Who’s hit hardest by the affordable housing shortage?

Whether we agree on the same solutions as a society, the fact remains that the United States has a deep affordable housing shortage that disproportionately impacts our most vulnerable populations. Extremely low-income households are more likely to contain seniors, individuals with disabilities, and children. These households are also more likely to be black and Hispanic.

This shortage is a threat to the economic stability of American families, and the consequences are far-reaching. Housing instability can lead to unemployment, lower academic achievement, and poorer health outcomes (including mental health). Low wages coupled with the shortage has made the prospect of securing housing a continuous challenge. Policies at the federal level—from cutting funding for housing support to imposing work requirements—have ensured that the most vulnerable feel the full brunt of the shortage.

The National Low Income Housing Coalition (NLIHC) is a housing nonprofit dedicated to steering national housing policy in a socially just direction. I read two of its reports: The Gap: A Shortage of Affordable Rental Homes, which looks at the availability of affordable rental housing for the extremely low-income and other income groups and Out of Reach: The High Cost of Housing, which examines the gap between the cost of rental housing in the US and renters' wages.

The reports give insight into how severe the affordable housing shortage is, and perspective on who is impacted by it most. Here are some highlights.

Who faces the greatest shortage?

Extremely low-income households are those with income at or less than the poverty level, or 30% of their Area Median Income. In the United States, extremely low-income renter households make up a little over a quarter (11.2 million) of the total renter household population (43.8 million) and almost 10% of total households.

Assuming the standard of housing affordability is that housing cost should not exceed more than 30% of a household's income, then there are about 7.5 million rental homes that are affordable to extremely low-income renters. That means there's a shortage of 3.7 million rental units.

However, the gap is even worse than it seems for the lowest earners. People in the extremely low-income bracket are the only income group that faces an absolute housing shortage. Why? Higher-income households have more rental options, and they can and do occupy the only rental units extremely low-income households can afford (as illustrated in figure 1).

Looking at the numbers, the 6.6 million very low-income renter households (those with incomes between extremely low and 50% of the Area Median Income) will occupy the rental homes that are affordable to extremely low-income people, as well as the slightly more costly units that are affordable within their income bracket but not to people making less.

According to NLIHC, 3.5 million of the 7.5 million rental homes affordable to extremely low-income people are occupied by higher-earning households, resulting in only 4 million affordable rental units that are available to the lowest-earning households. That means in totality, there's an 8.7 million-unit shortage of rental housing. That shortage of affordable housing has led to millions of the most vulnerable renters being cost-burdened.

Who has the heaviest cost burden?

A cost-burdened household dedicates more than 30% of its income to rent and utilities, while severely cost-burdened households spend more than 50%. In the United States, 9.7 million extremely low-income households are cost-burdened and 11 million are severely cost-burdened.

Under these circumstances, households with limited resources often must choose between paying rent and buying food or paying for healthcare. The burdens placed on households struggling to afford rent while having to choose between other necessities directly leads to housing instability.

“In no state, metropolitan area, or county can a worker earning the federal minimum wage or prevailing state minimum wage afford a two-bedroom rental home at fair market rent by working a standard 40-hour week,” the Out of Reach report says.

There are only 22 counties in the country where a full-time worker earning minimum wage can afford a one-bedroom rental unit. In the United States, renters need to earn $22.10 per hour to afford a two-bedroom apartment and $17.90 to afford a one-bedroom. The federal minimum wage is $7.25.

What does this cost burden look like in the Washington region?

Washington, DC

A minimum wage worker would have to work 104 hours or have 2.6 full-time jobs to afford a two-bedroom apartment in DC. To afford a one-bedroom apartment, a minimum wage worker would have to work 91 hours or have 2.3 full-time jobs.

The fair market rent for a two-bedroom apartment in DC is $1,793 and $1,561 for a one-bedroom apartment. A household would have to earn $71,720 annually to afford a two-bedroom apartment and $62,440 to afford a one-bedroom apartment.

Maryland

A minimum wage worker would have to work 115 hours or have 2.9 full-time jobs to afford a two-bedroom apartment in Maryland. To afford a one-bedroom apartment, a minimum wage worker would have to work 96 hours or have 2.4 full-time jobs.

The fair market rent for a two-bedroom apartment in Maryland is $1,510 and $1,256 for a one-bedroom apartment. A household would have to earn $60,406 annually to afford a two-bedroom apartment, and $50,238 to afford a one-bedroom apartment.

In Montgomery and Prince George’s counties, a person would need to earn $71,720 annually or work 137 hours at the minimum wage rate to afford a two-bedroom apartment, or earn $62,440 or work 119 hours to afford a one-bedroom apartment.

Virginia

A minimum wage worker would have to work 131 hours or have 3.3 full-time jobs to afford a two-bedroom apartment in Virginia. To afford a one-bedroom apartment, a minimum wage worker would have to work 111 hours or have 2.8 full-time jobs.

The fair market rent for a two-bedroom apartment in Virginia is $1,232 and $1,048 for a one-bedroom apartment. A household would have to earn $49,276 annually to afford a two-bedroom apartment, and $41,922 to afford a one-bedroom apartment.

In Arlington County, Fairfax City, Fairfax County, and Prince William County, a person would need to earn $71,720 annually or work 190 hours at the minimum wage rate to afford a two-bedroom apartment, or earn $62,440 or work 166 hours to afford a one-bedroom apartment.

What are the solutions?

As these graphs show, the lowest-earning households are hit hardest by the nation’s affordable housing shortage. As noted in Out of Reach, 71% of the lowest-earning renters are severely cost-burdened and spend more than half their income on housing.

The Trump administration's actions to “curtail” the affordable housing crisis consist of budget cuts, hiking tenants' rent contributions, and increasing work requirements. The majority of people who need housing assistance are already active participants in the labor force. As the above data shows, even with a full-time minimum wage job, they still cannot afford a modest two-bedroom apartment (or even a one-bedroom one) in most places.

That being said, there are solutions. NLIHC has provided a few policy recommendations to help these low-income households:

1. Increase funding for tenant-based rental assistance. Voucher programs are proven to reduce housing instability and homelessness. The way it works is the recipient finds private market housing and contributes 30% of their income towards the housing costs. The voucher is used to pay the remaining cost up to the local housing agency’s payment standard. Despite the effectiveness of vouchers, only one in four households receive vouchers because of underfunding.
2. Increase capital investments in affordable homes for extremely low-income renters. One way to do this is by increasing funding to the national Housing Trust Fund (HTF). The HTF allows states to rehabilitate and create homes for low-income households through block grants.

Readers: what else would help address this issue locally?