June 12, 2017

NLIHC Report Finds that Affordable Rental Housing is Out of Reach for Millions of Households

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In order to afford a modest two-bedroom unit in the U.S., renters need to earn a wage of $21.21 per hour, or more than 2.9 times higher than the federal minimum wage of $7.25 per hour, according to the National Low Income Housing Coalition’s (NLIHC) 2017 Out of Reach report. In its annual report on the gap between renters’ wages and the cost of rental housing, NLIHC finds that a renter earning the federal minimum wage would need to work 94.5 hours per week on average to afford a one-bedroom rental unit at Fair Market Rent, and 117 hours per week (three full-time jobs) to afford a two-bedroom.

Twenty-nine states, the District of Columbia and a number of local jurisdictions have minimum wages higher than the federal minimum wage. However, a full-time minimum-wage worker cannot afford a modest two-bedroom rental unit in any state, metropolitan area or county in the U.S. A full-time minimum-wage worker can afford a one-bedroom rental home in only twelve counties in the U.S.

Furthermore, household incomes have not kept up with the pace of rent rises. Between 2007 and 2015, the median gross rent for a rental unit increased by six percent (after adjusting for overall inflation). However, the median income for renter households increased by only one percent, and the national median income dropped by four percent. According to NLIHC, the national gap between the average renter’s wage and the “housing wage,” which is the hourly wage full-time workers must earn to afford modest rental housing without spending more than 30 percent of their incomes on housing, is $4.83 per hour.

NLIHC breaks down and maps its housing wage data by state, metropolitan area and county. According to the data, the top three states with the largest shortfall between the average renter’s wage and the two-bedroom rental housing wage are Hawaii ($19.65), Maryland ($11.39) and California (10.26).

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The report finds that high and increasing cost of rental housing, along with stagnating wages, has resulted in more than 11.2 million severely cost-burdened renter households, meaning households who spend more than half of their income on housing. The report also finds that more than 20 million renter households live in “housing poverty,” meaning they are unable to pay for all of their other basic needs like food, transportation and medical care after paying their rent.

The demand for affordable rental housing is on the rise, and the supply of rental housing has not kept pace with demand over the past decade. According to Out of Reach, the shortage is greatest for those with the lowest incomes, as there are only 7.5 million affordable rental units for the 11.4 million extremely low income renter households. NLIHC finds that 3.5 million rental units that would be affordable to extremely low income households are unavailable to them because they are occupied by households of higher incomes, contributing to a national shortage of 7.4 million affordable rental homes for extremely low income households. In addition, new multifamily construction is typically not affordable for low-wage workers. NLIHC also shows that full-time workers would need to earn $26.56 per hour to afford the median rent of a new market-rate rental unit in an apartment building that was built in 2015, which is $1,381.   

The findings in Out of Reach reinforce the importance of supporting programs that are essential for preserving and expanding the supply of affordable rental housing. However, the President’s budget request for fiscal year 2018 proposes extreme cuts to HUD programs, which, if enacted, would serve fewer families with less assistance at a time when our nation’s affordable housing needs are growing. Read more about the budget request and how to support affordable housing programs on the Enterprise blog.