Out of Reach

Introduction
For a decade, the National Low Income Housing Coalition has presented Out of Reach to the nation with the intent of awakening the public consciousness about one of the most persistent contemporary forms of economic inequality – the gap between what rental housing costs and what poor people can pay. With the 2000 edition, we continue this quest. While we look forward to the day when we can report good news, the data this year tell us we are still very far from the goal of the 1949 National Housing Act of a decent home and suitable living environment for every American family. Despite the strong economy and record low rates of unemployment, decent and affordable housing remains out of reach for too many American households, who must devote precariously high percentages of their incomes to simply maintain a home.

The national proportions of housing affordability crisis are well-documented.1  Out of Reach takes the analysis several steps further, by revealing the dimensions of the housing affordability crisis on a jurisdiction by jurisdiction basis. Through the data provided people in every community and every state can understand their locality’s particular housing affordability problem. They can understand if it is better or worse than neighboring areas or other states or if it is relatively better or worse than last year. These are crucial questions for policy makers and advocates and citizens to be able to answer. One of the principle objectives the National Low Income Housing Coalition wants to achieve with Out of Reach is to inform state and local processes for assessing housing needs. To this end, we urge the use of Out of Reach for the housing needs analyses that are required in every Consolidated Plan and Public Housing Plan.

Out of Reach contains income and rental housing cost data for the 50 states and the District of Columbia by state, metropolitan area, and county or, in the case of New England, town. For each, we calculate the income that renter households need in order to afford rental housing and estimate how many of these households cannot afford to pay the Fair Market Rent (FMR). (See Appendix for description of Fair Market Rent.) We calculate the income levels renters would need to earn to pay the rent and keep their housing costs at the generally accepted standard for affordability of 30% of income. We further report what households with incomes at 30%, 50%, 80% and 100% of the area median income can afford for housing. Income data include HUD’s current (2000) estimates of family area median income, trended forward for 2001; NLIHC’s estimates of renter median income, based on 1990 census data; and Supplemental Security Income (SSI) programs.2

The information is organized alphabetically by state and the data are categorized by nonmetropolitan county3, metropolitan area, and state-level sections. Each state’s data are preceded by a summary table that illustrates the estimated percent of renters unable to afford 1, 2, and 3 bedroom FMRs, which are also detailed in the state data tables. The estimated percent of renters who cannot afford the Fair Market Rent is based on the national distribution of renter incomes in the 1999 American Housing Survey.

The summary tables also include that state’s average Housing Wage. The Housing Wage is an NLIHC crafted measure that represents what a full time worker must earn per hour in order to afford the FMR, paying no more than 30% of income. The Housing Wage, when compared to the minimum wage, is the clearest demonstration of the chasm between real wages and housing costs. The Housing Wage is highlighted in each state data table. The tables also calculate the number of hours of work per week at the minimum wage a household must work in order to afford the FMR in each jurisdiction.

Three new features of the state data tables in the 2000 edition enhance the usefulness of Out of Reach. First, where a state has a higher minimum wage than the Federal minimum wage of $5.15 an hour, that wage rate is used. Second, we present trends for the first time, by showing the percent change in the Housing Wage from 1999 to 2000. Finally, also for the first time, we include data and analysis on 3 bedroom FMRs.

Analysis

Housing Wage

The national median Housing Wage, based on each county’s Housing Wage for a 2 bedroom unit at the Fair Market Rent weighted by HUD’s 1999 population estimates, is $12.47 an hour, over twice the Federal minimum wage of $5.15 per hour. This means that on average, there must be more than 2 full-time minimum wage workers in a household in order for the household to afford a 2 bedroom housing unit at the Fair Market Rent.

Some states4  have recognized that the Federal minimum wage is insufficient, and have passed legislation mandating higher standards. While this demonstrates progress, the steps taken still fall short. In no jurisdiction within a state that has passed a minimum wage greater than the Federal minimum wage does the increase equal the 2 bedroom Housing Wage for that community. In fact, this year, as last year, nowhere in the United States – in no state, metropolitan area, county or New England town – is the minimum wage adequate to afford the FMR for a 2 bedroom unit. Moreover, in only 3 of the 3,646 counties and New England towns analyzed in this report can a household with an income at 30% of the area median income afford the FMR for a 2 bedroom unit.

  • In no county, metro area, or state is the minimum wage, federal or state, as high as the corresponding Housing Wage for a 1, 2, or 3 bedroom housing unit at the Fair Market Rent.
  • In 32% of counties, 54% of metropolitan areas, and 44% of states, the Housing Wage is at least twice the Federal minimum wage.
  • In three states, New Jersey ($16.88), New York ($16.04), and Hawaii ($16.52), the Housing Wage is more than 3 times the minimum wage.
Changes to Housing Wage

On a national basis, the average increase in the Housing Wage in the 3,570 local jurisdictions (98% of all jurisdictions) that had an increase was $0.32, or 2.92%. In many of these jurisdictions the changes are far more dramatic.
 

