By GENARO C. ARMAS
Associated Press Writer

December 20, 2004, 9:32 AM EST

WASHINGTON -- Most Americans who rely on just a full-time job earning the federal minimum wage cannot afford the rent and utilities on a one- or two-bedroom apartment, an advocacy group on low-income housing reported Monday.

For a two-bedroom rental alone, the typical worker must earn at least $15.37 an hour _ nearly three times the federal minimum wage, the National Low Income Housing Coalition said in its annual "Out of Reach" report.

That figure assumes that a family spends no more than 30 percent of its gross income on rent and utilities _ anything more is generally considered unaffordable by the government.

Yet many poor Americans are paying more than they can afford because wage increases haven't kept up with increases in rent and utilities, said Danilo Pelletiere, the coalition's research director.

The median hourly wage in the United States is about $14, and more than one-quarter of the population earns less than $10 an hour, the report said.

"A lot of people continue to be squeezed out," said Judy Levey, executive director of the Homeless and Housing Coalition of Kentucky. "Housing here is relatively inexpensive, but because the wages are so low, people can't afford housing,"

The report quoted federal Bureau of Labor Statistics data that showed hourly wages rising about 2.6 percent over the past year, slower than the 2.9 percent rise in rents recorded in the Consumer Price Index.

In addition, Pelletiere said, government spending on Section 8 rental vouchers, which helps 2 million Americans _ mainly poor _ pay rent hasn't kept up with demand.

The study analyzed data from the Census Bureau and the Housing and Urban Development Department to derive the hourly wage figures.

In only four of the nation's 3,066 counties could a full-time worker making the federal minimum wage afford a typical one-bedroom apartment, the coalition said. Three were in Illinois: Clay, Crawford and Wayne counties; the other was Washington County, Fla.

California topped all states in the hourly wage needed to afford a two-bedroom apartment, at $21.24, followed by Massachusetts, New Jersey, Maryland and New York.

States with more residents in rural areas were generally the most affordable, although no state's housing wage was lower than the federal minimum wage of $5.15 an hour, which has not changed since 1997.

West Virginia was the lowest at $9.31 an hour for a two-bedroom rental, followed by North Dakota, Arkansas, Mississippi and Alabama.

Pelletiere said the coalition's data for 2004 could not be compared with previous years because of changes in the way that HUD calculated "Fair Market Rents," which is the cost of rent and most utilities for a typical apartment. The fair rent varies widely by metropolitan area.

Overall, though, utility costs appear to be rising at a faster rate than rents, Pelletiere said. Add in stagnant wages and the housing situation for the nation's poor "has gotten worse over the last year," he said.

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On the Net:

National Low Income Housing Coalition: www.nlihc.org/index.html

HUD: www.hud.gov/



Copyright (c) 2004, The Associated Press

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Although the National Low Income Housing Coalition first published Out of Reach in 1989, 2003 marks the fifth year of Out of Reach in its comprehensive form that provides data on housing in every jurisdiction in the United States.1 The expanded Out of Reach in 1999 debunked any assertions that the affordable housing crisis in the United States was a localized problem. That was the first time we were able to document the true extent of the housing affordability gap in each and every jurisdiction in the country and present it in a form that allowed advocates and policy makers to understand the problems in their communities and how they compared to other jurisdictions.

The result was an explosion of interest in Out of Reach by policy makers and the media. Out of Reach findings are now routinely cited in all serious analyses of housing problems. HUD refers local governments to Out of Reach to help them conduct their required housing needs assessments. Out of Reach concepts such as the Housing Wage and the number of minimum wage jobs needed to afford housing have made their way into the popular lexicon of the housing debate. Its use is so ubiquitous on Capitol Hill that we have lost track of how many times Senators and members of Congress use Out of Reach data in speeches, committee hearings, and floor debates. The extent of Out of Reach’s reach has even provoked attempts to discredit the findings by conservative commentators.2

While Out of Reach generates widespread public discussion about the affordable housing crisis, it is, after all, just numbers – numbers that do not express the human toll of the affordable housing crisis. Numbers do not tell the stories of families who hold on to their homes by their fingertips, keeping the rent paid only by relying on food pantries and soup kitchens to eat at the end of the month and counting on informal and haphazard arrangements for child care so parents can work. Numbers do not describe what it means for a child to bounce from school to school because his or her family must keep searching for cheaper places to live, never catching up on lessons or forming lasting friendships. Numbers cannot make us feel the anxiety of an aging widow who fears that she will lose her home as her rent or property taxes go up and her pension does not. Numbers do not help us understand the frustration of wasted potential of a person with disabilities consigned to an institution for lack of an affordable place to live in her or his community.

