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.
May 28, 2015, 9am PDT | Philip Rojc | @PhilipRojc
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Parker Knight

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."

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Published on Thursday, May 21, 2015 in KPCC
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