Affordability Gap for Renters Widens in 2006
The cost of affordable housing climbed for the eighth consecutive year, continuing to outpace the wages of the low-wage households who need it the most, according to the National Low Income Housing Coalition (NLIHC)’s annual “Out of Reach” report, which was released last week.
“Every year it is becoming more difficult for low-income families to find decent homes they can afford,” said Sheila Crowley, president of the coalition. “As we approach the holiday season, with its intense focus on consumer spending, ‘Out of Reach’ shows the difficulty that millions of low-income families face to even pay for their homes.”
The hourly wage a full-time worker must earn to afford a modest, market-rate two-bedroom home rose this year to $16.31, up from $15.78 last year, the report shows. By comparison, the median hourly wage for all workers was $14 and the estimated wage for renters was $12.64.
Annually, on a national basis a family would have to earn $33,925 to be reasonably assured of finding an affordable two-bedroom rental unit in today’s housing market, the report finds.
“Yet, according to the most recent data available, roughly 42 million households nationwide, including 22 million with at least two people living in them, earned less than $34,000 last year,” the report says. “Roughly 11 million households earned less than $10,712, the equivalent of working 40 hours a week, 52 weeks a year at the minimum wage.”
Workers earning the federal minimum wage of $5.15, which has been in effect since 1997, are unable to afford even a one-bedroom rental home anywhere in the country, according to the study, and 88% of renters in cities live in areas where the Fair Market Rent for a two-bedroom rental is not affordable even with two minimum wage jobs.
Since 2000, Fair Market Rents have risen 28%, compared to a 21% increase in overall inflation and 22% average income growth, said Danilo Pelletiere, NLIHC’s research director. People who rely the most on the rental housing supply, those in the bottom 20% of the income distribution, saw their incomes grow just 15% in the last five years.
Over the same period, he said, the number of renters around the country has gone up “and affordability problems have increased significantly.”
The hourly wage is also calculated in the report for every state, metropolitan area and county in the country.
The calculation of the wage amount assumes that 30% of income is spent on housing and is based on the Department of Housing and Urban Development’s Fair Market Rent, which provides a best estimate of what a family moving today can expect to pay for a modest rental home and utilities.
Following are the 10 most expensive states in the country for a two-bedroom Fair Market Rental and the hourly wage it takes to afford it:
- Hawaii, $23.53
- California, $22.86
- Massachusetts, $22.65
- New Jersey, $21.21
- New York, $20.70
- Connecticut, $20.42
- Maryland, $20.07
- Rhode Island $19.36
- New Hampshire, $18.10
- Alaska, $17.90
The most expensive metro areas, according to the report:
- Stamford-Norwalk, Conn., $30.62
- San Francisco, $29.83
- Orange County, Calif., $28.56
- Oxnard-Thousand Oaks-Ventura, Calif., $28.29
- Westchester County, NY, $26.83
- Boston-Cambridge-Quincy, Mass., $26.27
- Santa Cruz-Watsonville, Calif., $26.13
- Nassau-Suffolk, NY, $26.08
- Easton-Raynham, Mass., $25.94
- Washington, D.C., $24.73
Noting that there is “a disconnect” between what those at the bottom of the income spectrum are earning and the cost of housing, Crowley said that government intervention is needed. “We have to get more income into low-income households and increase the housing supply,” she said. The former would be accomplished in part by raising the federal minimum wage, and the latter by putting in place a government program to build and preserve affordable housing.
Crowley said that she is hopeful that there will be a more receptive response in the new Congress for an approach to the affordable housing crisis that includes actual production and not just vouchers.
Participating in a media teleconference announcing the results of the latest “Out of Reach” study, Rep. Barney Frank (D-Mass.), the incoming chairman of the House Financial Services Committee, said that, “We have to get the federal government back in the business of building and preserving affordable housing.”
In a preface to the report, Frank writes that the high cost of housing is a barrier to economic development in many regions of the country. “In my home state of Massachusetts, leading business people have pointed to the high cost of housing across the board as an obstacle to their ability to increase employment in our state,” he says.
“A full range of housing programs, including various direct construction programs and public/private cooperation, can lead to a significant increase in badly needed affordable housing…,” he writes.