|
Comment on this article |
Email this Article
|
|
News :: Labor |
|
Low Wage Housing Crisis Grows As Congress Stalls |
Current rating: 0 |
by National Low Income Housing Coalition
(No verified email address) |
18 Sep 2002
|
It takes a wage of $15.48 an hour to affordably rent a two-bedroom house in Illinois.
This should be a major issue in this fall's election. But you won't hear US Rep. Tim Johnson saying anything about it. Or hardly anyone else in Congress, which hasn't raised the minimum wage since 1997, yet has voted itself a pay raise every year. It also cries out for further action on the part of local governments via such policies as living wages, more low-income housing, and expanded assistance for low-income home ownership. ML |
Nowhere in this country can a minimum wage worker afford housing. And the situation is nearly as bad for the millions that earn just a little above minimum wage.
Having a home of one's own is a benchmark in the transition into adulthood in the contemporary American culture. Living on one's own brings new freedoms and responsibilities that must be mastered. Whether as a single person, a couple, a family, or with roommates, finding a place to live, establishing a residence, and maintaining a home are fundamental indicators of success at this stage of human development.
Most often this transition is made in the rental housing market. Although home ownership is the American Dream, few people are launched from their parents' house directly into home ownership. Attaining the American Dream is a multi-step process and success as a tenant is a crucial step.
For most of the 20th century, public policy favored home ownership, beginning with the 16th Amendment in 1913 that established the federal income tax and continuing with federally backed mortgages. Starting with the New Deal, public policy also supported rental housing production and rent subsidies for low income people, recognizing (and ameliorating for some) the gap between housing costs and incomes. Despite these policy initiatives, public policy has and continues to treat home ownership and rental housing as distinct and separate experiences.
The rapid expansion of single family homes, emphasis on asset accumulation as the ticket to the middle class, and sophisticated public relations campaigns in recent years have idealized home ownership to such an extent that rental housing is no longer just another form of tenancy. Home ownership is the preferred status and rental housing is inferior. Disinvestment in federal assistance for low income renters has been met with little public resistance, while exponential growth in the federal subsidy of home ownership through tax expenditures is considered untouchable even by the most outspoken budget hawks.
This dichotomizing of renting vs. owning, instead of conceptualizing them as steps on the housing continuum, has serious adverse effects on the well-being of American families and on the health of the American democracy. Even as the homeownership rate rises, access to good affordable rental housing diminishes. Eventually the number of people who succeed as renters will become so small that the pool of potential homeowners will evaporate. There will be two distinct classes of people - homeowners, and everyone else, upon whom some secondary standing will be assigned.
The absence of a viable rental housing market that affords all comers choices and opportunities stymies the normal developmental process into adulthood and severs the housing continuum. Young people are forced to continue to live with their parents. Families are forced to move in with relatives. People with disabilities are forced to reside in costly, medically unnecessary, and constitutionally questionable institutions. Renters are forced to pay unbearably high percentages of their income to afford housing, a situation which, at best, prevents their saving and planning for home ownership, and, at worst, compels them to choose among purchases of basic necessities. For too many Americans for whom decent and affordable rental housing is out of reach, homelessness is the inevitable result.
The National Low Income Housing Coalition examines housing data each year to determine the extent of the rental housing affordability gap and reports the findings in Out of Reach. Since 1999, we have examined this gap in every jurisdiction in the country. With discouraging consistency, we learn that the gap widens each year. The most immediate and serious consequence is for the millions of families and individuals for whom basic housing stability is threatened. Housing instability interferes with success in other basic tasks, especially employment of adults, education of children, and childrearing. Not only are these families denied the opportunity to realize the American Dream of homeownership, they are denied the opportunity to succeed at one of our culture's most important developmental tasks, establishing and maintaining a home of one's own.
As the Millennial Housing Commission so artfully articulates, housing matters,1 not just to individual and family well-being, but to neighborhood, community, and national social and economic well-being. Public policy that fails to support housing at every step on the continuum is shortsighted and self-defeating. For the American Dream to become the American Reality and not just rhetoric, public policy at all levels needs to work to close the rental housing affordability gap.
At the National Low Income Housing Coalition, we look forward to the year when we report that the national housing wage has declined from the previous year. 2002 is not that year.
