June 8, 2017; WTTW (Chicago, IL)
A new report offers a bleak look at the cost of housing in Illinois for those earning minimum wage. Not only is it bleak in Illinois, the picture for renters around the nation doesn’t look good, either.
“In only 12 counties [out of more than 3,100] in the United States can a full-time worker earning the prevailing federal or state minimum wage afford a one-bedroom rental home,” according to “Out of Reach 2017: The High Cost of Housing,” a report just issued by the National Low Income Housing Coalition. The report analyzes how much someone would need to earn in order to afford a modest apartment state by state.
The federal minimum wage is $7.25, though some 29 states and the District of Columbia have higher floors. However, the report states that “a full-time minimum-wage worker can afford a one-bedroom rental home in only 12 counties, not including Puerto Rico. These twelve counties are located in Arizona, Oregon, and Washington State, all of which have a minimum wage higher than the federal level.”
For example, in Illinois, the fair market rate for a two-bedroom apartment is $1,085. A person earning minimum wage would have to work more than 101 hours a week to be able to afford the apartment and not fall into the category of “rent burdened.” A rule of thumb researchers use to determine the amount of income someone should be set aside for housing is about 30 percent of take-home pay (after taxes and other payroll deductions). However, there is evidence that wages are not increasing as fast as rental housing costs.
Housing costs are not just a problem faced by low-income renters. The squeeze of affordability is much wider. Ronda Kaysen, writing in the New York Times, describes the search for “The Elusive $1,500 Rental.” College graduates, public service workers, service industry employees, and teachers all seek affordable places to call home and face growing difficulty finding it. Yes, it’s New York, but the stories Kaysen chronicles are repeated in many U.S. cities.
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Megan Arellana, writing in the Denverite, says the average Denver renter doesn’t earn enough to afford a one-bedroom apartment in the Denver metro area. “Lots of people pay more than that, but the federal government considers them cost-burdened,” writes Arellano. When renters are rent-burdened, it means they can’t meet other basic needs without sacrifices in food, medical care, transportation, and other services.
While renters across income levels face difficulties, lower-income renters face even greater challenges. Research shows that the private market rarely produces new rental units for the lowest income households:
Absent public subsidy, the private market rarely produces new rental housing affordable to the lowest income households. The rent these households can afford to pay often does not cover the costs of development and operating expenses. The majority of low-cost rental homes in the private market are older homes that have filtered down in quality and price relative to newer units. These low-cost homes, however, are being lost. Landlords in strong housing markets have an incentive to upgrade these low-cost homes to obtain higher rents.
What can be done? Isn’t this just the way the market works? What’s this have to do with public policy?
While low-income renters struggle to afford their homes, the largest share of federal housing expenditures benefit higher-income homeowners in the form of deductions from their taxable income. Homeowners are eligible to subtract the interest paid on their mortgage and real estate taxes from their federal taxable income if they itemize their deductions rather than claim the standard deduction. These two deductions combined cost the federal government nearly $100 billion annually, more than 83 percent of which benefits homeowners with incomes greater than $100,000 (Joint Committee on Taxation, 2017).
There are strong links between housing and community well-being. Today, the role of federal and state governments is being redefined both by action as well as intentional inaction. It’s easy to get lost in the details of the many programs and what impact they may or may not have, but this report documenting the vast gap in housing availability is worth attention.—Kevin Johnson