Report Shows Growing Gap Between Income and Rent

The gap between income and rent continues to widen, and despite a robust level of rental housing, there remains a dearth of housing that can be considered affordable, according to […]

The gap between income and rent continues to widen, and despite a robust level of rental housing, there remains a dearth of housing that can be considered affordable, according to new data released yesterday by a prominent national housing advocacy group.

The data, which also points to lower wages nationwide, was provided by the National Low Income Housing Coalition as part of its Out of Reach series, an annual report first launched in 1999 that calculates the amount a person working full-time must earn to afford the Fair Market Rent on a two-bedroom, otherwise known as the Housing Wage.

The report, Out of Reach 2010, indicates that:

  • A family in the United States needs to earn $18.44 an hour, or nearly $38,360 a year, in order to afford a modest rental home;
  • The national two-bedroom Fair Market Rent (FMR) is $959 a month;
  • Seventy-four percent of those renting in metro areas with two full-time minimum wage jobs would preclude them from affording the two-bedroom FMR.

In 2010, according to the report, the estimated average wage for renters in the United States is $14.44, a 25-cent decline from 2009. The report goes on to note that at the federal minimum wage of $7.25, a household would have to work 102 hours each week to afford the nation’s average FMR for a two-bedroom home.

“Despite the recession, rents are going up, wages are going down, resulting in a larger gap between what people earn and what they need to earn,” said NLIHC research analyst Megan DeCrappeo, Wednesday on a call with reporters, adding that competition for affordable units is also on the rise. DeCrappeo added that nine states, Hawaii, California, Maryland, New Jersey, New York, Massachusetts, Connecticut, Alaska, and Florida, and the District of Columbia surpassed a two-bedroom Housing Wage of $20.

Dean Baker, co-founder of the Center for Economic and Policy Research, said the report reminds “ us how people are struggling with the necessities of life.

“This shows us very clearly [that] things are getting worse during the downturn and not likely to get better any time soon. It’s a grim picture.”

But Baker went even further, saying the data should have larger, long-term policy implications, pointing to the five million jobs the economy lost between December 2008 and December 2009, and what will likely be a protracted economic recovery. “Many people were happy to see job growth, but to get us back to where we were, considering the labor market grows at 125,000 jobs per month, it will take us almost 20 years to make up for the lost jobs without a pickup of job growth—and no one’s predicting that in 2010 or 2011.”

Baker pointed to the country’s vacant housing stock, roughly 13 percent of the entire housing stock, as an opportunity to fulfill affordable housing goals. “We have the housing, the labor, and the workers to make affordable housing. It’s just a question of making it available. We need a housing policy for middle and bottom.”

NLIHC President Sheila Crowley said that providing $1 billion for the National Housing Trust Fund, a centerpiece of the NLIHC policy portfolio, will help address the growing shortage of affordable housing. She added that such an injection of funds would create new jobs, insofar as every $1 billion provided to the trust fund would support the immediate construction of 10,000 rental homes, creating 15,100 new construction jobs and 3,800 new jobs in ongoing operations, she said.

Much of the federal response to the housing crisis has been keeping prices high or where they were, but not about lowering rents, creating an imbalance in the housing market, according to Danilo Pelletiere, research director at NLIHC. He also echoed Baker’s assertion that there is housing available, but that it sits vacant rather than addressing rental needs: “Until we have policy from a housing and people perspective, we’re going to have this mismatch. It’s ‘water, water everywhere and not a drop to drink.”

To view the complete Out of Reach 2010 report, click here.

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