Out of Reach: The Housing Wage

In Rhode Island, you would have to work 40 hours a week, 52 weeks of the year, and earn $19.16 per hour (after taxes) to be able to afford a basic two-bedroom apartment in a relatively safe area. This is what the National Low Income Housing Coalition (NLIHC) discovered in its annual report, Out of Reach, a side-by-side comparison of wages and rents in every county, Metropolitan Area (MSAs/HMFAs), combined non-metropolitan area, and state in the United States.

The report calculates the amount of money a household must earn in order to afford a rental unit in a range of sizes (zero, one, two, three, and four bedrooms) at the area's Fair Market Rent (FMR). The FMR is based on the generally accepted affordability standard of paying no more than 30 percent of income for housing costs. From these calculations, the hourly wage (the Housing Wage) a worker must earn to afford the FMR for a two-bedroom home is derived.

Rhode Islanders would have to spend just over $40,000 to rent a decent and safe two-bedroom housing unit. Considering that the average income in Rhode Island is $42,000 a year before taxes, chances of a resident being able to rent something safe and spend only 30 percent of their income on it are low.

Amy Clark of NLIHC quickly defused two statements that challenge the report's findings -- firstly,  that the cost to rent a one-bedroom unit would be lower and more attainable for a wider variety of incomes and secondly, that most people renting two-bedroom units are two-income families. Clark pointed out that the report evaluates the cost of single-bedroom units and without fail, the housing wage required to support a one-bedroom unit is higher than for any other kind of unit. She also pointed to the statistics that over the past five years there has been a radical decline in two-income families because of the recession. "America has returned to a single-income family structure as a rule and not the exception. We are no longer a nation of two-income families," she said.

Home ownership in America is at its lowest rates in over 30 years. The latest Census reports that less than 30 percent of all American homes are owned (without mortgage debt) and 11 percent of all existing homes in America are empty and in repossession by their lenders.  

The NLIHC is working with the current Federal administration to create a committee to explore the concept of a National Rental Policy that would include a mandated percentage of affordable housing in every jurisdiction and create a government incentive program to assist in the construction of affordable housing. Missing from the plans for a National Rental Policy are any pragmatic initiatives to begin to transform the American perception of housing as an investment and luxury to recognition of affordable housing not only as a basic human right, but also as a priority and necessity for economic recovery and stability.

(Written by Cassandra Tribe. Published in the June 2011 Issue of Street Sights, read the issue online at http://bit.ly/mwl2hm)