Out of Reach 2004
The analysis in Out of Reach is based on Fair Market Rents (FMRs) provided by the department of Housing and Urban Development (HUD) for fiscal year 2005. For the majority of jurisdictions the FMR is defined by HUD as “the dollar amount below which 40 percent of the standard quality rental housing units rent.” In some metropolitan areas this is set to the 50th percentile due to generally high costs and high geographic concentrations of affordable housing. The 39 areas where the FMR is set at the 50th percentile rent (see Appendix A for further explanation of FMR) 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 averages for all county values (metropolitan and nonmetropolitan) weighted by the number of renter households reported by the 2000 U.S. Census.State average area median incomes (AMI) are derived in the same manner from HUD area median income estimates for FY 2004. 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.
The study estimates affordability based on the 30% of income standard set by federal housing policy and used in many subsidy programs. This standard is also a generally accepted measure of affordability in the housing industry at large.
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 the hours of work needed to pay the FMR at 30% of income. What a person can afford at the minimum wage assumes pay for 2,080 hours a year, i.e. a 40-hour week for all 52 weeks of the year. In reality, people do not work every day, and those earning hourly wages often do not get paid sick leave or other paid time off, or they may switch jobs and lose work time. According to the Bureau of Labor Statistics, as of August 2004 the average private employee in the US worked less than 1,800 hours in the past 12 months. Many also do not qualify for health insurance and must bear the full cost of health care expenditures. Thus the annual income of a minimum wage worker used for the calculations of affordability is likely to overestimate real income of minimum wage workers.
Conversely, the numbers do not include other sources of income such as the Earned Income Tax Credit (EITC) or child support payments which supplement reported wage income. The FMRs and AMIs used to calculate the Housing Wage are the same HUD data used to set payment standards for its subsidy programs, however, and NLIHC has determined that using this data is the most consistent way to calculate affordability each year. These are the only data that are available annually on a jurisdiction-by-jurisdiction basis.
This edition of Out of Reach includes a field showing the number of renter households in a given area earning 30% or less of the area median income unable to afford rent. These are numbers taken from CHAS data, a special tabulation of 2000 Census data created for HUD. More information on the CHAS dataset is available at www.huduser.org/datasets/cp.html.
Out of Reach conducts an analysis by percent of the AMI for each jurisdiction. The results for households earning 30% of AMI are presented in this book. It is important to note that these are straight percentages and do not include adjustments HUD uses in calculating its administrative thresholds for Extremely-, Very- and Low-Income categories.
Finally, Out of Reach provides a comparison of rental housing costs and Supplemental Security Income (SSI) payments made to individuals in each state. The basic federal SSI payment for 2004 is $564. State governments supplement this in various ways. Included here are all state supplements administered by the Social Security Administration that apply to all individual SSI recipients in the state. State supplements that may be administered at the state level or those administered only to populations with specific disabilities, in specific facilities, or in specific household settings are not included. For a more thorough treatment of SSI and housing costs see the Technical Assistance Collaborative, Inc. and Consortium for Citizens with Disabilities Housing Taskforce report Priced Out in 2002 at www.c-c-d.org/PO2002.pdf.
Out of Reach addresses affordability for the rental housing market, not the home ownership market. This is not meant to imply that housing affordability problems are unique to renters. Harvard University’s Joint Center for Housing Studies’ State of the Nation’s Housing: 2004 (www.jchs.harvard.edu/publications/markets/son2004.pdf) includes an analysis of the affordability problems of homeowners.
Data included in print version. The data available in the print version of Out of Reach is limited, in an effort to present the most important information clearly. Additional data can be found online at www.nlihc.org/oor/oor2004/.
New England states. New England is the only geographic region in the nation where Metropolitan Statistical Area (MSA) borders do not always correspond with county borders. Thus, in many cases parts of a county are within an MSA, and other parts of the same county are in a nonmetro portion. Therefore, for New England states we include data for all MSAs and for all nonmetro portions of counties. We also provide lists of towns within each MSA and nonmetro area.
The Out of Reach methodology was developed by Cushing N. Dolbeare, founder and Chair Emeritus of the National Low Income Housing Coalition. Ms. Dolbeare is a housing policy consultant, and a senior scholar at Joint Center for Housing Studies of Harvard University.
Sources
Fair Market Rent data are FY 2005 FMR levels from the HUD web site at: www.huduser.org/datasets/fmr.html.
Median income data are based on HUD estimates of median family income for 2004, also from the HUD web site at: www.huduser.org/datasets/il/il04/index.html.
2000 Census data are from Summary File 1 and Summary File 3 100 Percent Data, at: www.census.gov/main/www/cen2000.html.
Information on SSI payments is from the Social Security Administration at: www.ssa.gov/pubs/11069.html with state supplement information coming from www.ssa.gov/pubs/statessi.html.
Information on statewide minimum wages is from the Department of Labor’s website, at: www.dol.gov/esa/minwage/america.htm.
Consumer Price Index figures are from the Bureau of Labor Statistics, at: www.bls.gov/cpi/.
The number of renter households in a given area earning 30% or less of the area median income unable to afford rent is calculated from FY 2000 CHAS data. More information on this dataset is available at: www.huduser.org/datasets/cp.html
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