but due to paying below-market rents

for their housing, they are not rent burdened. Instead, they are highly

vulnerable to becoming rent burdened if they loose their affordable

housing unit.

20. Los Angeles regional transit savings data created by the Center for

Transit-Oriented Development in “Creating Successful Transit-Oriented

Districts in Los Angeles: A Citywide Toolkit for Achieving Regional Goals,

Executive Summary” February 2010 (http://latod.reconnectingamerica.

org/), using the American Public Transportation Association’s “Transit

Savings Calculator” (http://www.publictransportation.org/contact/

stories/calculator_08.asp) and its “Transit Savings Report” December

2009. Accessed November 2010 at: (http://www.apta.com/mediacen-

ter/pressreleases/2009/Pages/091209_December_Savings.aspx). The

“Transit Savings Report” figure of $9,967 for Los Angeles is based on the

purchase of 12 monthly public transit passes versus average commut-

ing distances, local gas prices, and monthly unreserved parking rates.

21. The Housing Authority of the City of Los Angeles (HACLA)

also oversees affordable housing, with funding coming mainly from

the U.S. Department of Housing and Urban Development. HACLA’s

Section 8 program provides 45,432 Housing Choice Vouchers, rent

subsidies in the form of housing assistance payments to private

landlords on behalf of eligible families. HACLA also manages more

than 6,500 public housing units at 60 sites (large developments, se-

nior, and scattered sites) throughout Los Angeles. A small number

of the Housing Choice Vouchers provided through HACLA’s Section

8 program are used by eligible families to occupy affordable hous-

ing units partly financed by the City of Los Angeles’ Housing Depart-

ment and Community Redevelopment Agency, particularly perma-

nent supportive housing for formerly homeless residents. However,

most of HACLA’s Section 8 vouchers are used by families occupying

privately-owned rental units that leased on an annual basis, without

multi-year affordability restrictions. Data about HACLA units were

not available for this study.

22. There is no means test for tenants seeking to live in regulat-

ed, rent-stabilized housing units in the City, but a majority (55%) of

occupied-renter households in pre-1980 housing units pay more

than 30% of their income for rent (see Table 4-27). These tenants

are rent burdened and their RSO apartments protect them against

potentially steeper rent increases, and their current rent is likely be-

low market-rate if they have resided in the same unit for 5 or more

years (Economic Roundtable. 2009. Economic Study of the RSO and

the Los Angeles Housing Market, pages 129–132, 152–154). The City

of Los Angeles’ Rent Stabilization Ordinance (RSO), administered by

its Housing Department, sets the maximum annual percentage in-

crease in rents for apartment units built in 1978 or before.

23. Source: Economic Roundtable. 2009. Economic Study of the RSO

and the Los Angeles Housing Market, page 32.

24. In the Economic Roundtable’s detailed study of the City of Los

Angeles’ Rent-Stabilization Ordinance, the rent differential between

RSO and non-RSO rental housing units was found to be between

$150 (median) and $199 (mean) monthly, Citywide, or between

$1,800 (median) and $2,388 (mean) annually:

Average Monthly Rent Median Monthly Rent

RSO Non- Rent Diff. Non- Rent Diff RSO RSO $ % RSO RSO $ %

CITY OF LA $871 $1,071 -$199 -19% $800 $950 -$150 -16% North Valley $875 $1,063 -$188 -18% $850 $1,000 -$150 -15% South Valley $962 $1,241 -$279 -22% $900 $1,105 -$205 -19% West LA $1,231 $1,703 -$472 -28% $1,100 $1,600 -$500 -31% Central LA $854 $972 -$118 -12% $800 $900 -$100 -11% East LA $799 $892 -$93 -10% $725 $860 -$135 -16% South LA $793 $836 -$42 -5% $750 $713 $37 5% Harbor $863 $983 -$120 -12% $820 $850 -$30 -4%

STATE OF THE CITY

29

25. These figures add our projected increase in annual housing

costs when displaced from RSO housing units with the estimated

costs of changing from public transit to private transportation.

Transit savings data from Center for Transit-Oriented Develop-

ment, see note 31.

26. These hypothetical data are based on the following calcula-

tion:117,531 RSO households in TODs x $11,767 annual transit savings = $1,382,987,277117,531 RSO households in TODs x $12,355 annual transit savings = $1,452,095,505

27. In Table 4-8, data are compiled from the 2005–2009 American

Community Survey 5-Year Estimate, census tract data in which “Met-

ro Groups” capture census tracts predominantly in the City of Los

Angeles’ half-mile radius Transit-Oriented Districts. “Median House-

hold Income, in 2009 $” is income amounts from the 5 years of survey

captured in this estimate, adjusted by the Census into 2009 dollars.

“Rent Burden” and “Severe Rent Burden” are the percentage of renter-

occupied housing units paying 30% or more and 50% or more of

their income for rent and utilities, respectively.

Low High

Housing $1,800 $2,388 Transit $9,967 $9,967 Total $11,767 $12,355

LOS ANGELES 2011

30

PATRICK BURNS has worked as a Senior Researcher at the Economic

Roundtable since 2002. His skills include labor market research and in-

dustrial sector analysis. He is originally from northeastern Massachusetts,

where he studied at Clark University, before moving west for graduate

study at Kent State University and UCLA in the 1990s. Before working on

this study, some of Patrick’s recent research has focused on Los Angeles’

rental housing markets and public costs of homelessness.

DR. DANIEL FLAMING has been the president of the Economic

Roundtable since 1991, when the Los Angeles County Board of Su-

pervisors unanimously endorsed converting the Roundtable into an

independent research organization. Dr. Flaming has led more than 40

major research projects at the Roundtable that have illuminated criti-

cal changes in the regional economy and documented conditions of

the working poor. Dr. Flaming has extensive practical experience in the

community social and economic analysis and urban social policy.

DR. ALI MODARRES is the former Associate Director of the Edmund

G. “Pat” Brown Institute of Public Affairs at California State University, Los

Angeles and Chair of the Department of Geography and Urban Analy-

sis on the same campus. He specializes in urban geography and his pri-

mary research and publication interests are community development

and planning. He has published in the areas of urban development,

transportation planning, environmental equity, social geography, im-

migration, and race and ethnicity as they relate to the issues of access

and the role of public policy in creating disadvantaged communities.

BIOGRAPHIES

STATE OF THE CITY