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Out of Reach

Many people know that millions of households in the United States cannot afford to pay for decent housing.  Far fewer people know the extent of the affordability problem in their own communities.  The National Low Income Housing Coalition produces Out of Reach in an effort to provide this information to policy makers and advocates.  Out of Reach contains income and rental housing cost data for the fifty states and District of Columbia by state, metropolitan area, and county or, in the case of New England, town.  For each, it calculates the income that renter households need in order to afford rental housing and estimates how many of these households cannot afford to pay the Fair Market Rent (FMR), and what they would need to earn to pay the rent and keep their housing costs at 30 percent of their income, the generally accepted standard for affordability established by Congress and the Department of Housing and Urban Development. It also shows the amount a household can afford for housing (at 30% of income) at 30%, 50%, 80% and 100% of median income.  This facilitates assessment of how well HOME, Community Development Block Grant, tax credit and other affordable housing efforts are serving renter households with incomes below the family median for the area.  Income data include HUD’s current estimates of family area median income, NLIHC’s estimates of  renter median income, which are based on 1990 census data, and assistance under the Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) programs.¹

The information is organized alphabetically by state.  The state tables are preceded by a state summary table, tables showing the least affordable jurisdictions, and maps showing the housing wage, that is, what people need to earn in order to limit their housing costs to 30 percent of their incomes, and the number of hours per week one needs to work at the federal minimum wage of $5.15 an hour to afford the FMR for a two-bedroom unit. The housing wage is highlighted in every state table and contrasted to the federal minimum wage of $5.15 per hour as a percent of minimum wage.  The state tables also calculate the number of hours of work per week at the minimum wage a household requires to afford the rent for each jurisdiction. Unlike past years, Out of Reach now includes data for nonmetropolitan counties, which considerably expands the scope of the report.

As a standard for rent, Out of Reach employs the Fair Market Rent (FMR) used by HUD for the Section 8 Housing Assistance Payments Program. FMRs are gross rent estimates; they include shelter rent and the cost of utilities, except telephone.  The level at which FMRs are set is expressed as a percentile point within the rent distribution of housing units in an area.  The current definition is the gross rent paid by the 40th percentile of recent movers to standard housing (excluding new construction).   To develop FMRs, HUD uses the 1990 Census; the Bureau of the Census’ American Housing Survey, used to develop between-Census revisions for the largest metropolitan areas; and telephone surveys of individual FMR areas. 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.  The Appendix contains a more complete explanation of FMRs.

Analysis

Like a high stakes game of musical chairs, the number of poor renters remains the same and they must compete for a diminishing number of affordable places to live.  A 1998 HUD report found that the number of very low income renter households with “worst case” housing needs has remained at an all time high of 5.3 million.  Households with worst case needs are defined as renters who (1) do not receive federal housing assistance, (2) are very low income, that is, have incomes below 50 percent of the local area median, and (3) pay more than half of their income for housing or live in severely substandard housing.  In addition, the report found that the stock of rental housing affordable to low income families is shrinking.  Between 1993 and 1995 there was a loss of 900,000 rental units affordable to very low income families, a reduction of 9 percent. There was an even greater reduction — 16 percent — in the number of units affordable for extremely low income renters, that is, those with incomes below 30 percent of area median.²   This implies that very and extremely low income families are becoming homeless, are living in overcrowded conditions, are doubled up, are paying precariously high percentages of their incomes for housing, or are living in dilapidated housing.

This is the backdrop against which Out of Reach must be examined. The report incorporates two measures of affordability, the estimated percent of renters who cannot afford FMR, and the housing wage. In 39 states, 40 percent or more of renters cannot afford the FMR for a two bedroom unit. In four states, Virginia (53%), New York (52%), Rhode Island (51%) and Vermont (50%), it’s 50 percent or more. In 315 of the nation’s 399 metropolitan areas, 40 percent or more of renters cannot afford the FMR for a two bedroom unit.  In 39 metro areas, it is 50 percent or more.

In no state is the federal minimum wage as high as the statewide housing wage.  In 29 states, the housing wage is more than twice the minimum wage.  In three states, Hawaii ($17.01), New Jersey ($15.90), New York ($15.87), and in the District of Columbia ($15.77), the housing wage is more than three times the minimum wage.

Similarly, in no metro area is the minimum wage as high as the corresponding housing wage.  In half of the nation’s metro areas, the housing wage is twice the minimum wage or more. In 30 of these areas, 50 percent or more of renters cannot afford the two bedroom FMR.  In 25 metro areas, the housing wage is three times the minimum wage or more.  In all 25, more than a third are unable to afford the two bedroom FMR.  In five, more than half cannot afford the two bedroom FMR: Westchester County, NY (55%); Santa Barbara, CA (53%); Nassau-Suffolk, NY (53%); Dutchess County, NY (52%), and Monmouth-Ocean County, NJ (52%).  San Francisco (49%), Boston (48%), and New York (48%) are close behind.

The nationwide median housing wage for states is $11.08 an hour, more than twice the federal minimum wage.  A median of 43 percent of renters are unable to afford the two bedroom FMR.  Nowhere in the United States — in no state, metropolitan area, county or New England town — is the minimum wage adequate to afford the two bedroom FMR.  Moreover, there were only four of the 3,661 counties and New England towns analyzed in this report where a household with an income at 30% of area median could afford the FMR for a two-bedroom unit.  In more than three quarters (76%), households with incomes of 50% of median could not afford the FMR for a two-bedroom unit.  Because of the disparities in income between renter and owner households, nationally 45% of renter households have incomes below 30% of median and 68% have incomes below 50% of median.

