Who Lives in New Housing in Los Angeles? A study by the Population Dynamics Research Group Sol Price School of Public Policy (USC January 2019):
Is it really new people who live in the newly built housing, and are these new households so much better off than existing residents that they require upscale housing accommodations? How valid is the speculation that the typical occupants of new housing are new rich people moving to LA?
The study compares new and old residents, but also considers that the “new” people may just be newly formed households composed of native Angelenos who are Millennials now coming of age.
The focus is on the rental housing sector where the great majority of newcomers live.
Are New People Living in New Housing? Fewer than 3 percent of households in Los Angeles county (according to the census in 2006, 2011, and 2016) had newly occupied a housing unit after moving from outside the county. The share that were local movers was substantially greater in 2011, the recession year, than in 2016.
Also noteworthy is that the share that are inmovers from outside LA County in the previous 5 years was much greater in 1980 (15.7%) than in 2000 (11.6%). Local movers were a relatively constant share in earlier decades. Defining New Housing
What constitutes “new housing” is simply defined as all units built within the 5 years preceding each census or ACS survey, as reported in those data collections for the year each unit was built. In 2016 this amounts to just 1.5% of all occupied housing units.
Placing this in comparison to the share of “new residents,” in 2016 there were nearly twice as many new movers in one year to Los Angeles housing from outside the county (2.8%) as there were newly built housing units in 5 years (1.5%). Or, compared to the share of households newly formed by householders under age 25, there also were nearly twice as many (2.7%) as the share of units built in the last 5 years.
Whether the focus is on all housing in Los Angeles County or solely on rental housing, the evidence shows many times more “new residents” arrived in 5 years’ time than “new housing” was built in the same time period.
Renter Householders It is likely that previous residents have moved out of Los Angeles County, surrendering their housing units to newcomers. Most of the new arrivals in the housing market are living in previously built, not new, housing.
The answer to the question posed at the top is clear: New people are not only living in new housing–but who else lives in the newly built housing? In 2016, 55.2% of all occupied housing in Los Angeles county was renter occupied. This is a slightly larger share than in previous years. As far back as 1980, more than half of the housing stock has been occupied by renters, with the lowest share (50.7%) recorded in 2006.
Among newly built units, the rental share has generally been substantially greater, but that has varied over time). The rental share was very large (64.0%) for new units built in the boom prior to 1990, and since the Great Recession the rental share has been climbing in new construction, reaching 67.6% in 2016.
Newcomers moving to Los Angeles are far more likely to be renters than owners, no matter the age of housing they live in. Since 2006, the rental share for newcomers living in newly built housing has sharply escalated, reaching 96% renters in 2016.
Under the alternative definition of new residents, adults younger than 35, there also is a bias toward renting, but that is not nearly as extreme as was observed for newcomers moving in from outside Los Angeles County.
Renters Who Are New Residents
Among all rental households, non-Hispanic whites occupied a rapidly declining share of rental units. Between 1980 and 2006 the white share fell from 55.8% to 31.4%, but in the subsequent 10 years to 2016 the white share remained virtually constant.
Conversely, the Hispanic and Asian shares expanded rapidly from 1980 to 2006, holding steady for the last decade. Inmovers to LA County rental housing were much more likely to be white, comprising roughly 50% from 2000 to 2016.
Asian householders also comprised a much larger share of the stream of inmovers to rental units from out of county. Conversely, the Hispanic share of inmovers landing in rental units was nearly half as large as their share among all renters.
When examining the racial makeup of inmovers to newly built rental units, an even more diminished share of Hispanics were found, and a slightly smaller share of whites than among inmovers to all rental units. However, the Asian share of the new rental units is substantially greater, as is the African-American share in 2011 and 2016.
Place of Birth of Renters
Another way to characterize the occupants of rental units is by their place of birth, whether they are native Californian, born in other states, or foreign born. The foreign born may be further subdivided into new immigrants who arrived in the last 10 years and longer-settled foreign born.
The new immigrant share of all rentals has declined markedly from its peak in 1990, falling from a 18.5% to 8.0% share of all rentals in 2016.
What may be surprising is that among newly built rentals, and also among all inmovers, the new immigrant share is dramatically larger and the settled immigrant share far smaller than among all rentals. Those who are longer-settled are better positioned in the housing market and already have housing units.
New immigrants are having to seek newly formed opportunities. Although remaining prominent in every year, the reason the new immigrant share has been declining in new units and among all inmovers is simply that immigration flows to California have steadily declined since 1990.
Also declining are the number of domestic movers from other states in the US. What is steadily growing is the share of households headed by a native Californian. These “locals” have grown up with many more connections and have longstanding ties into previously built housing.
The striking observation in is how large a share of inmovers to new rentals is made up by people born in other states. In recent years this is more than twice as large as the share among all renters.
Educational Attainment of Renters
There is widespread speculation about changes in social and economic class among new residents in Los Angeles.
Notice a steady growth between 1980 and 2016 in the share of renters with a college degree (BA or higher): College completion expanded from 16.5% of all renters in 1980 to 30.0% in 2016. Among inmovers to Los Angeles County or specifically to newly built units, this BA share is substantially greater.
In 2016, college degrees were nearly twice as frequent among inmovers to rental units from outside Los Angeles County (58.7%) or among inmovers of newly built rental units (55.2%) as the 30.0% college degrees found among all renters in the area.
