“How expensive?” tracks measurements of California's completely unaffordable real estate market.
The pain: Rent increases have exceeded wage increases in 44 of fifty major U.S. metropolitan areas over the past 4 years—and in 4 of California's six metropolitan areas on this study.
The source: My trusted table has been checked Zillow's evaluation of rent growth in comparison with average hourly wage growth between 2019 and 2023 across the country.
The pinch
The pandemic economy has not been kind to renters. Nationally, rents rose 30.4% in 4 years, while wages rose 20.2% – a value drop of 10.2 percentage points for the standard renter.
Next, consider the rapidly growing economy of the Inland Empire. It was nowhere near maintaining with the rising cost of rent in California.
Over the past 4 years, rents in Riverside and San Bernardino counties increased 41.4% (the fourth largest increase among the many 50 metros). Meanwhile, IE wages rose 23.3% (seventh nationally).
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That meant the Inland Empire's typical paycheck fell behind the monthly rent check by 18.1 percentage points – the sixteenth worst gap among the many 50.
The biggest deficit nationally? Tampa! The 50% rent increase (No. 2 of the 50) fell well wanting the 15.3% increase (No. 27) – a niche of 34.7 points.
Pressure points
Three other California markets had smaller but similar gaps.
San Diego: 36.6% rent increase (No. 8) versus 18.8% increases (No. 18) – 17.8 points behind (No. 17).
Sacramento: 28.6% rent increase (No. 30) versus 16.2% increases (No. 26) – 12.4 points behind (No. 23).
Los Angeles-Orange County: 22.2% rent increase (No. 43) vs. 17.2% increase (No. 22) – 5 points behind (No. 41).
But within the Bay Area, which has suffered significant population outflow in recent times that has dampened demand for housing, wages have outpaced rents.
San Jose: 6% rent increase (No. 49) vs. 12.5% increase (No. 39) – 6.5 point advantage (the second largest gain for renters).
San Francisco: 3.4% rent increase (smallest of the 50) vs. 12% increase (No. 42) – 8.6 point lead (biggest win).
Good news
At least this budget-busting trend has cooled somewhat over the past 12 months, as wage increases outpaced rents in 4 of California's six metropolitan areas.
The construction of recent rental apartments and the slight decline in demand for living space gave tenants a certain level of pricing power. And a limited supply of staff meant wage increases increased.
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San Jose's 6.6% increase for 2023 exceeded a 0.8% rent increase. In IE, increases of 5.9% exceeded rent increases of three.1%. San Francisco's 2.6% increase exceeded a 0.1% rent cut. And the two.7% increases in LA-OC exceeded the two% rent increases.
But Sacramento's 1.6% increases were outpaced by rent increases of three%. And in San Diego, rent increases of 1.4% followed a rent increase of three.1%.
Jonathan Lansner is a business columnist for the Southern California News Group. He might be reached at jlansner@scng.com
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