To summarize:

• The number of poor, unassisted renters is at an all time high, and the number of housing units available to them is decreasing.
• The housing wage one must earn to afford a one or two bedroom unit anywhere in the country exceeds the minimum wage, often by a factor of two or more.
• Low wage workers are faced with impossible demands on their ability to live in decent, affordable housing.

The way to bridge the housing affordability gap is to raise incomes, lower housing costs, or both. Raising the minimum wage will raise incomes.  This will also have the effect of raising wages for workers up the income scale and putting more workers at the level of the housing wage. Increasing the number of section 8 vouchers, an important income supplement, will also alleviate household income pressures and help people on fixed incomes, seasonal workers, and homeless people. Lowering housing costs includes expanding the number of units available to low income people, whether by subsidy or production of new units, and preserving assisted housing at risk of loss to the private market. Housing programs work, and stable housing allows people to live in stable communities.

Methodology

The methodology and 1990 Census data analysis on which the estimates are based was developed by Cushing N. Dolbeare. The analysis is based on FMRs established by HUD for fiscal year 1999.  State average FMRs are weighted averages for all counties (including nonmetropolitan counties for the first time this year), 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, the report assumes that the relationship between renter and owner incomes has not changed since 1990.  The study also estimates affordability based on the 30%-of-income standard used in federal housing subsidy programs. The standard is also a generally accepted measure of affordability.

The estimates of the  proportion of renter households unable to afford the FMR is based on the national income distribution of all renter households as reported by the 1995 American Housing Survey (AHS), the most recent information available. 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 are unavailable.

The calculations of wages needed and hours of work at the federal minimum wage needed to pay the FMR at 30% of income is fairly straightforward 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.

Some Metropolitan Statistical Areas (MSAs) fall into more than one state. Data for these are only listed 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 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 later, only data for the nonmetro portion of the county is represented.

The following New England towns have been omitted because the 1990 Census data for each was not available on the tabulation of population and housing data used for this research (STF3C on CD-ROM):

• CT: Ashford, Chaplin, Harwinton, Lebanon, Old Saybrook, Roxbury, Thompson, Washington
• MA: Adams, Berkley, Brewster, Chatham, Dighton, Eastham, Georgetown, Hadley, Hatfield, Holland, Mashpee, Norton, Oakham, Orleans, Sturbridge, Sunderland, Ware, West Brookfield, Williamsburg
• ME: Casco, Limington, Milford, Turner, Wales
• NH: Chester, Epping, Fremont, Greenville, Hampton Falls, Kensington, Mason, New Ipswich, Raymond, South Hampton, Weare
• RI: Charlestown
• VT: Fairfax, St. Albans, St. Albans city, Swanton.

Sources and related information

Fair Market Rent Data are final FY 1999 FMR levels from the HUD web site (http://www.huduser.org/datasets/fmr.html).  Median income data are HUD estimates of median family income, also from the HUD web site (http://www.huduser.org/datasets/il/fmr99rev/medians2.html).  Census baseline data is from the 1990 Census STF3C CD-ROM, for counties and New England towns and cities.  Because no estimates of 1999 median renter incomes are available, the estimates are based on 1990 median renter incomes as percent of median family household income.

Basic data for TANF calculations was taken from information prepared by the Center on Budget and Policy Priorities and Center for Law and Social Policy.  In states where welfare benefits vary by region or for different categories of recipients, the cash assistance benefit shown in Out of Reach is the one that applies to the largest number of welfare recipients in the state.

SSI information is from the Green Book. Approximately 37 percent of SSI recipients receive a state supplement.  For those SSI recipients, other than those receiving a state supplement because they are living in some type of group living arrangement, the amount of state supplement ranges from $2 a month to $362 a month for an individual.  At present, 25 states supplement the Federal standard for individuals living independently.

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Center for Law and Social Policy and Center on Budget and Policy Priorities, “Monthly Cash Assistance and Food Stamp benefits for a Single-Parent Family of Three with No Earnings, 1999,” in State Policy Documentation Project.  Washington, DC:  Center for Law and Social Policy and Center on Budget and Policy Priorities (1999).

House Committee on Ways and Means, Green Book, 1998: Background Material and Data on Programs Within the Jurisdiction of the Committee on Ways and Means, 105th Congress, 2d Session, Committee Print (May 19, 1998).

Department of Commerce, Bureau of the Census, CD ROM STF3C. Washington, DC: Bureau of the Census (1996).

Department of Housing and Urban Development and Department of Commerce, American Housing Survey for the United States in 1995.  Washington, DC: GPO (1997).  Also found at http://www.huduser.org/datasets/ahs.html.

Department of Housing and Urban Development, Notice: “Estimated Median Family Incomes for Fiscal Year 1999” (January 27, 1999), found at http://www.huduser.org/datasets/il/fmr99rev/medians2.html.

Department of Housing and Urban Development, “Fair Market Rents for the Section 8 Housing Assistance Payments Program — Fiscal Year 1999.” 63 Fed. Reg. 52858 (October 1, 1998). Also found at http://www.huduser.org/datasets/fmr.html.
 

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