Out of Reach 2001: America’s Growing Wage-Rent Disparity
Introduction
Settling into a new century, it is important to reflect on the status of our nation relative to where we thought we would be when we peered into the future twenty, thirty, or forty years ago. In many ways we have far exceeded our own expectations, with few of us anticipating the profound changes that only a few decades would introduce in our lives.

Yet one fact of daily living remains stubbornly unchanged in this country – the need for a safe, decent and affordable home for every American. Though every American still deserves the opportunity to obtain such housing, increasing numbers of the poor and near-poor are denied it. The cost of housing has consistently and dramatically outpaced income for many years,1  with the hardest hit being poor people whose incomes are not likely to increase significantly over time. Combined with an ever-dwindling supply of housing available to the lowest income groups,2  we have reached a point of crisis that will be solved only with sustained and dramatic action.

The National Low Income Housing Coalition presents the Out of Reach report annually to document, for every jurisdiction in the country, the ever-widening gap between what rental housing costs and what poor people can pay. Though the sheer volume of data in this report is notable, one fact rises above all the numbers and calculations: Housing is the beginning, the foundation, the stability, that people must have to go to work each day, send their children to school, arrange transportation and child care, and generally succeed in life. When housing searches, moves, and eviction notices become routine, employment and school stability are nearly impossible to sustain.

Out of Reach provides data on housing affordability in the context of rental housing, often the first step people take on the road to permanent housing stability. The people behind the numbers in this report represent many groups: poor and near-poor, working and non-working, two-parent, single parent, and childless families, disabled and elderly people receiving Supplemental Security Income (SSI). These varied groups all face the same stark reality: Their income, whether from work, Temporary Assistance to Needy Families (TANF), or SSI, is not enough to pay for a safe and decent home. This report contains data to inform local communities, states, and the federal government on the dimensions of the affordable housing crisis. It can be of particular use in 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 fifty states, the District of Columbia, and for the first time, the territory of Puerto Rico. The data are provided by state, metropolitan area, and county3 or, in the case of New England, town. For each, we calculate the income that families need to be able to afford to pay the Fair Market Rent (FMR). (See Appendix for description of Fair Market Rent.) We calculate the income levels families need to earn in order to pay the rent and keep their housing costs at the generally accepted standard of affordability, 30% of income. We further report what households with incomes at 30%, 50%, and 80% of the area median income can afford for housing. Income data include current (2001) estimates of family area median income from the U.S. Department of Housing and Urban Development, trended forward for 2002.4  Supplemental Security Income (SSI)5 data are provided by The Technical Assistance Collaborative Inc., as published in Priced Out in 2000: The Crisis Continues,6 and for states, data on the share of households paying more than 30% of their income on rent are calculated by the Economic Policy Institute.7

The information is organized alphabetically by state, and the data are categorized by nonmetropolitan county,8  metropolitan area, and state-level sections. Each state’s data are preceded by a summary table that graphically depicts the Housing Wages for a one, two, and three bedroom home compared to the state’s minimum wage, and highlights the two bedroom Housing Wage trend from 1999 through 2001. The Housing Wage is a 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 federal or state minimum wage, is the clearest demonstration of the chasm between real wages and housing costs. The tables also show 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.

New in this Edition

Each year when the new edition of Out of Reach is released, questions from readers touch on a few important themes. This year we collected this information and wrote a Frequently Asked Question (FAQ) section.  Data on the U.S. territory of Puerto Rico are also included for the first time in the 2001 edition. In expanding the geographic scope of Out of Reach, we hope that more people will become involved, particularly in their own communities, in the allocation of scarce housing resources.

Data from the 2000 Census have only been partially released to date. Currently available, and therefore included in this edition, is the number of renter households for each jurisdiction, and from this, we calculated the percentage change in renter households since the 1990 Census.  These data provide two important pieces of information. First, the number of renter households in any area allows us to know how many households are actually affected by the rental market and are therefore threatened by growing affordability problems. Second, the changes over a decade in the percentage of renter households in an area provides perspective on the relative number of different types of households and how they have or have not changed both in isolation and compared to surrounding areas.

