Out of Reach
Q – Does the Out of Reach report address the affordability of home ownership?A – Out of Reach addresses affordability for the rental housing market, not the home ownership market. Most low income people rent their homes rather than owning them, and much information already exists on homeownership. For information about home ownership affordability, go to the National Association of Home Builders website and look at the Housing Opportunity Index (www.nahb.org/facts).
Q – Out of Reach contains income data for families, but families often get additional income from sources such as the Earned Income Tax Credit (EITC), child care tax credits, and child support payments. Doesn’t that misrepresent the income people actually receive per year, and therefore overstate the problem?
A – Out of Reach uses HUD’s income estimates that are done annually to determine eligibility for various housing programs. An in-depth look at income issues and the working poor can be found online in an issue guide published by the Economic Policy Institute (www.epinet.org), titled “Poverty and Family Budgets.”
Q – What does the term “family” mean in the “Family AMI” column?
A – The Census definition of “family” is two or more persons related by blood or marriage. The “Family AMI” variable relates to the universe of all families and is not intended to apply to a specific family size.
Q – Is it realistic to compare the Housing Wage to a state or federal minimum wage? Specifically, does anyone really make the minimum wage anymore?
A – According to the U.S. Bureau of Labor Statistics, in the year 2000 more than 2.7 million workers in the United States, aged 16 years and over, earned at or below the prevailing Federal minimum wage. Slightly more than half of these workers (1.4 million) are between the ages of 16 and 24, while 1.3 million are 25 years old and older. About two-thirds (1.8 million) of these workers were women; 1.5 million were white, 204,000 were black, and 177,000 were Hispanic. Of the 954,000 male minimum wage workers, 752,000 were white, 157,000 were black, and 141,000 were Hispanic. These numbers do not include workers who earn a state minimum wage1 , typically slightly higher than the Federal minimum wage, or other workers whose earnings hover just above the minimum wage.
Q – What is FMR?
A – FMR, or Fair Market Rent, is calculated annually by HUD using telephone surveys and American Housing Survey and Consumer Price Index data. It typically represents the 40th percentile rent for a unit with a specified number of bedrooms. In other words, one can assume that a two-bedroom FMR of $500 means that 40% of two-bedroom units in that area rent at or below $500, while 60% of the two-bedroom units in that area rent above $500. Recently HUD began calculating FMRs in some metropolitan areas at the 50th percentile level. We have indicated in this report the percentile at which an FMR is calculated.
Questions often arise about the validity of using the HUD-generated FMR calculations, in part because across the country FMR in one locality may be calculated using a different source of data than FMR in another locality, though all FMRs use the same baseline data, currently from the 1990 Census. While this is a legitimate concern, the FMR methodology HUD has developed makes the best use of data currently available for all areas of the country. It is the best data available to estimate the cost of rental housing across the United States for every local jurisdiction.
Q – Out of Reach paints a stark picture of housing affordability for low income people. What should be done about the affordable housing crisis?
A – NLIHC has long maintained the affordable housing crisis is solvable, and the solutions are not complicated. They are: improve incomes, expand and improve housing vouchers, preserve and improve existing assisted and public housing, and build more housing that is affordable to the lowest income families.
1 Ten states plus the District of Columbia currently have minimum wage laws in effect that are higher than than the Federal minimum wage. See footnote 13 in the introduction to this report.
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