In 1999, the national two bedroom housing wage was $11.08; in 2003, the national housing wage is $15.21, a 37% increase. There is nothing on the horizon to cause us to think that rents will not continue to rise. Indeed, the loss of modest rental housing stock continues,3 as market forces drive up the cost of housing and government fails to intervene to level the playing field.

Out of Reach is an economic and demographic analysis of the affordable housing crisis, essential to the policy debate. Ultimately, however, the debate is about our values as a nation. The numbers of Out of Reach document a lack of equality, fairness, and compassion – values that we purport to hold, but fail to live up to. We urge that these data be used to stimulate the debate about these values and what it will take to turn words into action.

Analysis

Out of Reach is a side-by-side comparison of wages and rents in every county, Metropolitan Statistical Area (MSA), combined nonmetropolitan area,4 and state in the United States. For each jurisdiction, the report calculates the amount of money a household must earn in order to afford a rental unit of a range of sizes at the area’s Fair Market Rent (FMR), based on the generally accepted affordability standard of paying no more than 30% of income for housing costs. The FMR is the U.S. Department of Housing and Urban Development’s (HUD) best estimate of what a person seeking housing would have to pay in the local market (see Appendix A for more information on FMR). Data used for calculations are from the U.S. Census Bureau and HUD (see Appendix B for more details on data used).

By providing the calculation of the income necessary to afford an area’s FMR, Out of Reach enables a quick comparison of rental housing costs and the ability of people in the local market to afford rental housing. The comparisons provided in this year’s edition are of an area’s FMR for a two bedroom apartment to the amount of rent affordable to those earning the Area Median Income (AMI), Extremely Low Income (ELI) households (those earning less than 30% of AMI), and those earning the median income of renters in the area. Also included is a calculation of the hours that an individual or household would have to work at minimum wage to afford a two bedroom apartment at the FMR. For each state, the report also compares Supplemental Security Income (SSI) recipients’ benefits and minimum wage workers’ earnings with housing costs. Finally, we derive the hourly wage a worker must earn to afford the FMR for a two bedroom home. This figure is the Housing Wage. Together, these comparisons provide strong evidence of the lack of affordable rental housing in America, and at the state and local level.

Housing and Earnings

Today, the national median two bedroom Housing Wage for 2003 is $15.21, 3.74% higher than the year before. This trend is similarly reflected in the Bureau of Labor Statistics Consumer Price Index (CPI).5 From June 2002 to June 2003 the CPI for all products increased by 2.1% while the index for housing in general rose 2.5% and for rent of primary residences rose 2.9%. Indeed, contract rents have risen steadily since 1997, overtaking previous highs in 2002.6 Wages have not kept pace with sharply rising housing costs. After rising somewhat at the end of the 1990s, real median earnings have fallen throughout much of 2002 and 2003 as earnings growth has declined.7 Throughout this period, and since 1997, the federal minimum wage has remained at $5.15.

This year, the two bedroom Housing Wage ranges from $35.02 in Santa Clara County, CA, to $7.12 in parts of Alabama, and $5.94 in portions of Puerto Rico. Low Housing Wages do not necessarily mean affordable housing however. In Puerto Rico, $5.94 is greater than the median hourly wage.

Sixty-six percent of MSAs have Housing Wages of at least twice the prevailing minimum wage, with 46 of these areas falling between three and four times the minimum wage. Eight more fall between four and five times the minimum wage, and in three MSAs the Housing Wage is greater than five times the minimum wage.

Extremely Low Income Renters

The most serious housing problems are faced by the lowest income households. For ELI families, those with incomes less than 30% of the AMI, the mean combined national hourly wage is $8.34, only 45% of the national Housing Wage.

In no state can an ELI household afford a two bedroom home at the FMR. The two states that come closest are Iowa and Nebraska, where ELI households can afford a home at 80% and 79% of the FMR, respectively. At the bottom among the states is California, where a household earning the ELI threshold of 30% of AMI can only afford homes renting for less than 42% of the FMR. Puerto Rico has the largest gap, with households at the ELI threshold only able to afford 22% of the FMR.