Finally, effective December 2000, for 39 metropolitan areas HUD has set the FMR at the 50th percentile (instead of the 40th percentile) to expand the housing available to rent by low income people. As a result, this year’s FMRs for these areas and, in turn, the corresponding Housing Wage numbers, show significant changes. To alert users to which percentile is used to calculate the reported FMR, we have placed an asterisk next to each jurisdiction or MSA for which the 50th percentile FMR is used.

Analysis

Housing Wage

The national median housing wage, based on each county’s housing wage for a two bedroom unit at the Fair Market Rent weighted by Census 2000 population figures, is $13.87 an hour, more than twice the federal minimum wage of $5.15 per hour. This means that on average, there must be more than two full-time minimum wage workers in a household in order for the household to afford a two bedroom housing unit at the Fair Market Rent.

Several states9  have enacted minimum wage legislation that exceeds the federal minimum wage, in some cases by only $0.10 and in other cases by as much as $1.60. Though a state minimum wage implicitly recognizes the inadequacy of the current Federal minimum wage, the efforts of these states still fall short. In fact, there is no jurisdiction in any of these states that can claim to require a wage that equals the one or two bedroom Housing Wage.

Confirming the analysis from the past two years, data this year reveal that nowhere in the United States – in no state, metropolitan area, county, or New England town – is the prevailing minimum wage adequate to afford the FMR for a two bedroom home. Ironically, the local areas that come closest to being affordable to minimum wage earners, with a two bedroom Housing Wage of $5.77, are located in the U.S. territory of Puerto Rico, where the federal minimum wage is not always applicable.10

Changes to Housing Wage

Nationally, 3,779 local jurisdictions were included in the analysis. Of these, all but one, or 99.9%, experienced an increase in the Housing Wage, with the average increase amounting to $0.50, or 4.61%. This increase is larger than last year’s of $0.32 (2.92%), and highlights the widening affordability gap for the nation’s poor.

There is only one jurisdiction, Madison County, Missouri, whose Housing Wage declined from 2000 to 2001. The decline was 3.1%, from $7.37 in 2000 to $7.13 in 2001, still more than the federal minimum wage.

Numbers of Renters, 1990 to 2000

Census 2000 data provide the opportunity to understand, at the local level, how many households are affected when rents are too high for poor families to afford. Moreover, we can see how this number has changed in a decade of relative prosperity for the nation.

The data presented in this year’s Out of Reach report provide a snapshot of the housing affordability problems currently faced by renters. Fluctuations in the Housing Wage can be accounted for by changes to the FMRs, and the increases are directly proportional. In any place where a sizeable increase was made to an area’s FMR, the Housing Wage will reveal a corresponding increase. In a rental market with a low vacancy rate and high demand for housing, rents, and subsequently the FMR calculations, can rise quickly.

In many places across the nation, high demand combined with low vacancies is placing increasing pressure on the housing market, exacerbating a situation already in crisis. The sad fact remains that even in places where the FMR has increased only at the rate of inflation, the minimum wage is insufficient for people to afford a home.

Conclusion

There are many factors that contribute to the current affordable housing crisis. Some of the most prominent reasons include the limited supply of affordable housing units, the continuing loss of existing units, and a pronounced and prolonged period of disinvestment by the Federal government.11  The 2001 edition of Out of Reach reveals that the gap between the incomes of renters across the nation and the average cost of housing units is simply widening over time.

The current situation is not an inevitable byproduct of the nation’s prosperity. In fact, the opposite is true. We have never before had the enormous resources, knowledge, and ability to effect change in people’s lives by ensuring safe, decent, and affordable housing for all. In the end there is only one solution: to make a collective decision that as a society, we will not allow people to go without homes.

Methodology

The methodology for this report was developed by Cushing N. Dolbeare. The analysis is based on FMRs established by HUD for fiscal year 2002. The 39 areas at the 50th percentile rent are denoted in the tables with an asterisk (*). Increases to the FMR percentiles are based on criteria established in HUD’s interim rule, published October 2, 2000 (65 FR 58870). State average FMRs are weighted averages for all counties (metropolitan and nonmetropolitan), based on number of renter households reported by the 2000 Census. State average area median incomes are derived in the same manner from HUD area median income estimates for FY 2001.12  The study 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.