  • The Housing Wage in 390 local jurisdictions (11%) increased by $1.00 or more from 1999 to 2000.
  • 52 (1.4%) local jurisdictions saw an increase of $2.00 or more to their Housing Wage.
  • The California jurisdictions of Marin, San Francisco, and San Mateo Counties each experienced an increase of $5.62 in their 2000 Housing Wage over the 1999 figure.
  • 111 local jurisdictions (3.0%) experienced more than a 10% rise in their Housing Wage, and 15 of those had greater than a 15% increase.
  • Four local jurisdictions had more than a 20% increase in the 2 bedroom Housing Wage from 1999 to 2000.
There are 76 (2.1%) jurisdictions whose Housing Wage declined from 1999 to 2000, with an average decrease of $0.52 or 4.4%.
  • 69 (1.9%) local jurisdictions showed declines between $0.08 and $0.65.
  • 5 jurisdictions (3 in Pennsylvania, 1 in Louisiana, and 1 in Texas) had a decrease of more than a $1.00 in their Housing Wage from 1999, a decrease of between 10% and 15%.
  • 64 (1.8%) jurisdictions showed between a 2% and 5% decline in the Housing Wage for a 2 bedroom FMR in 1999.

    •  
  • 3 of the local jurisdictions showing a decline had less than a 1% decrease in the Housing Wage from 1999.
While the data tell us that changes have occurred from 1999 to 2000, they do not tell us why. The fact that the Housing Wage has increased should come as no surprise to the low income people who are searching for housing or to local housing advocates. From a methodological perspective, it is important to remember that changes in Fair Market Rents directly affect the Out of Reach data. Thus, changes in the Housing Wage in a jurisdiction correspond to changes to the Fair Market Rents. Sharp increases in the FMR reflect sharp increases in the cost of rental housing in those markets, fueled by short supply and high demand. Likewise, decreases in FMRs can reflect changes to local rental housing markets, i.e., increased supply of affordable housing units or reduced demand.

Estimated Percent of Renters Who Cannot Afford FMR

Whether one examines state, metropolitan, or local data, it is clear that a substantial number of renters cannot afford the cost of basic rent. In 46% of states, 54% of all metropolitan areas, and 49% of all local jurisdictions, 40% or more of renters cannot afford the FMR for a 2 bedroom unit. When compared to the 1999 analysis, these data indicate a slightly improved situation for renters. In the aggregate, renters’ incomes have risen, but it is important to bear in mind that dramatic increases in earnings for higher income renters can mask stagnation or lesser increases in earnings for low income renters.

It is also important to make clear that while the AHS survey data includes all renters, the Federal minimum wage has not increased in the past several years. So the story told by these data is that while some renters are better off millions more are worse off than they were just a few years ago. In other words, while some renters’ incomes have risen in tandem with rising Fair Market Rents, workers at or near the minimum wage are increasingly being squeezed out as more and more housing units are priced at levels they cannot afford.

Conclusion

The 2000 edition of Out of Reach reveals that the gap between the incomes of renters across the nation and the average cost of housing units continues to widen, despite small improvements in some market. The solutions are straightforward and within our means. We must expand the availability of housing assistance and invest more resources in production and preservation of affordable housing. We must improve incomes by increasing the minimum wage, expanding the Earned Income Tax Credit, establishing living wage ordinances, and continuing to develop living wage jobs.

Methodology

The methodology for Out of Reach was developed by Cushing N. Dolbeare, Founder and Chair Emeritus of the National Low Income Housing Coalition. The analysis is based on FMRs established by HUD for fiscal year 2001. State average FMRs are weighted averages for all counties (metropolitan and nonmetropolitan), based on number of renter households reported by the 1990 Census. State average area median incomes are derived in the same manner from HUD area median income estimates for FY 2000.5  Renter median income estimates are based on 1990 renter median income as percent of household median income. In other words, lacking better data, the report assumes that the relationship between renter and owner incomes has not changed since 1990. The study also estimates affordability based on the 30% of income standard used in federal housing policy subsidy programs. This standard is also a generally accepted measure of affordability.

The estimates of the proportion of renter households unable to afford the FMR are based on the national income distribution of all renter households as reported by the 1999 American Housing Survey (AHS), the most recent information available. Stated differently, if the income needed to afford the FMR is 59% of renter median and 32% of all renter households had incomes below 59% of area median in 1999, then we assume that 32% of all renter households in the state cannot afford the FMR. Again, this assumption is made because better data are unavailable.

