The effect of California’s housing crisis is reaching new heights.
According to a new report from the University of Southern California and the Los Angeles Business Council, exorbitant housing costs in Los Angeles, the second most populous city in the US, are inhibiting employers from attracting “high-performers,” or top talent, to their companies.
For the study – which was led by Raphael Bostic, a USC Price School of Public Policy Professor and the newly appointed head of the Atlanta Federal Reserve – USC surveyed 14 of Los Angeles’ largest employers, which account for nearly 200,000 jobs in the region.
Nearly 60% of the employers say Los Angeles’ high cost of living impacts employee retention, with 75% naming housing costs as a specific concern, according to the survey results. Further, 10 employers (71%) view high housing costs as “a barrier” to hiring new mid- and upper-level employees.
“This study shows that high housing costs are burdening our leading employers, either by having to develop special hiring packages, or subsidizing transportation and relocation costs,” Bostic said. By contrast, most of the employers surveyed said no special outreach or programs have been put in place to retain lower-skilled workers because local supply is abundant.
“It’s concerning that high housing costs could lead to Los Angeles losing its competitive edge in recruiting top talent. That would be devastating to our economy,” Mary Leslie, president of the Los Angeles Business Council, said.
In 2015, Boeing moved a manufacturing facility from Long Beach to Seattle likely to escape Southern California housing costs despite the state’s pleas for it to stay, the report said. And Los Angeles-based SpaceX opened an engineering office in Seattle the same year in an effort to hire top talent who “just refuse to live in LA,” founder Elon Musk previously said.
Southern California’s real estate market has been red hot for a few years now, thanks to low mortgage rates, a strengthening economy, and dwindling home supply. Zillow pegs the median home value in Los Angeles at $616,900 and the median rent at about $2,860. That’s compared to $195,700 and $1,500 for the US as a whole.
“Though we have yet to see a critical mass of businesses priced out of the region, this is an area of concern,” Bostic said. “There’s ample evidence to show that the time is now to implement strategies to reduce housing costs.”
But while expensive housing has become ubiquitous with cities like Los Angeles and San Francisco, overpaying for housing is a widespread problem. Over 10 million households pay more than half their income in housing costs nationwide, according to the report.