Renters Also May Not Find Decent and Affordable Housing

Thursday, April 17, 2008
Mortgage News Daily

If the several million people facing foreclosure over the next few years actually lose their homes, where are they going to go?

The conventional wisdom is that they will go back into the rental market and perhaps that is one reason for the jump in permits and housing starts for residential buildings over five units reported by the Census Bureau the last few months. However, a study recently released by the National Low Income Housing Coalition is questioning the affordability of rental housing, not just in high priced locations, but virtually everywhere in the country.

Out of Reach 2007-2008 asks and tries to answer two questions:

  1. Could someone who gets a full-time job in your community today reasonably expect to find a modest rental unit he or she could afford?
  2. What would a family in your community have to earn to be reasonably assured of quickly finding an affordable rental unit?

In answering, Out of Reach constructed a "Housing Wage" for every county, metropolitan area, and state in the country and then compared it to local wage and income levels in those communities. The Housing Wage is the full-time hourly wage one would need to earn in order to pay what the Department of Housing and Urban Development estimates to be the fair market rent (FMR) for an apartment in each area, spending no more than 30 percent of income (the HUD standard for rental assistance programs) on housing costs.

According to the report, the 2008 national Housing Wage for a two-bedroom rental unit is $17.32. A full-time worker must make this much and work year round - 2080 hours per year - to be able to afford the average FMR of $900 per month.

The current national minimum wage is $5.85 and when fully implemented in July of next year will be $7.25 per hour. Three fully-employed family members, earning minimum wage and spending 30 percent on housing would just be unable to afford an average apartment at fair market value. In fact, the report states that there is no county in the country where a single individual can work 40 hours per week at minimum wage and afford a one-bedroom apartment at the local FMR.

Of course the median hourly wage in the U.S. is much higher than the minimum wage although there were 1.7 million workers earning the minimum before the rate was increased last year. Still, at the median hourly wage of $16.00 and the average income of renters at $13.94, only a household that averages a 50 hour work-week with no unpaid time off can afford the average FMR for a two-bedroom unit at the national mean renter wage.

In 2006 more than 9 million renter households paid more than 50 percent of their income for housing, leaving little for food, transportation, medical insurance, etc., and 98 percent of these households were considered low income.

But neither rents nor Housing Wage alone tell the whole story. For example, the report points out that the area with the highest two bedroom Housing Wage in the survey was Stamford-Norwalk, Connecticut while Henry County, Alabama had the lowest of all the states ($9.25 - Puerto Rico was lower). Therefore the higher minimum wage in Connecticut - $7.65 won't go as far as the $5.85 minimum in Alabama in providing housing.

The study also looked at rural housing and found a similarly depressing situation. The data show that in no state can a full-time minimum wage job assure access to affordable rental housing even in non-metro areas which have generally been assumed to be affordable.

Low cost rental housing and well as subsidized rental units and tenant-based rental subsidized do provide a supply of market-rate rental units that are affordable but often these units are deteriorating, unsafe, or occupied by higher income households. The numbers of these units shrinks yearly because of neglect, gentrification, and conversion to condominiums.

So what are the answers to the questions the National Low Income Housing Coalition asked?

  1. No one in the U.S. today who gets a full-time job at the minimum wage can reasonably expect to find a modest rental unit he or she can afford
  2. A sample of some of the statewide Housing Wages would include:
    • Colorado - $16.09
    • Iowa - $11.88
    • California - $24.01
    • Texas - $15.02
    • New York - $23.03
    • South Carolina - $12.92

A complete list of state Housing Wages can be found at

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