As the second-largest city in the United States, Los Angeles attracts residents from across the country and around the globe. As the epicenter of the multibillion-dollar entertainment industry, the city is a magnet for aspiring actors, directors and screenwriters. With idyllic weather year-round, beautiful beaches and a diversity of scenery, it is possible, during some months, for an Angeleno to snow ski in the morning and surf in the afternoon.
The Economics of Los Angeles
Los Angeles is a perfect study in how the demand curve works. When the demand for something is high, prices rise. There is plenty of demand to live in Los Angeles. As a result, everything including rent, food, gas, and utilities is expensive. When considering a move to LA, the first order of business is understanding how much money it is going to take to pay the bills.
The following information is detailed in averages, but keep in mind Los Angeles is a huge, sprawling city. Prices vary wildly depending on where you plant roots. Rents in Santa Monica are not comparable to rents in South Central L.A. By understanding the average cost of rent, utilities, food and transportation in Los Angeles, and then making adjustments based on your unique circumstances, you can narrow down the range of how much money you need to live there.
Average Rent in Los Angeles
As of Sept. 2020, based on figures from Numbeo.com, the average cost for a one-bedroom apartment in the city center sits at approximately $2,230 per month. If you are looking to get roommates, a three-bedroom apartment averages over $4200. The good news is that while these averages may seem scary to a new resident, they are skewed upward by the presence of extravagant luxury rentals in the wealthy areas of town. You can find plenty of Los Angeles rentals for under $1,800 per month if you go outside of the city center, though it is advisable when you find something that seems cheap for the area to investigate the neighborhood and the apartment to ensure it is somewhere you are willing to live.
Average Home Cost in Los Angeles
If you can afford to buy in Los Angeles, prepare yourself for stiff competition and high prices. According to real estate website Zillow, the average cost of an LA home is hovering at $764,528. If you're considering buying in the LA area, it is beneficial to get pre-approved for a mortgage as this will assist you tremendously when closing a deal with the seller. You can research current mortgages available for a home in L.A. using a tool like a mortgage calculator.
Average Utilities in Los Angeles
Like many parts of California, the Los Angeles region does not have a monolithic climate. Several micro-climates comprise the area. For example, the San Fernando Valley regularly reaches the triple-digits during the summer and can be quite cold for Southern California during the winter. Malibu, by contrast, rarely exceeds 80 degrees and has only dipped into the 30s a handful of times. Your utility bill can vary greatly based on the specific climate in your neighborhood. Citywide, the average utility bill is nearly $200 per month for a 915 square foot apartment. This figure fluctuates throughout the year and will vary according to the size of your home, but you can use it as a benchmark.
Average Food Costs in Los Angeles
Food in Los Angeles is significantly more expensive than the national average. A gallon of milk costs $3.80, and a loaf of bread costs $3.34. A dozen large eggs is $3.45 and 16 oz. of cheese is $5.77. For a pound of boneless, skinless chicken breasts, the cost is $5.42. Even a frugal consumer, to be safe, should build $500 into his monthly budget for food costs in Los Angeles.
Average Transportation Costs in Los Angeles
Los Angeles is the epitome of a car-centric city. Driving is almost a necessity. City residents who attempt to live car-free find out very quickly that it is an exercise in extreme and constant frustration. Bus lines are erratic, and unlike Manhattan, most parts of L.A. are not conducive to standing on the sidewalk and hailing a taxi. While the Metrolink offers commuter rail service in Southern California, it is nowhere as expansive or sophisticated as public rail transportation in cities such as New York and San Francisco. The service is also expensive; local round-trip commutes often cost more than $20 for a single trip.
As a car owner in Los Angeles, your biggest expenses, apart from the vehicle itself, are auto insurance and gas. Insurance costs vary greatly based on your ZIP code, in particular, its crime rate and level of congestion. The average rate for the metro area is $1184 per year for liability only and $85 per and $541 per year for comprehensive and collision. For male drivers, particularly young ones, rates could be higher.
Gas prices are exorbitant in Los Angeles. As of 2020, a gallon of gas averages $3.74, which is greater than California's average and the national average. Moreover, the city's legendary traffic gridlock means drivers burn through a tank of gas more quickly than in most other cities.
Living in Los Angeles as a Student
Los Angeles is home to several prestigious universities and, as a result, attracts many students to the area. Rentals situated close to universities are pricey, once again due to supply and demand, but you can lower your costs significantly by sharing a place with several roommates. For example, splitting a three-bedroom unit could lower your rent costs down to $1,000 or less, depending on the cost of the unit. Roommates also enable you to split your utility bill four ways.
It is still advisable to expect $500 per month in food costs, even if you eat college-student cheap. On the bright side, living within walking distance of campus mitigates transportation costs significantly.
Living in Los Angeles as a Professional
Living in Los Angeles as a professional usually means eschewing the roommate lifestyle and having a car to commute to work. These two changes alone make the city far more expensive than it is for a student. As previously stated, the city's average rent is around $2,230 and utilities average $200. Limiting food costs to $500 per month allows for a healthy, filling diet but not for eating many meals at restaurants. For transportation, count on $160 per month for car insurance and at least that much for gas, given the city's sprawl and congestion. Unless you own your vehicle outright, building room in your budget for a car payment is necessary.
On a monthly income of $3,500, which is $42,000 per year, you can probably meet your basic necessities, but your budget is stretched to the limit, and an unexpected expense, such as a car breakdown or medical issue, puts you in the hole quickly. Therefore, a yearly income of $50,000 or greater is recommended to be financially secure as a professional in Los Angeles.
Living in Los Angeles as an Unemployed Job-Seeker
Because it is a huge city, Los Angeles features bountiful employment opportunities. For this reason, the area attracts job-seekers from all over. However, it is a tough city for an unemployed person to survive financially. The state of California caps weekly unemployment benefits at $450, an amount well under what is needed to sustain even a bare-bones lifestyle in Los Angeles. Furthermore, while the city has a lot of jobs, plenty of competition exists for those jobs. Put simply, a move to Los Angeles with no job is inadvisable unless you come with at least six months of living expenses, or about $20,000, in the bank.