Out of Reach
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Rental Housing At What Cost? October, 1998 |
Out of Reach is an affordability analysis of the private rental housing market in American metropolitan areas. It documents the difficulties renters face in obtaining affordable rental housing by state, metropolitan area, and county. The analysis reminds us that the solution to these difficulties is more affordable housing. More affordable housing means more help for those for-profit and non-profit housing developers and community based organizations who have a successful history of providing it, as well as those who have linked housing to education and training, job development, and other supportive services.The data in Out of Reach are the best estimates we can make of the affordability problems likely to face renter households looking for housing in fiscal year 1998. We know of no good way of linking this information to the total number or percentage of renter households with affordability problems in each of the areas examined. We do know, however, that in general renter incomes are lower than those of owners. According to the 1995 American Housing Survey (AHS), 24% of renter households and 9% of owner households had extremely low incomes (below 30% of area median), while 19% of renter households and 48% of owner households had incomes above 120% of area median.
Families with the lowest incomes face the most critical affordability problems. More than half (54%) of extremely low income renter households paid more than 50% of income for housing costs (as did 44% of very low income owners). In contrast, only 5% of renters paying more than half their incomes for housing were above 50% of area median income.
The housing cost data used in this report are the Fair Market Rents (FMRs) established by the Department of Housing and Urban Development (HUD) for FY 1998. HUD uses the FMRs to determine the eligibility of rental housing units for the Section 8 Housing Assistance Payments program. FMRs are gross rent estimates. They include shelter rent plus the cost of all utilities, except telephones. The level at which FMRs are set is expressed as a percentile point within the rent distribution of rental housing units. The current definition HUD uses is the 40th percentile rent paid by recent movers into modest but adequate existing, unsubsidized units -- that is, the dollar amount below which 40% of these units were are rented in the last 15 months. (See Appendix A for HUD’s fuller explanation.)
The findings of this report are presented in the following tables and maps. The State Summary table presents data for the 50 states and the District of Columbia, and is followed by highlights showing the least affordable states, metro areas, and counties in the country. The Summary Table shows Fair Market Rents (FMRs), the percent of renters unable to afford FMRs, that is, who must pay more than 30% of their incomes on rent, the percent of the federal minimum wage of $5.15 per hour renters need to earn to afford the FMR, and the hours per week one would have to work at minimum wage to afford FMRs. The maps show the data for two bedroom FMRs.
Each state has its own table which includes metropolitan areas and, more local still, metropolitan counties. The state tables show Fair Market Rents (FMRs), the 1998 estimated Area Median Income (AMI), the 1998 estimated renter income, and the income renters need to afford one and two bedroom apartments at the FMRs. The tables list the income renters would need if they were to spend 30% of their income on rent, and, on the next page, how that income compares to the estimated Area Median Incomes and estimated renter median incomes. The state tables then show the hourly wage one would need to afford the FMR, the percent of minimum wage, and the hours per week one needs to work at minimum wage to afford the FMR. This and additional data will also be on our web site, www.nlihc.org.
In most areas, large numbers of renters cannot afford the FMR without paying significant percentages of their incomes on rent.[1] In 255 of 345 metropolitan areas and 661 of 885 counties, one out of every three renter households cannot afford the one bedroom FMR without paying more than 30% of their incomes in rent. At least one third of renters in all but one metropolitan area and in 875 counties cannot afford the two bedroom FMR. In 122 metro areas and 274 counties more than 40% of renter households cannot. In all but eight states, the two bedroom FMR is out of reach for at least one out of every three renter households.
As for FMR and the minimum wage, in 168 metro areas and 473 counties renters need at least double the minimum wage to afford a two bedroom FMR. In every state, metro area and county, renters need more than the minimum wage to afford the FMR. In some places it is impossible to rent at all on the minimum wage. In Nassau County, NY, Suffolk County, NY, and Fairfield County, CT, a minimum wage worker would need to work 160 hours per week to afford the two bedroom FMR.
Finally, confronted with an astonishing housing affordability gap, we do well to remember the outstanding work for-profit and non-profit housing developers and community based organizations are doing to bridge the gap. They work with limited resources to assist people who have not shared in the great economic expansion, who work hard and remain poor, or who struggle to find a decent place to live. In helping individuals and families they strengthen communities. Out of Reach demonstrates that expanded efforts to provide affordable housing are needed throughout the nation.
Methodology[2]
The analysis is based on FMRs established by HUD for fiscal year 1998. State average FMR’s are weighted averages for metropolitan counties, 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 1998. Renter median income estimates are based on 1990 renter median income as percent of household median income. In other words, lacking better data, we assume that the relationship between renter and owner incomes has not changed since 1990.
The study also estimates affordability based on the official 30%-of-income standard used in federal housing subsidy programs.
The estimates of the proportion of renter unable to afford the FMR is based on the income distribution of all renter households as reported by the 1995 AHS. In other words, if the income needed to afford the FMR is 58 % of renter median and 38% of all renter households had incomes below 58% of area median in 1995, then we assume that 38% of renter households in the state cannot afford the FMR. Again, this assumption is made because better data is unavailable.
The calculation of wages needed is fairly straight forward and is based on pay for a 40-hour week for all 52 weeks of the year. However, many people earning hourly wages do not get paid vacations 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.
Sources
Fair Market Rent Data are final FY 1998 FMR levels from the HUD web site. Median income data are HUD estimates of median household income, also from the HUD web site. Census baseline data is from the 1990 Census STF3C CD-ROM, for counties and New England towns and cities. Because no estimates of 1998 median renter incomes are available, the estimates are based on 1990 median renter incomes as percent of median household income.
- While FMRs are frequently criticized because it is difficult to find housing at these rent levels in many communities, they are undoubtedly higher than rents paid by many low income households who have not moved within the past two years. Back to text.
- The methodology and 1990 Census data analysis on which the estimates are based was developed by Cushing N. Dolbeare, founder of the National Low Income Housing Coalition and Consultant on Housing and Public Policy. Back to text.
