Affordable rent remains out of reach for millions of low-wage workers

A new report by the National Low Income Housing Coalition (NLIHC) says rental housing remains out of reach for millions of workers, with wages falling short of the cost of modest rentals in every state, metropolitan area and county in the U.S.

Titled “Out of Reach: The High Cost of Housing,” the report warns that rental housing has become increasingly unaffordable over the past decade, particularly for households with the lowest incomes.

NLIHC measures the “housing wage” as the estimated full-time hourly wage a worker must earn to afford a decent rental home while spending no more than 30% of income on housing costs. The calculation is based on fair market rent (FMR) data from the Department of Housing and Urban Development (HUD).

Nationally, the housing wage averages $34.73 for a modest two-bedroom rental and $29.19 for a one-bedroom. The report says those figures “far exceed not just the minimum wages in all states and nearly all counties, but also the median wages of workers in many of the most common occupations.”

A clear division

NLIHC President and CEO Renee Willis said in a press release the report illustrates a clear division.

“Despite economic gains for some, low-income renters continue to face impossible choices between paying rent and meeting basic needs,” Willis said, adding the findings also reinforced that the housing crisis would only deepen if cuts to federal housing investments continue.

“Congress must protect and expand housing programs that ensure stability, opportunity and a pathway out of poverty for millions of renters,” she said.

Of the 25 most common occupations in the U.S., NLIHC’s analysis shows 17 pay median wages below the housing wage for a one-bedroom rental home, and 18 pay less than that threshold for a two-bedroom rental home. This accounts for more than 74 million people — nearly half of the entire U.S. workforce, the report stated.

The federal minimum wage of $7.25 per hour — which falls below the poverty threshold for a single adult working full time — is still the standard in 20 states. But even in states and localities with higher minimum wages, “there is nowhere in the U.S. where a full-time minimum-wage worker can afford a modest two-bedroom rental home at FMR.”

How race factors in

In March, NLIHC published a report detailing how Black, Latino and American Indian or Alaska Native (AIAN) households are disproportionately represented among extremely low-income renters and disproportionately impacted by the national housing shortage. Eighteen percent of Black non-Latino households, 16% of AIAN households and 13% of Latino households are extremely low-income renters compared to just 6% of white households, its findings showed.

Racial wage disparities across income distribution are also examined in Thursday’s report, which details gaps between workers of color and white workers.

“At the 60th percentile, white workers can nearly afford a two-bedroom rental home at FMR, while Black and Latino workers at the same percentile cannot afford even a modest one-bedroom rental home,” the report stated.

People of color also experience higher rates of unemployment and underemployment, which further limits access to affordable housing, the report observed, citing recent national studies.

Additional analysis

Other housing and mortgage industry analyses have reached similar conclusions about rental affordability for low- and minimum-wage workers.

Best Interest Financial, a mortgage company based in West Bloomfield, Mich., examined recent FMR data from HUD and other wage data from the UC Berkeley Labor Center.

Its report, written by Jaime Dunaway-Seale, stated a single minimum-wage worker could not afford a one-bedroom apartment in any of the country’s 50 largest metros using the 30% rule (the recommendation that consumers spend no more than 30% of their income on their housing payments).

“To afford the median rent in these cities, a worker earning the federal minimum wage would have to work 174 hours a week, or about 35 hours each workday,” the Best Interest report stated.

The most affordable city in Best Interest Financial’s analysis was St. Louis, where FMR for a one-bedroom apartment was $995 and would consume about 41% of a minimum-wage worker’s income based on the city’s $15 minimum wage.

To adhere to the 30% threshold, “minimum-wage workers in St. Louis would need to lower their rent costs to $720 a month or increase their earnings to $20.73 an hour — about $6 more than they actually make,” the Best Interest report observed.