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Affordable Housing: The Dream and Lie

Apr. 30th 2019
Photo by Bradley Dunn on Unsplash

Photo by Bradley Dunn on Unsplash

This post is part of a research review for Housing Options & Planning Enterprises (H.O.P.E.). H.O.P.E  is a nonprofit located in southern Maryland, providing much needed help with financial literacy, homeownership, and affordable housing.


Affordable adequate housing is a basic need. We all should have a home, a home we can afford and that, among other things, contributes to our emotional and physical health. Or at least doesn’t chip away at it.


I recently had the chance of reading two detailed and important reports, ALICE: A Study of Financial Hardshipand Out of Reach, the High Cost of Housing.


I learned that affordable housing is out of reach for many Americans and is one of the main barriers in the path to financial stability. Lack of stable housing doesn’t only mean you don’t always have a roof over your head. As the Out of Reach 2018 report clearly states, it could also result in the loss of employment, and in poor health, and can interrupt student learning and cause lower academic achievement.


To better understand the affordable housing crisis, I refer here to the U.S. Department of Housing and Urban Development (HUD) definitions of Fair Market Rent and Fair Market Rent.


Fair Market Rent (FMR)is the gross rent estimate that includes the base rent, as well as any essential utilities that the tenant would be responsible for paying. It does not include, for example, utilities such as telephone, television, or internet[1].


Housing Wageis an estimate of the hourly wage a full-time worker must earn to afford a rental home at HUD’s fair market rent without spending more than 30% of her or his income on housing cost.


The national 2018 housing wage is $22.10 for a modest two-bedroom rental home and $17.9 for a modest one-bedroom rental home.

To afford these houses, a full-time worker earning the federal minimum wage of $7.25 needs to work approximately 122 hours per week for all 52 weeks of the year, for a two-bedroom house, or 99 hours per week for all 52 weeks of the year for a one bedroom.


According to theUnited State Department of Labor, in 2017, among those paid by the hour, 542,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.3 million had wages below the federal minimum.It means that 1.8 million people had to work the impossible 100 hours a week, out or the 168 that there are, to afford basic needs such as shelter and food.


This gap between wages and affordability creates homelessness and unsafe and crowded housing situations for many working individuals and families. More about who these families and individuals in a second.


First, let’s discuss the effect of the minimum wage. Twenty-eight states and Washington D.C. have instituted a minimum wage that is higher than $7.25 federal minimum wage. While increasing the minimum wage is important, it is by no means a panacea. To start with, many of the states that have a higher minimum wage, also have a higher cost of living, which working a minimum wage job cannot cover.


Let’s take for example Maryland, where the minimum wage is $10.10. The Fair Market Rent for a two-bedroom house is $1,150 – In order to afford this level of rent and utilities, without paying more than 30% of income on housing –  a household must earn $5,034 monthlyor $60,406 annually, which translates into a housing wage of $29.04.

Let me repeat that, $29.04 per hour, full-time job, for 52 weeks a year to be able to house a small family of four.


While the median annual salary in Maryland in 2016 was $78,945, 62.4% of the people in Maryland made less than the required $60,000 to afford this modest housing. Most of the Maryland population cannot afford to rent a two-bedroom house.

Screen Shot 2019-04-30 at 12.13.16 PM


Who are the victims of this wage gap and shortage in affordable housing?


Could be any one of us.


A series of reports under the name ALICE: A Study of Financial Hardshipfinds that about 40% of households in the U.S. struggle to make ends meet. United for Alicehas identified people in need who live above the (dangerously outdated) poverty line, as “ALICE” an acronym for Asset Limited, Income Constrained, Employed. These people have a job, sometimes two or three, yet cannot afford basic necessities, such as housing, child care, food, transportation, and health care.

These studies clearly demonstrate that anyone can be an ALICE. ALICE households live in every county – urban, suburban, and rural – and they include women and men, young and old, and all races and ethnicities. On top of that, the number and percentage of families and individuals living below the ALICE threshold (meaning ALICE and poor households) increase annualy.


Revisitng our example from before, the state of Maryland, the graph below (data from here) shows the increase in the number of struggling households between the years 2012-2016. In the course of 6 years, the percentage of households grew by 6%, even though the economy has gotten overall strongerand wages have increased.

Screen Shot 2019-04-30 at 12.14.46 PM


It turns out that the cost of living and the wealth gap in Maryland (and in other states not shown here) have overshadowed all economic prosperity. I intend to unpack this statement in more detail in my next post.


A side note, before we continue to the next section, as you can see I didn’t delve into the cost and struggles of purchasing and keeping a house. First, because the increasing gap between the housing wages and actual earned wages (whether it’s minimum wage or the average renter wage) is an excellent illustration of the affordable housing crisis. Second, because house ownership has been decreasing in the last 13 years, pushing rent rates up and increasing the burden on already struggling families. If you are interested to learn more about homeownership has been pushed out of reach for an increasing percentage of the American population, please refer to The State of Housing Report.



Federal and State Resources

Low-income households can reach out for federal and state programs to mitigate their financial struggles.


While federal programs are efficient for their receivers, they tend to disproportionately target high earners over low earners and to support homeownership significantly more than rent.

The center on Budget and Policy Priorities states that“about 60% of federal housing spending for which income data are available (counting both tax expenditures and program spending) benefits households with incomes above $100,000.  The 7 million households with incomes of $200,000 or more receive a larger share of such spending than the more than 50 million households with incomes of $50,000 or less, even though lower-income families are far more likely to struggle to afford housing”.

They also add that while renters account for 36% of the nation’s households and 60% of those paying more than half of their income for housing, less than 30% of federal housing spending in 2015 went towards renter and the rest towards homeowners. The federal housing fund for renters is so underfunded that in 2015 only one out of four households in need received the assistance they needed.


States programs vary significantly from one state to another. The state of Maryland, for example, provides some mortgage assistance but has no rent-dedicated programs outside of Section 8 (federally funded). See their list of programs here.


What More can be Done?


All of the above leaves a lot of room and need for charitable organizations to step up and provide assistance.


There is a long list of such organizations, doing sacred work under impossible conditions. What can we do? We can support these organizations and we can demand, in every possible way, global fair pay. There is absolutely no reason a bank teller (or anyone else) should struggle to afford decent housing, childcare, and medical care.




A final note: if you need housing assistance of any kind or know of someone in need and located in southern Maryland, don’t hesitate to contact H.O.P.E.  

[1]Yes, you read it right. No phone and no internet. Obviously, these criteria need to be updated, as both are required to get a job and to keep a job.

Posted by starvinartist | in Info | No Comments »
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