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Writer's pictureDavid Martins

Housing Costs Remain “Out of Reach” for Low-Wage Workers Nationally and in Vermont

On July 14th, the National Low Income Housing Coalition (NLIHC) released its 2021 Out of Reach report. Each year, the Out of Reach report compares the wages that people earn with the average cost of housing both nationally and for every state, county and metropolitan statistical area (MSA) across the country. 

Findings from the 2021 Out of Reach report paint a clear picture of the insurmountable housing costs that low and moderate-income renters face. In the United States today, there is not a single state, MSA, or county where a 40 hour-per-week worker earning the federal or state/local minimum wage can comfortably afford a two-bedroom apartment at Fair Market Rent (FMR).

To capture the gap between wages and housing costs, researchers at the NLIHC have created a metric known as the housing wage. The housing wage describes the “hourly wage a full-time worker must earn to afford a modest and safe rental home without spending more than 30% of their income on housing costs,” based on a region’s FMR. When compared to an area’s minimum wage and the wage an average renter earns, the housing wage sheds light upon the state of housing affordability in a given area: the larger the gap between the housing wage and the minimum wage, the less affordable the respective area’s housing market for low-wage workers.

Nationally, the housing wage for a modest two-bedroom apartment is $24.90. This is nearly three times the $7.25 federal minimum wage, meaning that the average minimum wage earner must work 97 hours per week (2.5 full-time jobs) to afford a 2-bedroom apartment or 79 hours per week (2 full-time jobs) to afford a one-bedroom apartment at FMR. Although some renters earn above the minimum wage, the NLIHC found that the average renter’s hourly wage of $18.78 is still $6.12 short of the national housing wage. Individuals who rely on Supplemental Security Insurance (SSI) face even greater challenges in accessing affordable housing. The maximum affordable rent for an individual living on SSI is only $238, which is shockingly low given that the average monthly rent for a 1-bedroom apartment at FMR in the United States is $1,061. 

The 2021 Out of Reach report ranks Vermont as the state with the 16th most expensive housing wage and the state with the 6th largest gap between average rental wage and 2-bedroom housing wage. With a statewide housing wage of $23.68–almost double the state minimum wage of $11.75–a Vermont worker earning minimum wage must work 81 hours per week (equal to 2 full-time jobs) to afford a 2-bedroom apartment at FMR, or 64 hours per week (equal to 1.6 full-time jobs) to afford a 1-bedroom apartment at FMR. In Burlington/South Burlington, the state’s only MSA, the 2021 housing wage is a staggering $31.31. It is also important to note that the NLIHC’s report uses data from the 2015-2019 American Community Survey (ACS), so it does not take into account the economic downturn of 2020. After a year of job losses, furloughs, and limited hours, many of these households will be struggling to an even greater extent than is shown in this report. 

Indeed, of the 10 most common occupations in Vermont, only two have median wages high enough to afford a two-bedroom apartment, and only four are high enough for a one-bedroom apartment. Many of the other common low-wage jobs in Vermont analyzed by the NLIHC were in sectors hard-hit by the pandemic, such as food service and retail; these workers were already struggling to afford housing and may have lost hours or lost jobs entirely over the past year.

Astronomical housing wages disproportionately impact low-wage workers and people of color. For one, people of color are more likely to be renters as opposed to homeowners, due in large part to the continuing impact of decades of redlining, discriminatory housing policy and limited ability to build up wealth. In Vermont, there is a shocking racial homeownership gap: 76 percent of Black households rent compared to only 28 percent of white households. Other people of color also have significantly lower rates of homeownership, according to 2019 American Community Survey data compiled by Vermont Housing Finance Agency. Furthermore, people of color are more likely to work in low-wage occupations, a systemic inequality resulting from the long history that limited economic opportunity and concentrated workers of color in chronically undervalued occupations. According to an analysis of the Bureau of Labor Statistics by the Center for American Progress, nationally, people of color are overrepresented in many of the low-wage jobs that were most vulnerable to potential layoffs during the coronavirus pandemic. And according to the Public Assets Institute’s State of Working Vermont 2020 report, there is a significant racial disparity in the poverty rate in Vermont, with Black Vermonters over twice as likely as the state average to be living in poverty.

