NLIHC Report Highlights Gap Between Wages and Rents

The National Low Income Housing Coalition recently issued a report entitled “Out of Reach 2015.” The report highlights the growing housing affordability crisis in America and the need to expand and preserve the supply of quality affordable housing through programs such as the LIHTC program. It looks at the mismatch between the wages people earn and the price of decent housing. It finds that the gap between what people earn and the price of decent housing continues to grow.

The Housing Wage is an estimate of the full-time hourly wage that a household must earn to afford a decent apartment at HUD’s estimated Fair Market Rent (FMR), while spending no more than 30 percent of income on housing costs. According to the report, the 2015 Housing Wage is $19.35 for a two-bedroom unit, and $15.50 for a one-bedroom unit. The Housing Wage for a two-bedroom unit is more than 2.5 times the federal minimum wage, and $4 more than the estimated average wage of $15.16 earned by renters nationwide.

In addition, the report found that there is no state in the U.S. where a minimum wage worker working full time can afford a one-bedroom apartment at the fair market rent. The federal minimum wage remains at just $7.25 per hour in 2015 and hasn’t been raised since 2009. Had the federal minimum wage risen alongside productivity, it would be more than $18 dollars per hour today. The declining value of the federal minimum wage has been identified as a leading cause of growing wage inequality for low-wage workers.

Expanding and preserving the supply of quality, affordable housing is essential to any strategy to end homelessness, poverty, and economic inequality. The report finds rents still rising and the supply of affordable housing still insufficient. Rents for apartments have risen nationally for 23 straight quarters. And the tightening rental market has the most significant impact on low-income renters. Many higher and middle-income renters occupy units that are affordable to lower income groups, reducing the supply of affordable and available decent apartments for the lowest income renters. As a result, in 2013, for every 100 extremely low-income (ELI) renter households, there were just 31 affordable and available units. ELI households are those with incomes at or below 30 percent of area median income (AMI). By comparison, there were 57 units and 97 units affordable and available to households at or below 50 percent of AMI and 80 percent of AMI, respectively.

In addition, there’s an insufficient number of affordable rental housing units being developed to serve the existing need. The report finds that the existing supply of subsidized housing is also shrinking. Many subsidized rental properties are at risk of losing their affordability as subsidy contracts expire, which can lead to displacement of lower income households, especially in markets where housing values and rents have risen significantly.