Income Inequality in Pasadena Growing, Report Finds

A street intersection in Pasadena, California

The economic divide between top-income and low-income households in Pasadena continues to widen, driven by increasingly expensive housing and low wages, according to a new report from Occidental College’s Urban and Environmental Policy Institute.

Pasadena now ranks second among California’s 50 largest cities in terms of the concentration of income among the wealthiest residents and the gap between the richest and poorest households, says the report co-authored by Occidental’s Peter Dreier and Mark Maier of Glendale Community College.

The richest five percent of Pasadena households (those with incomes above $250,000) have 25 percent of city residents’ total income, while the poorest fifth (those with incomes below $26,059) have just 2.2 percent, finds the 2019 edition of “Pasadena’s Tale of Two Cities.” The average income of the richest five percent of Pasadena residents ($547,864) is 45 times greater than the average income of the lowest 20 percent ($12,153).

“By this measure, only San Francisco and Lancaster outdo Pasadena as California’s capital of inequality,” says Dreier, Occidental’s E.P. Clapp Distinguished Professor of Politics. Both Dreier and Maier, professor of economics at GCC, are Pasadena residents.

“Pasadena is one of California’s best-known cities, thanks to such institutions as the Rose Parade, the Rose Bowl, and Caltech,” says Dreier. “But there’s a big disconnect between the city’s prosperous image and its reality.”

In the five years since the last “Tale of Two Cities” report was released, Pasadena’s percentage of low-income households remained unchanged at 19 percent. The percentage of high-income households rose to 38 percent, and the number of middle-class households—those with incomes between $25,000 and $100,000—declined to 43 percent.

Skyrocketing housing costs are one of the major factors driving these trends, the report found. Pasadena is now one of the most expensive cities in California, with the median price of a single-family having risen 41 percent over the past five years, from $680,000 in 2013 to $960,000 in 2018.

Renters--who make up 56 percent of Pasadena households--have seen the average monthly rent for a two-bedroom apartment increase 42 percent to $2,900 since 2013. More than half of all Pasadena renters pay over 30 percent of their household income to keep a roof over their heads. Homeowners are feeling the squeeze, too. Among homeowners with household incomes under $35,000, 84 percent spend more than 30 percent of their incomes on housing.

High housing costs have contributed to the decline in enrollment in Pasadena Unified School District schools, as low-income families have been pushed out of the city, the report notes. Declining enrollment means that PUSD receives less revenue from the state government, which is based on average daily attendance.

Wages for Pasadena workers have failed to keep up with rising housing costs.

One-third of Pasadena workers earn less than $15 per hour, a percentage that has not changed in five years. Contrary to the stereotype of the minimum-wage worker as teenagers working a summer job, most of Pasadena’s low-wage earners, 59 percent, work full time and full year, and another 26 percent work part-time and full year.

The new data show that low wage workers are concentrated in a few sectors: food services, accommodations such as motels and hotels, health care, education services (primarily early childhood), retail trade, and construction.

The report makes a number of recommendations to Pasadena city officials on how to address the consequences of the income divide, including:

  • revise the city’s in-lieu fee policy to require developers to build affordable units within the market-rate developers rather than pay a small fee to avoid having to create mixed-income developments.
  • help nonprofit developers purchase existing apartment buildings and preserve them as permanently affordable rental or co-operative housing.
  • adopt a “just cause” eviction law that prevents landlords from arbitrarily evicting tenants unless there is a valid reason, such as not paying rent or  destruction of property.
  • adopt laws to restrict the conversion of apartments to condominiums. Condo conversions increase the cost of housing without increasing the supply.
  • fully implement the city’s commitment to gradually raise Pasadena’s minimum wage to $15 by 2020.