A knife’s edge: 1 million Californians live on financial edge, Berkeley report says

As rents outpace incomes, California families are living on a knife’s edge, unable to afford basic needs and living in constant anxiety, according to a new report.

More than 1 million California households live in extreme poverty, meaning they earn less than $11,234 a year, the threshold for the government to declare them in need of federal assistance, researchers from UC Berkeley’s Poverty and Inequality Research Center say.

In Orange County, 15 percent of the population, or 345,000 people, live in poverty, not far from the national average of 15.2 percent.

The escalating cost of housing is the No. 1 reason why people move to new areas and why the widening wealth gap means a move to another state can be viewed as a radical departure from a comfortable routine, according to the researchers.

“When it comes to the cost of rent, especially for middle-income families, it’s an overreach,” said Raj Chetty, one of the authors of the report, which was released Wednesday. “Most families in this state are on the edge of their ability to pay even in a good year.”

Inflation on housing costs is up more than 4 percent a year in California since 2000, making it the most expensive state, according to the report. Over that time, median incomes have risen about 8 percent to about $64,000 a year.

Meanwhile, the California Housing Advisory Board has estimated that nearly 1 million units will have to be removed from the state’s housing market by 2025 because of a lack of supply, but homeownership rates remain stubbornly low.

For many California families, renting is simply unaffordable, and many one-bedroom apartments are expensive enough that they can’t comfortably save a little bit each month and carry a mortgage.

“Rent has gone up faster than income has, and it’s still rising faster than incomes,” said Devra Parker, an urban planner and UC Berkeley professor. “Where have people gone who are in a good place to move? They’ve gone out of state, they’ve gone to Canada.”

To bridge the income gap, a number of federal programs offer reduced-rate health insurance plans. But the plans offer basic benefits at subsidized rates, such as dental or vision, not the comprehensive coverage people require, Parker said. And that’s especially true for low-income households.

“Families here are going to end up facing much larger out-of-pocket costs when it comes to health care, when it comes to housing, when it comes to transportation,” she said.

In Orange County, a single adult making $25,320 annually is deemed poor by the federal government and has access to help paying rent, food and even utilities through CalFresh, the Supplemental Nutrition Assistance Program.

“We’re trying to get people to work,” said Deanne Loonin, director of nutrition at the California Food Bank. “The key is work, and we do a tremendous amount of effort to help people find work, particularly ones with barriers.”

California’s largest economic research institute, the Brookings Institution, also released a study Wednesday that found the state’s housing costs are “unsustainable.”

“California is only able to sustain and expand its economy to the extent that its residents are able to afford housing,” it reads. “Given the housing crisis in the state and rising home prices, the sheer cost of housing will continue to weigh on job growth and household budgets.”

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