NLIHC’s flagship report Out of Reach was first published in 1989 and was authored by NLIHC founder Cushing Dolbeare. In honor of the 25th anniversary of Out of Reach, we take a look back at an excerpt from the original Out of Reach. Over the years, NLIHC has expanded and improved the Out of Reach report; however, the methodology remains the same. While both average income levels and housing costs have risen since 1989, the disparity between the two and thereby the report’s findings remain tragically relevant and accurate twenty-five years later. Ultimately, NLIHC strives for the day when the Out of Reach report can be retired and everyone in our country has a decent and affordable home.
OUT OF REACH (1989)
Why Everyday People Can’t Find Affordable Housing
By Cushing N. Dolbeare
Millions of Americans can no longer afford a decent place to live. They have been forced into this cruel situation by rising costs, shrinking real wages, and the destruction of millions of affordable apartments.
Housing costs, in general, represent the largest expense in the average household budget. It is a fixed cost, paid monthly. Usually it has first claim on a household’s income. Families pay for food, clothing, and health care with what remains. As the following data illustrate, that often amounts to precious little.
Though America’s homeless are the most visible manifestation of the affordable housing crisis, much of the problem remains hidden and undocumented. Many households are paying more than 50% of their income for rent and/or double up with other families to stay housed. These families, though not homeless, are in desperate need of affordable housing.
The root cause of the housing problem in this country is the large and growing gap between the decent housing and household income, particularly renter household income. The last comprehensive information by state and locality are on housing costs and household incomes comes from the 1980 Census. Similar data will be available from the 1990 Census in 1991 or 1992. Meanwhile, it is possible to estimate the size of the current affordability problem by comparing the “fair market rents” (FMRs) for existing housing established by the Department of Housing and Urban Development with estimated renter incomes.
For comparison purposes in estimating ability to pay, we have used the current rule that defines “affordable” housing as that which consumes no more than 30% of a household’s income. The serious shortcomings of this approach should be noted, however. Although in general people with higher incomes tend to pay smaller proportions of it for housing, they could really afford more and still meet other basic needs. For example, a household with an income of $100,000 could spend 50% of its income for housing and still have $50,000 left over for other needs. But a household with an income of $10,000 would have only $7,000 left after paying 30% of its income for housing – probably far too little to meet their other basic needs.
Moreover, the 30% rule ignores family size. A large family, for example, must spend more for food and other needs than a single individual. Yet, at any given income level, there would be less remaining per person after paying 30% of income for housing. For example, a single person with an income of $5,000, if fortunate enough to get housing at $125 a month (30% of a $5,000 annual income), would have $292 per month for other expenditures. But a three-person household would have only $97 per person, and a seven-person household would have only $42 per person.
Though the housing situation makes affordable decent rental units difficult for most renter households earning the median household income, it puts the greatest strain on households living below the poverty line, depending on public assistance or holding down minimum wage jobs.
Nationally, the 1985 American Housing Survey found that nearly three out of every five poor renter households spend over half of their annual income on housing costs. More than four in five spend over 30% of their income on rent. One major reason is the lack of adequate housing assistance. Fewer than one in three poor renter households receive assistance through a federal, state, or local public or subsidized housing program, leaving the majority of poor families to fend for themselves in a world of ever-escalating housing costs.
The decrease in the supply of affordable housing can be attributed to three developments:
- An increase in the number of poor families. Between 1978 and 1985, the number of poor households rose 25%, from 10.5 million households to 13.3 million households.
- A decline in the average income of poor families. In 1978, the typical poor family’s income was $3,362 below the poverty line. By 1985, the typical poor family’s income was $3,999 below the poverty line.
- A reduction in the number of low cost rental units. In 1970, there were 9.7 million units that rented for $250 or less (30% of $10,000). In 1985, that number had fallen to 7.9 million. (These figures are an estimate and do not take into account the number of units that are in poor physical condition, are vacant, or are not occupied by low income persons.)
The housing crisis among America’s poor is real. For most of these households, housing costs are increasingly out of reach.
NLIHC is marking its 40th anniversary throughout 2014, culminating in commemorative event on Monday, November 17 in Washington, DC. Please save the date.