Analysis
Despite the emphasis on homeownership and the marginalization of renters, renter households still make up fully one-third of the households in the United States - nearly 36 million households. Renters are not solely in cities. While 35% of households in metropolitan areas rent their homes, 24% of those in rural areas are also renters.
Out of Reach is a side-by-side comparison of wages and rents in every county, Metropolitan Statistical Area (MSA), combined nonmetropolitan area2 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 (0, 1, 2, 3, and 4 bedrooms) at the area's Fair Market Rent (FMR) (see Appendix B (http://www.nlihc.org/oor2002/appendixb.htm) for more information on FMR), based on the generally accepted affordability standard of paying no more than 30% of income for housing costs. Data used for calculations are from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) (see Appendix A (http://www.nlihc.org/oor2002/appendixa.htm) for more details on data used).
From these calculations we derive the hourly wage a worker must earn to afford the FMR for a two bedroom home. This figure is the Housing Wage. The national median two bedroom Housing Wage for 2002 is $14.66.
For each jurisdiction the Housing Wage - the calculated required income - is then compared to the Area Median Income (AMI), the minimum wage, and the incomes of extremely low income households (those earning less than 30% of AMI). For each state, the report also compares Supplemental Security Income recipients' benefits and minimum wage workers' earnings with housing costs.
These comparisons paint a grim picture.
Minimum Wage
For the fourth year in a row, in no jurisdiction in the United States does a minimum wage job provide enough income for a household to afford the FMR for a two bedroom home. As housing costs have continued to rise, the minimum wage has remained at $5.15 since 1997. In constant dollars that figure is worth about 70% less than the minimum wage of 1968 was worth at that time.3
The Bureau of Labor Statistics (BLS) reports that in 2001, 2,238,000 workers in the United States earned the federal minimum wage or less. (The number of workers earning state minimum wages is not reported.)4 Over 60% of minimum wage workers are family heads or spouses of family heads.5
In order to afford to rent a two bedroom home at the nationally-weighted FMR, a worker would have to earn $14.66 per hour, nearly three times the federal minimum wage, and still more than double the highest minimum wage among states that have enacted higher minimum wages.6
*Seventy-five percent of the nation's states - states that are home to more than 90% of all renter households in the nation - have a Housing Wage of more than twice the prevailing minimum wage. Nine have Housing Wages more than three times the minimum.
*Twenty-five percent of the nation's counties (out of 3,205) have a Housing Wage at least twice the prevailing minimum wage. Of those, 152 have a Housing Wage between three and four times the minimum wage, and eight more are between four and five times. Four California counties have the 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.
*The two bedroom Housing Wage ranges from $37.30 in Marin County, California, to $7.11 in parts of Alabama, and $5.94 in portions of Puerto Rico. Low Housing Wages don't necessarily mean affordable housing, though - in Puerto Rico $5.94 is greater than the median hourly wage.
*Seventy percent of the 356 MSAs have Housing Wages of at least twice the minimum wage, with 54 of these areas falling between three and four times the minimum wage, five more between four and five times, and two where the Housing Wage is greater than five times the minimum wage.
Extremely Low Income Renters
For Extremely Low Income (ELI) households - those earning less than 30% of the AMI - the picture is similarly troubling. Nationally the average hourly wage for these workers is $8.37, only 57% of the 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 81% and 80% of the FMR, respectively. Puerto Rico has the largest gap, with ELI households able to afford only 29% of the FMR, and next is California, where these renters can afford only homes renting for less than 45% of the FMR.
*In only 26 counties can ELI households afford two bedroom homes at the FMR, and these counties represent only two-tenths of one percent of the renters in the nation. ELI households in 331 counties (representing 24% of all renters in the country) can afford to pay rents of only 50% or less of their area's FMR.
*In no MSA can a household earning 30% or less of AMI afford the FMR for a two bedroom home. In 52 MSAs, home to one-third of the renters in the United States, ELI households are able to afford only 50% or less of their MSA's FMR.
SSI
Individual recipients of Supplemental Security Income (SSI) receive $545 monthly from the federal government (slightly more in some states that supplement the program with state funds),7 and for many, SSI is their only income. More than 45 million people rely on SSI benefits.8
Such an income does not even come close to making rental housing affordable anywhere in the country. In the state with the smallest gap between the rental costs that would be affordable to SSI recipients and actual median rental costs - West Virginia - recipients can still only afford one-third of the FMR. In Massachusetts and New Jersey, SSI benefits provide only enough income to cover 18% of the FMR for a two bedroom home.
