Out of Reach 2004
The National Low Income Housing Coalition once again must report that the cost of rental housing in the United States is out of reach of the vast majority of low wage earners and people who are elderly or disabled with public income benefits. The disparity between income and rent for people of modest means is so wide as to be unfathomable to the two-thirds of the U.S. population who are well-housed at costs that are well within their households’ budgets.1For the other one third of the nation, the consequences of ends that do not meet are all too real. They must devise ways of coping that at a minimum mean forgoing all optional or postponeable spending or saving, too often require making impossible choices among necessities, and in the worst case, managing with no home at all.
For those who labor under the misconception that this third of the U.S. population lives somewhere other than their community, Out of Reach is a reminder that no community, no town or city or county or state, has enough housing for the low income people who live there.
Out of Reach documents both the depth and the scope of the American housing crisis.
Although Out of Reach contains a lot of data that can be daunting to navigate, we hope we have presented the data in as accessible a manner as possible.
Analysis
Out of Reach 2004 provides a side-by-side comparison of wages and rents in every state, Metropolitan Statistical Area (MSA), and county in the United States. Based on the federal affordability standard of paying no more than 30% of income for housing costs, the report calculates the amount of money a household must earn in order to afford each area’s Fair Market Rent (FMR).
The Fair Market Rent is the U.S. Department of Housing and Urban Development’s (HUD) best estimate of what a household seeking modest rental housing must expect to pay for rent and utilities in the local market (see Appendix A for more information on Fair Market Rent). The data used for all calculations in Out of Reach are from the U.S. Census Bureau and HUD (see Appendix B for more details on the data and methods used).
Out of Reach enables the reader to make a quick comparison of rental housing costs in the local market to people’s ability to afford rental housing there. This year the published report compares the Fair Market Rent for a two bedroom home to the amount of rent affordable for those earning the area median income (AMI), those earning extremely low income (ELI – less than 30% of AMI), and those earning the median income of renters in the area. Also included is the number of hours that an individual or household must work at minimum wage to afford a two bedroom apartment at the Fair Market Rent.
An additional statistic provided this year is the number of ELI renter households who were unable to afford their rent in 2000 according to the Census.
For each state, the published report also compares the cost of decent rental housing to the benefits Supplemental Security Income (SSI) recipients receive and to the dollar amount minimum wage workers earn.
The signature statistic of the report is the hourly wage a full time worker must earn to afford the Fair Market Rent for a two bedroom home.2 This is the Housing Wage.
A more comprehensive set of data is also available on-line at www.nlihc.org/oor/oor2004/.
2004 is a Transition Year for Fair Market Rents
Readers should be aware that this year’s Fair Market Rents differ from those published in Out of Reach in recent years in a number of ways. The Fair Market Rents still represent HUD’s best estimate of what a household seeking rental housing would have to pay to find a decent rental unit in the local market. This year, however, not only were the Fair Market Rents estimated based on 2000 rather than 1990 Census data, an anticipated and necessary update, but HUD also made some significant and more controversial changes to the methodology it uses to estimate them (see Appendix C for more information). This is expected to be the first in a number of transition years as HUD adjusts to new sources of data, such as the American Community Survey, and as a more general debate ensues over HUD’s methods and role in setting local rent guidelines.
As a result, the data in Out of Reach this year represents a break from the editions published in recent years, and comparisons to past data are not provided in the tables and analysis in this year’s report.
Housing and Earnings
Today, the national Housing Wage for a two bedroom unit is $15.37. The median hourly wage in the United States is only about $14.00 and more than a quarter of the population earns less than $10.00 an hour.3
There is ample evidence that rents are rising and wages have not kept pace with rising housing costs. Bureau of Labor Statistics data suggest that rents continued to rise faster than incomes in 2004. From October 2003 to October 2004, the Consumer Price Index shows an increase of 2.9% for the rental of primary residences.4 Hourly wages, however, were up only 2.6% over the past year.5 Data compiled by the Joint Center for Housing Studies at Harvard University show that both contract rents and gross rents, which include the cost of utilities, have risen steadily from the mid-1990s, despite a decline in renter incomes after 2001.6 Since 1997, the federal minimum wage has remained at $5.15.
This year, the Housing Wage for a two bedroom home ranges from a high of $29.60 in the San Francisco, CA area to $6.21 in Starr County Texas, and $5.90 in portions of Puerto Rico. Low Housing Wages do not mean affordable housing, however. In Puerto Rico, $5.90 is greater than the median hourly wage.
Extremely Low Income Renters
It is well documented that the lowest income households suffer the most in today’s housing markets. The numbers this year show the extent to which this is true.
There is not a single metropolitan area where an ELI household can be assured of finding a modest two bedroom rental unit that is affordable. At the county level, a household at the ELI threshold can afford a decent two bedroom home at the Fair Market Rent in only nine counties, largely rural, including Loving County, TX, Elbert County, CO, and Mercer County, ND. These nine counties contain only 7,000 of the over 36,000,000 renter households in the country. In contrast, in 201 counties, containing nearly 8 million renter households, a household earning 30% of the AMI can afford less than half of their area’s FMR in rent and utilities.
