Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.
In San Francisco, a family would need 4.7 full-time minimum-wage jobs to afford a two-bedroom apartment.
Inequality has risen across America. Once high-paying middle class jobs have disappeared, as the job market has cleaved into high-wage knowledge and professional jobs and an even larger number of low-pay, low skill service positions. The result of this cleaving has been increasingly unaffordable housing, especially in the high-priced cities supposedly suffering least in the wake of the recession.
A report released this week by the National Low Income Housing Coalition, Out of Reach 2014, identifies the growing gap between housing and wages across the United States. To get at this, it uses a metric it calls the "housing wage" – the wage Americans would need to pay for a two-bedroom unit at market rent, devoting the recommended 30 percent of their income to housing costs. The housing wage for the country as a whole is $18.92 an hour, up 52 percent since 2000. Across the country, this means it would take an average of 2.6 full-time minimum-wage jobs to afford a modest two-bedroom apartment.
And, of course, this varies substantially by state and metro areas. In Washington State, where minimum-wage workers are some of the best off in the country, earning a hard-fought $9.32 per hour, it would still take an untenable 80-hour work to afford a two-bedroom rental unit. In Hawaii, it would take 4.4 minimum-wage jobs to afford fair market rental. And in Puerto Rico, where the gap between wages and costs is the lowest, it would still take 1.4 full-time minimum wage jobs. There isn't a single state where full-time minimum-wage workers could afford a market-rate one or two bedroom unit on their own.
The map below, by Zara Matheson of the Martin Prosperity Institute based on data from the report, charts the two-bedroom "housing wage" in several metros across the country, along with how many minimum wage jobs it would take to make that rent. The map also includes the figures for what the average renter in the metro area makes and how many of these "mean renter" jobs it would take to make this two-bedroom rent. In many cases, a household with one “average renter” still wouldn’t be able to afford their rent.
In high-rent metros like New York, Washington, San Francisco, and L.A., even three minimum wage jobs aren’t enough to afford a market-rate two-bedroom apartment. (Note that, for some of these cities with particularly high concentration of poverty, HUD pins the fair-market price to 50 percent, not 40 percent, of the area's median rent). And in many places, even the average wage that renters make isn't enough to afford that two-bedroom apartment. In Los Angeles, Honolulu, and Miami, households would need one-and-a-half or even two adults working full-time at the average housing wage to afford a two-bedroom apartment.
The scope of America's rental affordability problem is substantial, according to the report. More than 40 million American households are renters (35 percent of all households), a figure that has been growing substantially since the economic crisis. Just 34 percent of the apartments built in 2011 were affordable for even the median-income renter. And ten million of these renter households qualify as "extremely low-income," meaning they make 30 percent or less of the area’s median income. Today, there are just 31 affordable and available units for every 100 of these families.
This issue of providing affordable rental housing needs to be tackled from both sides of the equation. As I have written previously on this site, there is no more pressing issue in American than the need to upgrade service jobs, with more responsibility and better pay. A higher minimum wage, pinned to local wages and housing costs, is also needed. But we also need to build more housing. Since so much of the new housing we are building is aimed at luxury or middle class buyers, we need to especially focus on building more affordable housing.
American currently subsidizes single-family home-ownership for the already affluent. The majority of the annual $180 billion spent by the U.S. on tax subsidies and direct spending to support housing goes to affluent homeowners; less than a third goes to low-income renters. And while home-ownership helped stoke the industrial engine of a bygone age, the knowledge economy requires greater proximity, clustering, and flexibility – something that better rental options can help support.
Top Image: A sign in an apartment complex window reads, "Moved In April with Rent $925, Asking $1150 For May?" in Malden, Massachusetts June 17, 2012 (REUTERS/Jessica Rinaldi).