Looking for an affordable rental market? Study says you’re out of luck (© Kelly Redinger/Jupiter images)

© Kelly Redinger/Jupiter images

For middle- and low-income tenants, things just keep getting worse.

Tenants know this: The rent keeps going up. Housing counselors know this: More working families are struggling to pay rent and are coming in to seek help, afraid they'll end up homeless. Now, here come the numbers.

First was the report in February from the federal Center for Housing Policy, which revealed that an astonishing 1 in 4 working households in America — around 10.6 million families — spend more than half of their pre-tax income on housing, a level that experts say is unhealthy, if not impossible, to sustain.

Then on Tuesday came the latest exhaustive and dismal data crunch from the National Low Income Housing Coalition: "Out of Reach 2012," which finds that in no community in America is it possible to reasonably make the rent on minimum wage. In 86% of counties surveyed, even the average pay of tenants, which is about twice the minimum wage, won't cut it.

"There's a very serious gap between what rents cost and the amount of money that low-wage workers and elderly and disabled people or those on SSI (Supplemental Security Income) can afford," says Sheila Crowley, the president and CEO of the coalition. "It's obviously worse in some places than in others, but no place is rent-affordable."

 
  
  

The coalition study uses fair-market rent, the 40th percentile of area rent, and actual wage levels from U.S. labor surveys. It defines "affordable" housing as costing no more than 30% of gross income, the widely recommended standard. Nationally, the average fair-market rent for a two-bedroom home in 2012 is $949, meaning a full-time worker would need to make $18.25 an hour to pay rent without unduly straining the family budget, $4.10 more than the average tenant wage of $14.15 and 2.5 times the federal minimum wage of $7.25. You can use this tool to calculate your own housing wage. 

"It isn't just fixed-income seniors or the unemployed. It's also a big challenge for working people," says Sean Caron, director of public policy for the Citizens' Housing and Planning Association, a Massachusetts advocacy group. "This is really a problem that isn't reserved to a small amount of vulnerable people."

Working overtime to pay the rent
The Center for Housing Policy study looks at the housing budgets of working families, defined as those employed at least 20 hours a week and earning no more than 120% of area median household income.

Of the 22.5 million working families who rent, 26% give more than half their pre-tax income to the landlord. That's an increase of 12% since 2008, or an additional 630,000 families. In California, Florida and New Jersey, fully 1 in 3 households join the "severely housing-cost burdened."

"Retail, firefighter, teacher, postal clerk – those are all pretty good jobs," says Laura Williams, the report's author. "They're essential community workers, and they're not making enough to rent a two-bedroom apartment in a lot of communities."

What's your home worth?

Those in the increasingly busy business of helping tenants aren't surprised by the findings. Take the counselors at the Metropolitan Boston Housing Partnership. They typically get about 9,000 requests for assistance a year. Lately that number has ballooned to 15,000, many from struggling tenants with jobs.

"We used to see the more chronically homeless folks, and there still is a great need there, but we're also seeing the increase of the moderate-income family," says Kate Fulton, who helps direct client services for the agency.

One single mother working full-time in the medical field was spending more than 80% of her $2,300 monthly pay for a moderately priced three-bedroom home, leaving only $400 for other expenses.

"She's not behind on rent. She manages," says Kate Jordan, coordinator of the consumer education center for the housing partnership. "I don't have a good answer for how she does it, but she's doing it."

The woman knew it was unsustainable, however, and counselors were able to help her find a cheaper apartment. She's also working to boost her earnings.

"That's a really high percentage of income to go toward housing and be sustainable, and you've got to ask how long people can keep that up and what choices they're being forced to make," Caron says. "Making the math work is really tough."

How did it happen?
So how did the squeeze on average workers get so incredibly tight? Several forces are at work:

  • An improved economy. People are getting jobs and moving out on their own. Young professionals soak up the pool of moderately priced apartments.
  • Buying jitters. Would-be buyers continue to be unable or unwilling to finance a home purchase. So they rent, adding 2 million more tenants to the market since before the housing bust.
  • Not enough rentals. It takes time to approve and build rental housing. We have not had an increase in units to match the rise in renters.
  • A long-term shortage of affordable rentals. Motivating investors to incorporate affordable rentals into developments is a chronic struggle, although creative solutions exist.

Combined, this makes for intense demand, and national vacancy rates are at their lowest level in more than a decade. With prices spiking as a result, it can be near impossible in many areas to find an open unit at the fair-market rent cited by the study.

Home affordability calculator

Even high-income tenants are feeling the pinch. In New York City and San Francisco, both markets that traditionally favor tenants, high rents have sent would-be tenants on the buying path for the first time, ironically, to save money.

Now add to the mix stagnating wages for those in the middle, and declining wages for those at the bottom. While the national median monthly rent for working households rose 4% from 2008 to 2010, the median household income of tenants dropped 4%, the Center for Housing Policy found.

The increase in severely housing-burdened Americans from 2007 to 2009, the most recent years surveyed, was dramatic, according to the Department of Housing and Urban Development, with 7.1 million poor households either spending more than half their income on rent, living in substandard conditions, or both.