Looking for an affordable rental market? Study says you're out of luck
March Rental Advice: The gap between tenant wages and housing costs is widening precipitously, forcing millions of Americans to make tough choices. Here's a look at what's happening with rent across the country, and some advice on what you can do if you're having trouble paying your rent.
© 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.
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"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."
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"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."
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.
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.
25 years ago when I was making minimum wage...I couldn't afford an apartment by myself either...It's called...GET A ROOMMATE TO HELP PAY THE BILLS!!!
I liked your comment but I had to thumbs-down it after reading this:
2) Where the heck did they come up with the numbers for rental rates. I currently have a 3 bedroom 1.5 bath for rent for $600 (all appliances included). And no...it is not a dump. I would move my own family into it if it had more square footage (it's 1,350 sq/ft).
What the heck is wrong with 1,350 sq feet. Unless you have a family of 8 or something, it's a lot of space. A family of four used to get by with 1,200 sq feet, but now it seems families of that size these days want over 2,000 sq. ft.
No wonder many people are broke.
I think the best way to get the pols to listen is to stop spending. The entire "99%" needs to just stop wasting money, period. No big-screen TV's no stupid i-anythings, no new cars or computers every 3-4 years, NOTHING. Stop spending money anywhere that it isn't absolutely necessary and "they" will listen.
Hit them where it hurts.
People whine and complain that they can't afford the necessities but those same people tend to have an awful lot more "wants" than "needs".
....That why many corps moved factories and produciton overseas! Though, I am vehemently against such decisions and the long term damage they do. Still, though, many forget, its the american consumer that shops ourselves into this situation by being so extrememly price sensistive. -Just saying....
I live in a small town in Mississippi. I own my home and was looking into buying properties to use as rental units. This is what I found:
The average worker, in this area, makes $10.00 an hour.
The average rent is $750.00 per month.
Buying a "not so good" property, keeping it up, and paying property taxes (my county has a rate named commercial tax rate which is 3 times the regular home owner rate), and charging the average rental rate, I would be able to make $80 - $100 per month.
*** Not worth the effort unless I could own large blocks of homes.
What gets me is, some of the home owners, around here, complain about renters having multiple people (or) families living in the same home. Heck! They have to. The average utility bill here is $300.00 per month so it would take three workers making the $10.00 per hour just to pay the rent and utilities, then you need others working to buy food and clothing.
You want to talk about entitlements let's start right here. What gives the ceo and his cronies the right to take so big a slice of the pie in a lot of cases they get more than the investors once the pot has been divied up and the workers who do the trench work that makes the company work gets the crumbs. And this is the thing that gets me the most, they find stupid a%% workers that back them (you know like republicans) people who would benefit if they voted with their peers. They remind me of a bucket of crabs instead of linking claws and pulling every one out of the bucket they pull the ones back who look like they are about to get out. Equallity and fairness is the only way to go. Stop voting against yourselves just to hurt someone else.STOP THE HATE!!!!!!!!!!!!!!!!!!!
Biggest trajedy...rent is not tax deductible. But a rental property can be depreciated over time and creates a tax shelter for the land owner. Income tax is shifted from the landlord to the tenant. Want to fix it? Reverse the tax. Rent should be tax deductible and income producting property should not be allowed to be depreciated. Or depreciation is a capital loss, not an ordinary loss.