Race and Hispanic Origin of New Residents
Are New Residents Richer and Paying Higher Rents? One of the most frequent speculations about changes in Los Angeles centers around the changing income mix in the city, linking this to the high rents being asked for newly built units.
The longstanding trend has already been documented—since 1980—toward rising education levels, which is twice as pronounced among inmovers to rental housing from outside Los Angeles County. Next to be examined is the rent changes and incomes more specifically. Rents On the Rise
Rents have been rapidly rising in Los Angeles County in recent years, continuing a decades long trend. From 1980 to 2016, the median rent in the American Community Survey rose from $792 to $1,320, an increase of 66.6% in 2016 dollars.
This increase was not steady but rose most acutely in the late 1980s, from 2000 to 2006, and after the recession from 2011 to 2016, rising 4.4%, 3.2%, and 1.9% per year, respectively. Also rapidly increasing from 1980 to 2016 were top and bottom quartile rents, 68.8% and 66.5% respectively. Sharp increase in rents in LA was nearly universal, including high-, middle-, and low-end.
Household income, in contrast, was left far behind rising rents. For the same 36 years, the median household income rose from $50,951 to $60,000 in 2016 dollars, an increase of 17.8%. From 1980 to 2016, income of households in the bottom quartile increased by only 8.4% (from $26,229 to $28,430 in 2016 dollars) while income among households in the top quartile increased by 30.4% (from $84,498 to $110,200).
Renters’ income also increased at a very similar rate as all householders’ income increased at each quartile: top quartile by 33.8% (from $58,283 to $78,000), median by 20.1% (from $34,982 to $42,000), and bottom quartile by 9.7% (from $18,234 to $20,000).
Thus, whereas the rent increases were uniformly more than 60%, the incomes in the top quartile increased by one-half that amount and in the bottom quartile by one-eighth as much.
Inmovers to rental units who previously lived outside Los Angeles County pay higher rents than average in Los Angeles. In contrast to the 25% of renters paying rents in the top quartile (by definition), fully 50.7% of the recent movers into Los Angeles in 2016 paid rents in the top quartile.
And, the analysis is restricted to inmovers in newly built housing, 71.7% of the new occupants are paying rents in the top quartile. The frequency of higher rent payments by new residents appears to have escalated in 2011 and 2016 compared to years before the recession. Barely 10% (9.1%) of the new residents moving into newly built units command rents in the bottom half of the rent distribution for the county. These few low-cost rentals are likely under a subsidy program to produce more affordable units.
Income Distribution of New and Old Residents
Only about 12% of renters have incomes in the top quartile, while one-third have incomes in the bottom quartile for all Los Angeles residents and another third are located in Q2, the second-from-bottom quartile.
Inmovers from outside the county are only slightly better off than the average renters in Los Angeles, despite their education levels that are twice as high. (This is likely because many are such young adults and have not begun earning incomes commensurate with their high educations.) However, among new residents landing in newly built housing there has been a distinctly growing share since before the recession that are in the top income quartile.
Overall Assessment of Income and Rent Trends
Taking the long view on the evidence, rents have been rising over a 36-year period, as have educational attainment and, more slowly, incomes. Incomes for the bottom quartile of residents have grown less than 10%, while the bottom quartile of rents have increased more than 60%.
What this means for rental affordability is very closely considered in a separate report in this series, “How Much Worse is Affordability in LA than Before?” (HRB 3). The affordability analysis has been developed in even greater detail, comparing the 50 largest metro areas, in a separate publication forthcoming in the HUD-sponsored journal, Cityscape (Myers and Park, 2019).
Overall, rental opportunities have become much more taxing on residents in years since the recession, but the ongoing changes continue some longstanding trends. Is it really new people who live in the newly built housing of Los Angeles? More specifically, are the typical occupants of new housing really rich people newly moving to LA? Four Essential Conclusions: First, many fewer new units are being built than newcomers to the housing market. If new residents are defined as inmovers from out of county, 14% of households were newly arrived in the last 5 years, while only 1.8% of occupied housing was built in the last 5 years. There are far more new residents than new housing. Second, most new residents are lodged in rental housing—approximately 85%, compared to 55% who are renters among all households in Los Angeles County.
A third set of findings is that a progressively more advantaged population has been residing in rental housing in Los Angeles, following a decades long trend that escalated after the Great Recession. This is reflected in several indicators:
a) 30% of rental occupants are white, by 2006 ceasing the sharp decline in the white share that began in 1980. Meanwhile, roughly 50% of inmovers to rentals from out of county are white; b) a falling share of rental occupants are immigrants—by 2016, less than 50% of all renters were foreign born, as were only 35% of new residents from out of county; c) a rising share of rental occupants are native Californians, born and raised, now reaching 30% of renters in 2016; d) a rapidly rising share of rental occupants have a BA degree or higher, reaching 30% of all renters but approaching 60% of inmovers.
Finally, in answer to the question about whether the new people are rich, yes, but only a little. Whereas, two-thirds of all renters have incomes below the median for all households, a small share—12%—have incomes in the top quartile. That is only half of the 25% of all households that form the top quartile. However, among renters inmoving from out of county, 20% have incomes in the top quartile, and among inmovers in newly built rental units, 37% are top quartile.
When Los Angeles begins to build a larger supply of rental housing, or when homeownership becomes more accessible in the future, the above trends will likely moderate. One enduring fact will remain: the new people coming to Los Angeles will still live largely in existing—not new—housing. Many of those existing households hopefully can move up to better quarters when supply is more ample, making better room for the newcomers.