Looking below the state level reveals greater variation. In no MSA can a household earning the ELI threshold afford the FMR for a two bedroom home. In 43 MSAs, home to one-third of the renters in the United States, a household earning the ELI threshold is able to afford only 50% or less of their MSA’s FMR. A number of jurisdictions within Puerto Rico top the list. Within the states, New York City, Jersey City, and Los Angeles are the least affordable to an ELI family, but smaller metro areas such as Flagstaff, AZ also appear in the top ten.

At the county level, a household at the ELI threshold can afford a two bedroom home at the FMR in only 27 largely rural counties, such as Spencer County, KY, Loving County, TX, and Johnson County, IL. These 27 counties contain less than two-tenths of one percent of the renters in the nation. In contrast, in 208 counties households at the ELI threshold can afford 50% or less of their area’s FMR. These counties represent 8.4 million renter households, nearly a quarter of all renters in the country.

Moreover, the vast majority of ELI households earn less than the ELI threshold. For these households the prospects for finding a decent home at an affordable price are certainly bleak.

Renter Income

This year’s Out of Reach includes an analysis of renter income as compared to FMRs, and the findings are similarly striking.

At the state level, Nebraska is the least unaffordable when comparing renter income and FMRs, but still fully 36% of the renter households are unable to afford the two bedroom FMR in that state. In Massachusetts, which is the worst state in this regard, this number climbs to higher than 60%. Only in Puerto Rico and the District of Columbia do renters fare worse. Including these, there are 12 state level jurisdictions where the percentage of renters unable to afford a two bedroom FMR exceeds 50%.

Once again, looking only at the state level masks the extent of the problem. In 106 MSAs and a total of 597 counties more than half of the renter households are not able to afford the two bedroom FMR. Comparing the availability of units at or below the FMR with renter income reveals that nationwide there are 1,545 counties (48% of all counties) where the estimated proportion of renter households unable to afford a new lease on a two bedroom apartment at the FMR in their area exceeds the estimated proportion of apartments that would be available there at or below this threshold.8 These counties contain nearly two-thirds of the current renter households in the United States.

Minimum Wage

Also calculated are the number of work hours per week per household necessary at minimum wage to afford two bedroom home at the FMR. As in previous years, this number allows the reader to focus on the differential between the minimum wage and the Housing Wage, but it also allows quick appreciation of the challenges low income households face. In the first instance, the higher the number of hours that are necessary, the less affordable is housing. But by considering this number relative to the standard work week of 40 hours, it becomes clear that even if a household has multiple low wage workers or individual earners that work overtime or more than one minimum wage job to make ends meet, in the majority of the areas housing is still unaffordable.

Renter households in forty of the nation’s states – home to almost 90% of all renter households in the nation – face a Housing Wage of more than twice the prevailing minimum wage. Looking at this in terms of the work hours per week, it is clear that in these states a household is unable to afford a two bedroom home at the FMR even with two minimum wage earners working 40 hours a week, 52 weeks a year. Eleven states have Housing Wages more than three times the minimum.

Breaking this out by county, slightly more than 25% of the nation’s counties (815 out of 3,208) have a Housing Wage over twice the prevailing minimum wage. Of those, 125 have a Housing Wage between three and four times the minimum wage, and 38 more lie between four and five times the minimum wage. Santa Clara, San Mateo, Marin, and San Francisco counties in California have the dubious distinction of having Housing Wages more than five times the prevailing minimum wage, even taking into account California’s minimum wage of $6.75 – $1.50 more than the federal minimum wage. In these counties, a household would need the income from the equivalent of five full-time minimum wage workers to pay the FMR on a two bedroom apartment.

