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Los Angeles Rams Players Paying The Price In Move

Rents Higher than in St. Louis

Friday, September 30, 2016

The Rams’ move from St. Louis to Los Angeles this year brought the NFL back to LA after 21 seasons without a team. And while players might find Southern California more glamorous than the banks of the Mississippi River, they’ll pay for it in cost of living.

It would take a true diehard fan to pick up roots and move cities just because their favorite sports team relocated, so while we’re not suggesting many (if any) fans went to this extreme, there are a number of those employed by the Los Angeles Rams organization who found the move necessary. Therefore, with the Rams playing (and winning) the first regular-season game in Los Angeles since December 1994, Axiometrics thought it would be pertinent to analyze apartment market fundamentals in both St. Louis and Los Angeles.

Los Angeles apartments have historically been one of the higher priced markets in the nation. Although not priced as high as the San Francisco Bay Area to the north, the average rent in Los Angeles runs about $2,271. This places Los Angeles as the sixth most expensive major market in the nation behind the three primary Bay Area markets, New York and Boston.

St. Louis apartments, on the other hand, is far more typical of most Midwest markets that aren’t Chicago. The average rent in St. Louis – a paltry $954 in comparison to Los Angeles – is among the 10 most affordable major markets in the U.S.

Not only is rent in the Los Angeles market higher than St. Louis, but rent in Los Angeles tends to increase at a faster rate than rent in St. Louis. With the exception of a few winter months in 2011 and 2013, Los Angeles has experienced more rapid rent growth than St. Louis.

For NFL athletes, paying $2,271 for rent may not be more than a drop in the proverbial bucket, especially considering that the minimum salary for a rostered NFL player is well over $400,000. The $2,271 rent is slightly misleading from this perspective, however, as it’s probably more likely that a rostered NFL player is going to be living in a luxury apartment. Class A apartments in LA rent for an average of $3,330.

That’s just the average. The rent in one such luxury apartment in Los Angeles runs about $12,100 a month. In this particular case, an NFL player on the league minimum salary would be allocating almost 33% of their pre-taxed salary to rent, almost perfectly in line with the suggested one-third rent-to-income ratio.

Other more affordable luxury apartment options are available in Los Angeles: Nine apartment communities in the metro have rents greater than $5,000. In this case, a player on the league minimum salary would be significantly more comfortable allocating only 13% of their pre-tax income to rent.

So if the average rent in St. Louis is significantly cheaper than in Los Angeles, what would a luxury apartment in St. Louis look like for an NFL player? Not surprisingly the difference in rental rates among luxury properties between the two cities is substantial.

The highest rental rate among apartments in St. Louis is $3,150 per month, and the average Class A rent is $1,521. Compare this to Los Angeles, where a staggering 78 apartment communities have more expensive monthly rental rates. In fact, only one St. Louis apartment would rank in the top 100 among Los Angeles apartments, and the second most expensive St. Louis apartment would be only the 120th most expensive in Los Angeles.  

While Los Angeles’ relatively high cost of living (especially in comparison to the extremely affordable St. Louis market) isn’t a surprise, the rate at which Los Angeles’ rent growth has outpaced St. Louis may surprise some. This is especially true considering how much higher rental rates are in Los Angeles relative to St. Louis.

The primary driver of rent growth is job growth, and job growth in Los Angeles has exceeded that in St. Louis every year since 2010. St. Louis’ stronger performance early in the current cycle (dating back to 2010) can be partially explained by the accompanying job growth chart.

The combination of higher job and population growth has worked in conjunction to create higher demand in Los Angeles than in St. Louis, further driving rent growth. This increased demand, especially in Los Angeles, has spurred further development in recent years.

This isn’t totally surprising seeing that Los Angeles’ estimated 2015 population (3.9 million) far surpasses St. Louis’ (315,000). Los Angeles’ population has also grown at a much quicker rate than St. Louis. Between 2010 and 2015, Los Angeles has added 179,000+ people (4.7% growth) while St. Louis has experienced a decline in population (-1.2% growth between 2010 and 2015).

It's that higher (and higher-income) potential fan base, along with the marketing opportunities, that motivated Rams owner Stan Kroenke – also an apartment-property developer – to move the team back to its home from 1946-1994. And with their big NFL paychecks, stars like running back Todd Gurley and No. 1 draft pick/backup quarterback Jared Goff probably don’t mind the added expense.

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