Where a state has enacted a minimum wage that is higher than the federal minimum wage of $5.15 per hour, the state figure is used to calculate wages and hours of work needed to pay the FMR at 30% of income.13  These numbers assume pay for a 40-hour week for all 52 weeks of the year. In reality, people earning hourly wages often do not get paid vacations or sick leave, or they may switch jobs and lose work time. Many also do not qualify for health insurance and must bear the full cost of health care expenditures. Therefore, the wage levels cited are the lowest at which the FMR could be paid at 30% of income. Conversely, the numbers do not include other sources of income such as the Earned Income Tax Credit (EITC) or child support payments that supplement reported wage income.

Some Metropolitan Statistical Areas (MSAs) fall into more than one state. Data for these are listed only 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 a county 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.

Sources and Related Information

Fair Market Rent Data are proposed FY 2002 FMR levels from the HUD web site (www.huduser.org/datasets/fmr.html). Median income data are based on HUD estimates of median family income for 2001, also from the HUD web site (www.huduser.org/datasets/il/fmr01/medians01.pdf).

1990 Census data are from the 1990 Census STF3C CD-ROM, for counties and New England towns and cities, and 2000 Census data are from Summary File 1 (SF1) 100 Percent Data, www.factfinder.census.gov. Occupied housing unit data can be found by state in table GCT-H6.

SSI information is from Priced Out in 2000: The Crisis Continues. The Technical Assistance Collaborative, Inc. Boston, MA (www.tacinc.org), and Consortium for Citizens with Disabilities Housing Task Force (www.c-c-d.org/tf-housing.html).

Economic Policy Institute data can be found at www.epinet.org/datazone/acs/index.html, in the table titled “National and state data from the Census American Community Survey.” It was published online as part of an analysis of American Community Survey (ACS) data from 1999-2000.

Information on statewide minimum wages is from the website www.dol.gov/dol/esa/public/minwage/america1.htm.

1 Joint Center for Housing Studies at Harvard University, The State of the Nation’s Housing, June 2001; Center for Housing Policy, Paycheck to Paycheck: Working Families and the Cost of Housing in America, June 2001.

2 Ibid., The State of the Nation’s Housing.

3 Income estimates for metropolitan counties are available only at the MSA level. Income figures for some metropolitan counties may therefore differ slightly from the MSA-level figures reported here. County-level income data for metropolitan counties is reported in the 2000 Census, not yet publicly available.

4 The HUD income estimates are trended forward by calculating the percent change in income from 2000 to 2001, then multiplying the percentage change by the 2001 income data. This calculation was made in order to maintain consistency among our data sources. The HUD FMR estimates are for 2002, while the income estimates for 2002 will not be available from HUD for several months.

5 SSI is a federal program that provides monthly cash payments to poor individuals and couples who are elderly, disabled, or blind.

6 Available online at www.tacinc.org. SSI rates for 2000 consist of the federal payment of $512 in 2000 plus optional state supplements in the 22 states that uniformly provide a state-determined, state-funded additional amount to all recipients living independently in the community. Some states provide supplements for people with specific disabilities and/or people with disabilities who live in specific housing arrangements. Only supplements uniformly applied to all people with disabilities living independently in the community are included.
 
7 The State of Working America 2000/2001, table 6.10 page 352.

8 Areas not considered to be part of a Metropolitan Statistical Area (MSA).

9 Alaska, California, Connecticut, Delaware, District of Columbia, Hawaii, Massachusetts, Oregon, Rhode Island, Vermont, Washington.

10 The $5.15 Federal minimum wage is only mandated for employees in Puerto Rico covered by the Federal Fair Labor Standards Act (FLSA). Employees not covered by this act may be paid as little as $3.61 per hour.

11 National Low Income Housing Coalition, Changing Priorities: The Federal Budget and Housing Assistance 1976-1999. March 2001.

12 As discussed in a previous section, the 2001 income estimates were trended forward to estimate for 2002.

13 Alaska ($5.65), California ($6.25), Connecticut ($6.40),  Delaware ($6.15), District of Columbia ($6.15),  Hawaii ($5.25), Massachusetts ($6.75), Oregon ($6.50), Rhode Island ($6.15), Vermont ($6.25), Washington ($6.72).

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