SSI

A significant portion of the population lives on fixed incomes. As of 2002, 6,700,000 people receive Supplemental Security Income (SSI) and 3,700,000 of these are adults with disabilities. Since SSI benefits are designed to help aged, blind, and disabled people who have little or no income, the vast majority rely on this income to meet basic needs such as food, clothing, and shelter, and for some it is their only source of income.9 Individual recipients of SSI receive $552 monthly from the federal government. Five states provide a small supplement to the federal SSI payment.10

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. Even in West Virginia, the state with the smallest gap between the rental costs that would be affordable to SSI recipients and actual median rental costs, recipients can only afford one-third of the FMR. In the District of Columbia, the most expensive jurisdiction, SSI benefits provide only enough income to cover 15% of the FMR for a one bedroom home. Stated differently, nationally, the FMR on a one bedroom home would take 116% of the monthly federal SSI payment for an individual.11

Trends

The Housing Wage is linked directly to the FMR set by HUD each year. In general the FMR is defined as “the dollar amount below which 40 percent of the standard quality rental housing units rent” (emphasis added). As such, it is directly reflective of HUD’s adjustments to FMRs based upon vacancy rates, demand, rental costs, and quality standards. In short, the FMR is what HUD, the nation’s housing agency, determines it costs to rent modest, safe, and healthy housing in a specific county or MSA. While there is clearly housing for rent at less than the FMR in every jurisdiction, it is not necessarily of the quality that taxpayers should subsidize through rental housing assistance. As a matter of public policy, no household should be relegated to housing of any lesser quality.

The FMR numbers used in this report are the preliminary numbers issued by HUD for 2004. These numbers were released with this caveat:

“It should be noted that proposed FMR increases in many parts of the country, especially nonmetropolitan areas, were modest or non-existent. This is due to two factors. One is relatively modest increases in shelter rents (i.e., total rents excluding utilities). The other and more significant factor is reductions in utility costs from the previous year.”12

In fact, the FMR decreased in only nine counties. FMRs in Marin, San Francisco, and San Mateo counties in California decreased by $165, and six counties in Okalahoma were reduced by $20 each. For 1,827 counties, there was no change. But in 1,371 counties FMRs continued to increase despite lower utility costs. There was an increase of $10 or less for 934 counties, and an increase of over $10 and less than $100 in an additional 410 counties. In 27 counties, however, there were dramatic increases of between $124 and $219 in 27 counties. Of these, 19 are in Virginia, Maryland, and the Washington, DC area, with the remaining eight in New Jersey and California.

A somewhat closer look reveals that the counties in which the FMR stayed the same or declined are home to only 13% of the nation’s renter households, while 43% of renter households make their homes in counties that saw an increase of $20 or more.

The national Housing Wage for a two bedroom home increased by 3.74% from the 2002 edition of Out of Reach, and 8.8% from the 2001 report.13 By comparison, the inflation rate for 2002 was 2.1%, and the rise in the housing Consumer Price Index (CPI) was 2.5%.14 Since the Housing Wage rises and falls with the FMRs, counties with no increases in FMR registered no increase in Housing Wage. In 781 counties – home to nearly 55% of renter households – the increase was greater than 1%, and 30 counties registered increases of more than 10%.

Oklahoma was the lone state with a decrease in the Housing Wage, with a 1.25% decline. Every other state posted an increase with Maryland heading the list with a 12% climb. Among the MSAs, San Francisco and Oklahoma City posted declines in their Housing Wage, due to corresponding declines in their FMRs. Every other MSA in the nation posted an increase, led by a 27% jump in Sacramento, CA, a 22% climb in Washington, DC, and a 21% rise in Brockton, MA. Thirty-seven MSAs – home to nearly seven million of the nation’s 36 million renter households – posted greater than a 5% jump in the two bedroom Housing Wage.

Conclusion

At first glance, Out of Reach can seem overwhelming and complex to many people – too many numbers. At its core, though, it is simple. Too many working people in America cannot afford safe, decent rental housing for themselves and their families.

Out of Reach tells two stories. The first is of millions of American families unable to afford safe and decent rental housing. Wages have failed to keep pace with rental costs, rental costs have increased faster than costs of other basic needs, affordable rental housing is being lost to homeownership and market-rate rentals, and little or no new affordable housing is being built. As a result, these families are living in substandard conditions, are homeless, or are making choices each day to spend money on housing and do without health care, child care, or other basic necessities.

As sobering as this is, the second story tells us that this is not the beginning of the crisis, and that it has only gotten worse in recent years. Nobody needs columns of data to understand that this part of our report is, in fact, overwhelming. Our nation strives to be a standard-bearer for the world in fairness, compassion and quality of life, yet overlooks this problem year after year at the cost of the safety, health and security of millions of its citizens. We hope that in telling this story, Out of Reach can help further solutions that will allow us to one day write a happier ending.



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