Moreover, the vast majority of ELI households earn less than 30% of AMI. For these households the prospects for finding a decent home among current market rate rentals are even smaller. This is shown in the actual numbers of ELI renter households living in unaffordable housing. In 2000 there were over five million ELI renter households, roughly 14 million people, who could not afford rent. In Los Angeles, 250,000 households were in this situation.
Minimum Wage
Once again, this year there is not a single jurisdiction in the country where a person working full time earning the prevailing minimum wage can afford a two bedroom rental home.
Moreover, there are only four counties in the country - Wayne, Crawford, and Lawrence counties in Illinois and Washington County, Florida - where a person or a household working 40 hours a week, 52 weeks a year at the prevailing minimum wage can afford even a one bedroom apartment.7
In 70% of the metropolitan areas in the country, the Housing Wage is at least twice the prevailing minimum wage. In 56 metropolitan areas the Housing Wage is over three times the minimum wage. This is illustrated in Out of Reach by the number of work hours per week per household necessary at minimum wage to afford a two bedroom home at the Fair Market Rent. This number allows the reader to focus on the differential between the minimum wage and the Housing Wage, but it also allows an appreciation of the challenges low income households face. In the first instance, the more hours necessary, the higher the cost of housing relative to the minimum wage. In the second instance, by considering this number relative to the standard 40 hour work week, it becomes clear that households that have multiple minimum wage earners contributing to the rent, earn higher wages, and or work overtime are still likely to have significant problems finding a safe decent apartment in the community where they work.
Renter households in 991 counties, home to almost 79% of all renter households in the nation, must work over 80 hours a week at the local minimum wage to afford a two bedroom apartment at the Fair Market Rent. In Pitkin County, CO, where the Housing Wage is nearly five times greater than the minimum wage, it would take nearly five minimum wage earners or two earners earning two and a half times the minimum wage working full time for a household to afford a modest two bedroom apartment.
SSI
Supplemental Security Income (SSI) is the federal income maintenance program that provides a base of support for the elderly and disabled poor. As of December 2002, 6.8 million people received SSI and 3.9 million of these were blind or otherwise disabled working age adults. The vast majority of SSI recipients rely on this income to meet basic needs such as food, clothing, and shelter. For some it is their only source of income.8 Individual recipients of SSI receive $564 monthly from the federal government. Ten states provide a small supplement to the federal SSI payment.9
On its own, the SSI payment does not come close to making rental housing affordable anywhere in the country. Of all the groups discussed thus far, those receiving only SSI payments as income are at the greatest disadvantage in today’s housing markets. At $564 an individual can afford to pay $169 a month for rent. Even in West Virginia, the state with the smallest gap between Fair Market Rents and rents affordable to SSI recipients, affordable housing is well out of reach. In that state SSI recipients can afford just under half of the FMR on an efficiency apartment.
Conclusion
The stark dichotomy in every community between those whose home is a given and those for whom having a home is a struggle is a national scandal. It is a scandal that is well documented in this and other research and in the popular media. Nevertheless, it remains an issue that public policy makers have yet to prioritize as worthy of serious attention.
The National Low Income Housing Coalition offers Out of Reach to those who believe that safe, decent, and affordable housing for everyone in America is not only a basic right, but an attainable goal, in order to help you make your case with the decision-makers in your community and in Congress. Together, we will get them to listen.
1 National Low Income Housing Coalition, America’s Neighbors: The Affordable Housing Crisis and the People it Affects. http://www.nlihc.org/research/lalihd/neighbors.pdf
2 Assumes 2,080 hours of work a year, i.e. the equivalent of one person working 52 weeks a year, 40 hours a week with no additional time off. The average US private production or nonsupervisory worker on private nonfarm payrolls in the US as of August 2004 was 1,800 hours a year and the average leisure and hospitality worker works 1,300 a year according to the Current Employment Statistics (CES) at the Bureau of Labor Statistics at http://ftp.bls.gov/pub/suppl/empsit.ceseeb2.txt, accessed on December 2, 2004.
3 According to the November 2003 National Occupational Employment and Wage Estimates (November, 2004: www.bls.gov/oes/current/oes_00al.htm), the median hourly wage was $13.65 and 25% of the population earned less than $9.07 an hour. Multiplying this by the average hourly earnings increase of 2.6% yields a 2004 estimate of $14.00.
4 Bureau of Labor Statistics. “Consumer Price Index: October, 2004.” November 17, 2004 at ftp://ftp.bls.gov/pub/news.release/History/cpi.11172004.news, accessed December 1, 2004.
5 Bureau of Labor Statistics. “The Employment Situation: October” November 5, 2004 at www.bls.gov/news.release/empsit.nr0.htm accessed November 30, 2004.
6 Joint Center for Housing Studies of Harvard University. The State of the Nations Housing 2004, Table A-1 available at www.jchs.harvard.edu/publications/markets/son2004.pdf.
7 Again this assumes 2,080 hours of work a year (see footnote 2).
8 In 2002 45% of those receiving SSI benefits who are over 18 years of age reported no other sources of income. Social Security Administration, Annual Statistical Supplement 2003, Tables 7.D1 and 7A.
9 Supplements included here are for state programs administered by the federal government where the state supplement applies to all individuals living independently. This information can be found at www.ssa.gov/pubs/statessi.html (See Appendix B).
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