The calculations of wages and hours of work needed to pay the FMR at 30% of income are made at either the federal minimum wage ($5.15) or the state minimum wage if applicable. These numbers assume pay for a 40-hour week for all 52 weeks of the year. However, many people earning hourly wages do not get paid vacation or sick leave, or may switch jobs and lose work time. Therefore, the wage levels cited are the lowest at which the FMR could be paid at 30% of income.

Some Metropolitan Statistical Areas (MSAs) fall into more than 1 state. Data for these are only listed in the state in which the MSA’s central city is located.

Towns, rather than counties, have been used as the local jurisdictional unit for metro areas in New England states, because counties in these states often include portions of several MSAs. For these states, a county is not listed if all of the towns within it also fall within an MSA and are listed separately, but is listed – rather than its towns – if it is a nonmetro county or if any portion of it is outside of an MSA. In the case of the latter, only data for the nonmetro portion of the county is represented.

The following New England towns have been omitted because the 1990 Census data for each was not available on the tabulation of population and housing data used for this research (STF3C on CD-ROM):

CT: Ashford, Chaplin, Harwinton, Lebanon, Old Saybrook, Roxbury, Thompson, Washington
MA: Adams, Berkley, Grewster, Chatham, Dighton, Eastham, Georgetown, Hadley, Hatfield, Holland, Mashpee, Norton, Oakham, Orleans, Sturbridge, Sunderland, Ware, West Brookfield, Williamsburg
ME: Casco, Limington, Milford, Turner, Wales
NH: Chester, Epping, Fremont, Greenville, Hampton Falls, Kensington, Mason, New Ipswich, Raymond, South Hampton, Ware
RI: Charlestown
VT: Fairfax, St. Albans, St. Albans city, Swanton


 
Sources and Related Information

Fair Market Rent Data are proposed FY 2001 FMR levels from the HUD web site (http://www.huduser.org/datasets/fmr/fmr2001p.pdf). Median income data are based on HUD estimates of median family income for 2000, also from the HUD web site (http://www.huduser.org/datasets/il/fmr00/index.html). Census baseline data is from the 1990 Census STF3C CD-ROM, for counties and New England towns and cities. Because no estimates of 2001 median renter incomes are available, the estimates are based on 1990 median renter incomes as a percent of median family household income.

SSI information is from the Social Security Administration, Office of Policy, web site (http://www.ssa.gov/statistics/Supplement/2000/pdf/index.html), table 7.B: “Number of persons receiving federally administered payments and average monthly amount, December 1999”. Because the most current data are only reported as state averages, we have included SSI figures on the state summary pages only.

Information on statewide minimum wages is available from the Department of Labor, Employment Standards Administration. The data are also available from the website http://www.dol.gove/dol/esa/public/minwage/america1.htm.

______________________________________________________________________

Department of Commerce, Bureau of the Census, CD ROM STF3C.  Washington, DC: Bureau of the Census (1996).

Department of Housing and Urban Development, Notice: “Estimated Median Family Incomes for Fiscal Year 2000”: (March 9, 2000).

Department of Housing and Urban Development, Notice: “Fair Market Rents for the Housing Choice Voucher Program and Moderate Rehabilitation Single Room Occupancy Program – Fiscal Year 2001; Proposed Rule.” (April 2000).

Department of Housing and Urban Development and Department of Commerce, American Housing Survey for the United States in 1999. Washington, DC: GPO (2000). Also found at http://www.huduser.org/datasets/ahs/ahsdata99.html.
 

  1. Joint Center for Housing Studies at Harvard University, The State of the Nation’s Housing, June 2000; U.S. Department of Housing and Urban Development, Rental Housing Assistance at a Crossroads: A Report to Congress on Worst Case Housing Needs, March 1996; U.S. Department of Housing and Urban Development, The Widening Gap: New Findings on Housing Affordability in America, September 1999; The Center for Housing Policy, Housing America’s Working Families, June 2000.
  2. The HUD income estimates are trended forward by calculating the percent change in income from 1999 to 2000, then multiplying the percentage change by the 2000 income data. This calculation was made in order to maintain consistency among our data sources. The HUD FMR estimates are for 2001, while the income estimates for 2001 will not be available from HUD for several months. SSI is a federal program that provides monthly cash payments to poor individuals and couples who are elderly, disabled, or blind.
  3. Areas not considered to be part of a Metropolitan Statistical Area (MSA).
  4. Alaska ($5.65), California ($5.75), Connecticut ($6.15), District of Columbia ($6.15), Delaware ($5.65), Hawaii ($5.25), Massachusetts ($6.00), Oregon ($6.50), Rhode Island ($5.65), Vermont ($5.75), Washington ($6.50).
  5. As discussed in a previous section, the 2000 income estimates were trended forward to estimate for 2001.
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