Accurately Defining ‘Affordable Housing’

Each year, the National Low Income Housing Coalition’s publishes a report called Out of Reach; it takes the lowest possible wages in every state and compares those wages in terms of buying power to the most expensive rental product in any housing market: a two-bedroom apartment. As I note in a new Forbes piece, this selective use of data is then deployed to make shocking statements about how many hours a person would have to work at minimum wage (90 hours a week!) to afford a two-bedroom apartment, or how many dollars per hour they’d need to make ($60 per hour!) to move into that roomy two-bedroom unit.

But the obvious question they fail to ask is: how many minimum wage workers are desperately seeking a two bedroom apartment? Neither the Coalition nor the press that dutifully covers this report every year ever asks or answers that question. The impression created by the data is that the average human living in a place like Los Angeles or Seattle is either homeless or completely broke because they can’t afford a two-bedroom apartment. The Coalition’s data is hypothetical rather than practical:

Anyone who earns less money is going to spend a greater percentage of their income on housing — and on everything else. Why? They have less money to spend. By definition, using a ratio analysis of income to rent — or anything else — will show what you’d expect. Poor people pay more of their earnings for necessities and everything else. It’s kind of the definition of being poor. What the coalition does by taking the lowest wage and one of the most expensive types of housing — two bedrooms — is to widen that gap.

What’s the answer? Looking at the best guess, real numbers, according to the City of Seattle there are about 26,000 cost-burdened households earning about $23,000 per year, or $1,917 per month. Half of their monthly income amounts to $958.

Based on the government’s standard of affordability, set by HUD, those households should be paying about $575 per month: or about $383 less than they are currently paying. That gap, the $383 difference, is the measure of what makes housing out of reach, not a hypothetical wage to two-bedroom unit ratio.

So the answer is more housing. Shortages of any product mean higher prices. Loosening the regulatory grip local governments have on building permits would be the first step. And for those cost-burdened households? Subsidizing that cash gap would be a fast, efficient and compassionate use of funds rather than building a few, expensive, subsidized units that wouldn’t be ready for years.

Read the full Forbes post here.