Out of Reach 2011: Affordable Housing Challenges for Renters
The National Low Income Housing Coalition’s Out of Reach 2011 report offers a look at the housing challenges facing American families in 2011. The length of the economic recession and growing concerns over homeownership following the housing crisis led to a decrease in homeownership to 66.5% by the fourth quarter of 2010, the lowest level in over a decade. More Americans are choosing to rent as a means of making housing more affordable and maintaining flexibility at a time when geographic mobility improves job prospects. Out of Reach addresses the affordability of rental housing with respect to full-time wage levels. It is generally accepted that housing should account for no more than 30% of a household’s income to be affordable; in 2009, 52% of US renters were spending above this limit, a jump from 40% ten years ago. Half of that increase occurred between 2007 and 2009.
Out of Reach compares the Housing Wage, the minimum wage, and the average renter’s wage for every state, metro area, and county in the US. It defines the Housing Wage as the full-time hourly wage necessary to afford a two-bedroom unit at HUD’s estimated Fair Market Rent if no more than 30% of income is spent on housing. (Full-time work is defined as 40 hours per week for 52 weeks per year; the average employee actually works 34.3 hours per week so would have to earn a higher hourly wage to afford the FMR.) Nowhere in the US is the minimum wage sufficient to afford a two-bedroom unit, and in only a few counties in Illinois and Municipios in Puerto Rico is the minimum wage enough to afford a one-bedroom unit. Out of Reach determines the number of full-time minimum wage jobs necessary to equal the Housing Wage.
The US Housing Wage is $18.46, an increase of 47% since 2000. The FMR for a two-bedroom unit is $960, over two hundred dollars above what the average renter, with an hourly wage of $13.52, can afford. Renters earning minimum wage would have to work 2.6 jobs to afford the FMR. From 2005-2009, there were 703,556 renter households in Indiana, accounting for 29% of all households. The Fair Market Rent for a two-bedroom unit in Indiana is $713. The average renter earns $10.76 per hour and would need to work 51 hours per week to afford the FMR. Indiana’s Housing Wage ranks 20th in the nation at $13.70. The current Indiana Housing Wage is an increase of 32% since 2000. A household would need an income of $28,501 to afford a two-bedroom unit at the Fair Market Rent. An Extremely Low Income household, defined as earning 30% of the area median income, only makes $18,307 so can afford only $458 in rent. A minimum wage earner can afford $377 in monthly rent; a renter would need 1.9 full-time minimum wage jobs to afford a two-bedroom unit at FMR.
These numbers vary across the state. In Indianapolis, the Housing Wage is $14.63; it would take two people working minimum wage jobs full-time to afford a two-bedroom unit. The highest Housing Wage for a metropolitan area is $15.67 in Gary, where it would take 2.2 full-time jobs at minimum wage to make a two-bedroom unit affordable. Lake, Newton, and Porter Counties have the highest Housing Wage by county, also at $15.67. The lowest Housing Wage in Indiana is $11.46 in a number of counties across the state, which is equivalent to 1.6 full-time minimum wage jobs.
The Pew Research Center found that over half of American workers were affected by job losses, reduced work hours, pay cuts and underemployment during the recession. Falling wages for low income households have not been compensated for by an increase in affordable housing; in fact, such housing has become more scarce. Demand for rental housing has increased as a result of lower incomes and the foreclosure crisis, and in 2009 there was a shortage of 3.4 million affordable units. The amount of affordable housing units actually shrank as units were converted to serve higher income tenants or demolished; from 2000 to 2007, Extremely Low Income households lost access to 900,000 units previously available to them at the same time as the number of ELI renter households increased by over a million. The authors warn of continuing and increasing challenges for low income households seeking affordable housing if these trends continue.