Taking Roommate Applications: The Rising Cost of US Apartments

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Each week we are seeing new signs of economic recovery here in the United States. Investor confidence is up as Greece’s debt restructuring came through. Financial markets continue to climb. Reduced unemployment is fueling higher incomes and greater spending.

Lost in this positive economic news is the struggle plaguing our poorest residents.

A new report by the National Low Income Housing Coalition (NLIHC) highlights the impact that the recession has had on low-income families. The recession may have reduced the cost of homeownership, but the number of foreclosures had the unintended impact of forcing up prices within the rental market. Why does this matter? Low-income families are those most likely to be in the rental market.

Specifically, the authors analyzed the gap between the estimated hourly wage (the “Housing Wage”) necessary to afford a two-bedroom apartment and the wage the average renter in America actually earns (“Renters’ Wage”). The Housing Wage is determined based upon the full-time hourly wage a household must earn in order to afford a decent apartment at the HUD estimated Fair Market Rent while spending no more than 30% of income on housing.

The report finds that in 2012:

• The average Housing Wage: $18.25 per hour
• The average Renters’ Wage: $14.15 per hour
• Gap between Housing and Renters’ Wage $4.10 per hour

What this means is that in no state is an average 40-hour workweek enough to accommodate the rising cost of renting an apartment.

The East and West coasts, not surprisingly, are the regions that require residents to work more hours to afford rent. But how many more hours are really needed? In New York, New Hampshire, Massachusetts, Connecticut, New Jersey, Maryland, Virginia, and California residents must all work above 88 hours per week. That is more than two workweeks in one—just to “afford” an apartment! Washington, D.C. takes the cake with 140 hours needed each week to afford rent.

Our poorest residents often do not make more than minimum wage (nationally, $7.25 per hour). This is why affordable housing and rental assistance programs are vital to these residents’ stability. Yet, as the number of “extremely low income” (residents earning less than 30% of area median income) renting households rises (9.8 million in 2010), the number of affordable housing units has declined.

In the Preface to the NLIHC report, HUD Secretary Shaun Donovan explains that the U.S. has lost 150,000 homes from our affordable housing stock in the past 15 years. Moreover, an estimated $26 billion is needed to finance the backlog in capital needs for public housing.

Washington is taking action to mitigate housing needs. The Obama Administration invested $4 billion in public housing repairs as part of the Recovery Act. HUD’s FY13 budget requests an additional $1 billion for the National Affordable Housing Trust Fund to build or repair additional affordable housing units. Yet despite these programs pumping money into housing for low-income residents, a gap still exists.

As federal programs continue to be cut – HUD suffered $3.7 billion in cuts for FY12, 9% below FY11 – it is all the more important for states and local communities to find ways to produce affordable housing. State legislatures can pass measures to ensure affordable housing is built in the neediest communities: in Massachusetts, for instance, Chapter 40B allows developers to build more densely in communities when less than 10% of its housing stock qualifies as affordable. Cities can also take the lead: they can require developers to build a certain percentage of affordable housing units with each new development.

What’s clear is that despite the ongoing economic recovery, housing is a basic need that is becoming out of reach for many Americans. In cash-strapped times, we must find innovative ways to alleviate the burden felt by low-income residents who spend a disproportionate percentage of their income on housing related expenses.

Click here to read the entire Out of Reach 2012 report and see where your state ranks in terms of rental affordability. What measures are your cities taking to make housing more affordable for low-income residents?

BY Amanda Maher on March 26th, 2012

TAGS: housing | poverty | rent | cities | affordability | wages | workforce | economic recovery | affordable housing