Throughout the country and here in Vermont, these numbers carry real, dire consequences for low and moderate-income households. Tess Milner lives in Lamoille County and is the Secretary of the Lamoille Housing Partnership’s Board. Like many Vermonters, she regularly observes the effects of Vermont’s housing crisis: “Some Vermonters are forced to have to work multiple jobs just to pay the bills, which takes away from personal time, and time with their family. This one factor alone can cause a multi- faceted domino effect: Not only affecting a person’s well-being and family, but leading to overworked employees, quality of work performance, and increased healthcare costs to both the employee and employer.” Indeed, a 2011 study conducted by the National Center for Chronic Disease Prevention and Health Promotion found that respondents who identified as housing insecure were 6 times as likely as housing secure respondents to delay doctors visits, and nearly twice as likely to report extended periods of poor physical and mental health. As the dust of the COVID-19 pandemic begins to settle, it is more clear than ever that secure housing has a critical effect on health. 

While findings in the Out of Reach report are startling, their root causes are no secret. Data from the Center on Budget and Policy Priorities shows that from 2001-2018, the median cost of rent in all but five states increased faster than that of median household incomes. One driver of this trend is the nearly 40-year nationwide stagnation in wage growth, due in part to the failure of the federal government to raise the federal minimum wage in proportion with inflation and productivity (two different but related indicators of economic growth) since the early 1970s. An estimate cited in the Out of Reach report finds that if the federal minimum wage were to accurately reflect increases in productivity rates, it would today be around $21 per hour; another estimate is as high as $24 per hour. While economists debate the exact number, all estimates come far closer to the NLIHC’s national housing wage of $24.90 than our current $7.25 federal minimum wage.

But raising the minimum wage is not enough; we need a historic investment in affordable housing development as well as humane housing policies designed to keep all people safely housed, regardless of occupation or ability to work. Over the last 40 years, as wages remained continually stagnant nationwide, low and moderate-income households faced continually rising rents, large-scale government disinvestment from public housing and other federal housing assistance programs, and the loss of thousands of formerly affordable housing units. Between 1980 and 1983, federal spending on housing assistance programs fell a shocking 70%, from $60 billion to $18 billion, and proceeded to fall a total of 49% by 2003. More recent data from 2018 shows that three out of four income-eligible households are still excluded from access to federal rental assistance programs due to spending restrictions. At the same time, a surge in the national renter population following the 2008 foreclosure crisis has caused rents to steadily increase across the board. 

VAHC has long referred to the proverbial “three-legged stool” of policy reforms to describe the multi-pronged nature of solutions to the affordable housing crisis: capital investment into “bricks and mortar” to create new permanently affordable housing; housing-related financial assistance; and supportive services to help those who have faced housing insecurity, homelessness and other challenges. Thankfully, we are now seeing much-needed and long overdue investment into these three areas of housing. The 2021 State Legislative Session resulted in a historic $144 million investment into the Vermont Housing and Conservation Board (VHCB) for housing initiatives, primarily to increase permanent housing options for those experiencing homelessness and those impacted by the coronavirus pandemic. Already we are seeing these investments come to fruition—VHCB announced on July 14 that it has awarded $53.8 million in state and federal funds to create and rehabilitate 389 homes across Vermont. 221 of these units will be reserved for previously homeless households and those at risk of homelessness, who are some of the people most impacted by the high cost of housing. This unprecedented level of investment in affordable housing development and rehabilitation will create more options for low-income Vermonters to find housing they can afford and has the potential to alter the Vermont housing landscape for years to come.

See media coverage of Out of Reach 2021 Below:

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Please visit our new Housing & Homelessness Alliance of Vermont website at www.hhav.org!

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