Minimum-wage workers have always struggled to find affordable housing, but the housing predicament for low-wage workers has intensified in recent years. For families that need the space of a two-bedroom apartment, affordable housing simply does not exist. That's the disturbing finding of a new report from the National Low Income Housing Coalition (NLIHC).
Using the Department of Housing and Urban Development (HUD) standard of affordable housing as paying no more than 30% of income toward housing costs, NLIHC developed a "Housing Wage" that shows what a family breadwinner's salary must be to be able to afford rental housing at HUD's estimated Fair Market Rent for the area. As a national average, the 2015 Housing Wage is $19.35 per hour for a two-bedroom unit and $15.50 for a one-bedroom unit. The $15 minimum wage goal being advocated — and in some places, imposed — still does not meet either threshold. Even average renter wages fail to meet the two-bedroom affordability criteria; minimum wages fall far short.
The picture looks equally grim at the state and local level. There are only a few counties in Washington and Oregon where the minimum wage is over the threshold Housing Wage even for a one-bedroom apartment. Everywhere else, minimum wages are below the threshold Housing Wage, and in many cases, the median renter's wage also falls below the affordability threshold.
As an example, the largest gap between the average renter wage ($14.49) and the two-bedroom Housing Wage ($31.61) is in Hawaii at $17.12 per hour. That gap itself is larger than twice the minimum wage of $7.75. A minimum-wage worker there would have to work a staggering 125 hours per week just to afford a one-bedroom unit.
Areas with lower Housing Wage thresholds have corresponding lower median wages. Consider Arkansas as an example. Arkansas has the lowest two-bedroom Housing Wage, and is therefore the most affordable, but it also has one of the lowest median wages at $53,187 per year. A minimum-wage employee in Arkansas would have to hold 1.7 full-time minimum-wage jobs to afford a two-bedroom apartment, and would have to work 54 hours at one minimum wage job to afford a one-bedroom unit.
The expansion of this problem has its roots in The Great Recession and the housing crisis. Rental markets tightened up as some homeowners lost their homes and others were forced to downsize. In addition, millennials were (and are) waiting longer to buy their first home, either by choice or by an inability to save sufficient down-payment money. This in turn takes up more valuable space in the rental market and forces some higher-income families into the more affordable rental units. The supply problem cascaded throughout the rental market, eventually raising rental costs and making housing unaffordable for the lowest-income families. By 2013, for every hundred renter households defined as having extremely low income, only 31 affordable units were available to accommodate them.
The report points out that this issue must be addressed from both ends of the spectrum in order to find a solution. To meet the demand and bring rents down to a more reasonable level, the minimum wage would need to be raised even more and a larger number of affordable housing units built, which is not likely in our current economic climate.
The full NLIHC report can show you how the situation in your area stacks up by state and county. It contains all of the relevant area-specific data on housing costs, median income, and renter statistics. The report tells a grim story for the nearly 21 million people in America earning minimum wage.
Photo ©iStock.com/Susan Chiang