Trends
The national Housing Wage for a two bedroom home increased by 5% from the 2001 edition of Out of Reach, and 18% from the 2000 report. By comparison, the inflation rate for 2001 was 1.6%, and the rise in the housing Consumer Price Index (CPI) was 2.8%.9
*All but three counties registered increases in their two bedroom Housing Wage from 2001 to 2002. The average increase was 4.3%. In one hundred seventy eight counties - home to 28% of renter households - the increase was greater than 5%, and 62 counties registered increases of more than 10%.
*Every state posted an increase in two bedroom Housing Wage, ranging from a half-percent gain in Hawaii, to a 13% increase in Maryland.
*Monmouth-Ocean, New Jersey had a two-tenths of a percent drop in its two bedroom FMR, but every other MSA in the nation posted an increase, led by a 23% jump in Baltimore, MD, an 18% climb in Jersey City, NJ, and a 14% rise in Cincinnati, OH. Seventy-seven MSAs - home to more than 13 million of the nation's 36 million renter households - posted greater than a 5% jump in the two bedroom Housing Wage.
The Housing Wage is linked directly to the FMR as set by HUD each year. As such, it is directly reflective of HUD's adjustments to FMRs based upon vacancy rates, demand, and average rental costs. The FMR is what HUD, the nation's housing agency, determines it costs to rent modest, safe, and healthy housing. There may indeed be housing for rent at less than the FMR in every jurisdiction, but 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.
Conclusion
America's rental housing crisis for poor families is not new. What is striking in this year's Out of Reach, however, is that the gap between wages and rents has continued to broaden and deepen. This gap has continued to grow through times of economic expansion as well as recession, in rural areas as well as metropolitan counties, and in all regions of the nation. The desperate plight of low-income renters in America is fast becoming one of the sole constants in our society and economy.
What is most striking, perhaps, is that this crisis is inherently avoidable. An increase in the minimum wage could pull millions of families out of poverty and greatly improve their ability to afford decent and safe rental housing. Federal and state programs to produce and preserve affordable housing for extremely low income families have proven successful in the past, and are eminently feasible in today's market. The need is apparent - what is required now is the mobilization of the public to enforce growing political will toward a solution to the crisis.
The rental housing crisis is often referred to as a hidden problem, when in fact it could not be more visible. One-third of America's households are renters. Millions of them struggle every month to afford the most basic of housing units. What has faded into invisibility is the commitment to ensuring decent, safe, and affordable housing for every family. Out of Reach helps to raise the visibility of the problem, and aims to inspire action among those who can put weight behind that commitment once again.
Footnotes:
1 Meeting our Nation's Housing Challenges: Report of the Bipartisan Millennial Housing Commission Appointed by the Congress of the United States. May, 2002. At http://www.mhc.gov/MHCReport.pdf.
2 All areas within a state that arenot part of an MSA.
3 Isabel Sawhill and Adam Thomas. A Hand Up for the Bottom Third: Toward a New Agenda for Low-Income Working Families. May 2001. The Brookings Institution. At http://www.brook.edu/dybdocroot/views/papers/sawhill/20010522.pdf.
4 Bureau of Labor Statistics, Household Data/Annual Averages, Table 44. At http://www.bls.gov/cps/cpsaat44.pdf.
5 Sawhill and Thomas.
6 Alaska, Hawaii, Maine, Rhode Island, Delaware, District of Columbia, Vermont, Oregon, Connecticut, Massachusetts, California and Washington have enacted minimum wage laws higher than that of the federal law.
7 Hawaii, Washington, Pennsylvania, New Jersey, Nevada, Vermont, Rhode Island, New York, Massachusetts, and California supplement SSI benefits with additional money.
8 "Social Security Administration: Basic Facts." May 2002. At http://www.ssa.gov/pubs/10080.html.
9 Bureau of Labor Statistics press release, July 19, 2002. At http://www.bls.gov/news.release/pdf/cpi.pdf.
For detailed information on the situation in Illinois:
http://www.nlihc.org/cgi-bin/oor2002.pl?state=IL
For detailed information on Champaign County: |
See also:
http://www.nlihc.org/cgi-bin/oor2002.pl?getstate=on&getcounty=on&county=champaigncounty&state=IL
http://www.nlihc.org/
|
|
