Living in Los Angeles costs more than $70,000 a year: Here's why

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According to a new study from GOBankingRates, the cost of living in Los Angeles is an average of $70,320 per year, behind only San Francisco, San Jose and Oakland among the 50 largest cities in the U.S. The high cost of living is driven by rising home prices, transportation costs and the cost of daily living.

Despite these challenges, many residents have found ways to manage their finances and maintain their lifestyle.

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Why is Los Angeles so expensive?

With a vibrant job market, cultural diversity, and year-round sunshine, Los Angeles is widely known as a great place to live. This is just one reason why the city is expensive, along with a few other reasons.

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Rising housing costs

According to BestPlaces, Los Angeles’ residential cost of living score is three times higher than the national average. The median price of a home in the area is $912,500, and the average rent for a two-bedroom apartment is $2,370 per month, about $1,000 higher than the national average.

These rising rent prices are forcing residents to make difficult decisions: Surveys have shown that Los Angeles residents are spending a large percentage of their income on rent, leaving many with no choice but to move outside the city.

High housing prices in Los Angeles make buying a home a serious option for many residents, which means they are forced to pay sky-high rents if they want to stay in the city.

Expensive travel expenses

According to RentCafe, Los Angeles residents spend 25% more on transportation than the national average. RentCafe’s calculations take into account a variety of costs, but the most significant is fuel.

Gas prices in Los Angeles tend to be 30-40% higher than the national average, and with Los Angeles notorious for its heavy traffic and long commutes, it’s no wonder city residents spend a lot of money to get around.

Prices in California

LA residents don’t just live in expensive urban areas; they live in expensive urban areas in a state where prices are already higher than average.

The cost of living in California is about 30% higher than the U.S. as a whole. California residents spend more on groceries each week than any other state in the U.S. Utility bills are also high, as California has the highest water rates in the U.S.

tax

Finally, California has the highest state income tax rate in the United States. For example, people making over $1 million are taxed at 13.3%. The average single filer pays about 8%. California’s comprehensive sales tax rate is 8.66%, the 9th highest. These are additional costs that residents of cities like Los Angeles are forced to pay.

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Why people can live here

With all these costs in mind, you might wonder how anyone could afford to live in Los Angeles. The area is home to many A-list celebrities, athletes, and business figures. But how do regular people get by?

According to ZipRecruiter, the average salary for Los Angeles residents is over $68,000 per year, meaning a large portion of the population can easily afford the cost of living of $70,320 per year, which is higher than the average U.S. annual salary of $59,384.

That being said, there are many people in the area who have to make do with less.

The minimum wage in California is $16 an hour, and $20 for fast food workers. A full-time California worker making $20 an hour and getting paid every two weeks would earn about $1,510 a month — not even enough to cover the average rent in Los Angeles.

These people have to make sacrifices and get creative to live in the area, which often means finding roommates or taking on longer commutes to afford cheaper rent.

Los Angeles’ economic bright side

While there’s no denying the fact that living in LA is expensive, there are several areas where residents can save money compared to those living in other states and cities.

For example, healthcare costs in Los Angeles are about 10% lower than in the country as a whole. There could be a number of reasons for this: the city is home to many great hospitals, its year-round sunshine encourages people to stay active, or Los Angeles simply attracts healthier people.

Los Angeles has lower utility rates than the entire state of California and slightly lower average grocery prices than the rest of the state. This may not seem like much, but that’s just how much living in Los Angeles is.

Information current as of June 21, 2024.