L.A. Loses $36 Billion a Year from Housing Crunch, McKinsey Says
L.A. Loses $36 Billion a Year from Housing Crunch, McKinsey Says
(Bloomberg) -- Los Angeles County loses out on as much as $36 billion in economic growth every year because people are paying too much to keep a roof over their heads.
That’s the analysis of McKinsey & Co., which tallied how much residents are paying for housing beyond 30% of their income, a level that’s widely used to determine whether someone is “cost-burdened.”
Los Angeles is emblematic of the challenges that mark California’s worst-in-the-nation housing shortage. Since 2010, the city has been producing more housing relative to its population growth than almost anywhere else in the state. But very little of it has been accessible to lower- and middle-income workers.
“You can’t say L.A. doesn’t build,” said Jonathan Woetzel, director of the McKinsey Global Institute. “It just doesn’t build affordable.”
Fixing the affordable housing shortage is going to be costly, despite the clear economic benefits. McKinsey, which released a report on the topic Thursday, estimates it’ll take around $130 billion of public money to meet new regional goals for housing production through 2029.
The report -- which was prepared in collaboration with the Los Angeles Business Council Institute, the Los Angeles Coalition for the Economy & Jobs, and the United Way of Greater Los Angeles -- advocates for a range of policy solutions from adopting cost-saving building techniques to streamlining the permitting for new projects.
If these strategies are put into place, McKinsey estimates that almost half of the needed investment could come from the private sector.
To contact the reporter on this story: Noah Buhayar in Seattle at nbuhayar@bloomberg.net
To contact the editor responsible for this story: Craig Giammona at cgiammona@bloomberg.net
©2019 Bloomberg L.P.