Does $15 an Hour Mean Higher Rents?

Los Angeles will raise its minimum wage incrementally to $15 an hour by 2020. But with an inadequate supply of new housing, will this new spending power simply enable landlords to charge more? Some economists say yes.

1 minute read

May 28, 2015, 9:00 AM PDT

By Philip Rojc @PhilipRojc


Los Angeles Apartments

Parker Knight / Flickr

Although low-income renters in Los Anegeles were no doubt heartened by news of a forthcoming $15 minimum wage, economists offer words of warning. Rosalie Ray, a UCLA researcher who claimed Los Anegles is the nation's most unaffordable rental market, stands by those grim tidings. Her basic thesis: higher buying power without an increase in supply will push up prices. 

From the article: "That means around 700,000 minimum wage workers will have more money to compete for the same low inventory of rental units. [...] L.A.'s Department of Building and Safety is projecting a 29 percent increase in new units this fiscal year over last, with 12,000 units permitted. Still, that isn't enough to keep up with the city's population growth [...]."

Chris Thornberg, Beacon Economics co-founder, agreed: "What we need is housing — period. Whether we build it to be affordable or not, ultimately it's about adding to the supply."

Thursday, May 21, 2015 in KPCC

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