New DC Rental Cost Figures Show Need for More Affordable Housing Investment

“How expensive is D.C. for renters?” a recent headline on DCentric asks.

The short answer from the latest report by the National Low Income Housing Coalition is “very” — more expensive, in fact, than only a year ago.

As the DC Council decides what to do with Mayor Gray’s proposed budget, it should ask whether a $19.9 million cut to the Housing Production Trust Fund will get us to that One City the Mayor is so fond of talking about.

Or will it instead drive up the already-high family homelessness rate — and leave even more families choosing between rent and other basic needs? A rhetorical question I know.

So let’s turn to the report.

How NLIHC Calculates Affordability

NLIHC uses several sets of figures to assess rental housing (un)affordability nationwide and for states, counties and major metropolitan areas.

The first set is the U.S. Department of Housing and Urban Development’s fair market rents for two-bedroom apartment units — those in either the 40th or 50th percentile of all reasonably well-maintained units in the area, basic utilities included.

The second figure is the standard 30% of income that both government agencies and analysts use to determine whether housing is affordable for a particular household or group of households.

NLIHC also uses figures from other federal sources to estimate the average local wage for renters — obviously important when the issue is whether rents are affordable.

What We Learn About Rental Housing Affordability in the District

No surprise to learn that rental costs in the District are rising, but so is average income. Not enough for renters, however.

• The 2012 FMR for a two-bedroom apartment in the District was $1,506 per month — $90 more than in 2011.
• A household would have had to earn $60,240 a year for the apartment to be affordable — $1,800 more than the year before.
• This translates into an hourly wage of $28.96, assuming full-time, year round work — $3.79 more than the estimated average for D.C. renters.
• Renters earning the average — $25.17 an hour — would thus have paid $2,364 more per year for the apartment than they could afford.

Things get worse, of course, for poor and near-poor residents.

• For what HUD defines as extremely low-income renters, i.e. those earning 30% of the median for the area, the two-bedroom apartment cost $700 more than they could afford.
• The hourly wage that would have made it affordable is three and a half times what a full-time, year round minimum wage worker earns.
• Looked at another way, the minimum wage worker would have had to put in 140 hours every week or live with another full-time minimum wage worker and a third who worked half-time.
• Because the minimum wage remained flat while the two-bedroom FMR rose, the apartment was over $1,000 further out of reach than it was only the year before.
• What would be affordable for the minimum wage worker is an apartment costing no more than $429 a month — about 37% of the current FMR for an efficiency in the D.C. area.
• For residents dependent on Supplemental Security Income, any FMR unit is even more absurdly out of reach because the most they could afford is $209 a month.

Rent’s Too Damn High. But Why?

What’s happening here is basically what’s happening nationwide — less supply and more demand. And, as always, growing demand for a shrinking supply drives prices up.

On the supply side, affordable rental units are disappearing. This is a long-term trend, as the Harvard Joint Center for Housing Studies has shown.

Many low-cost units are being converted to upscale rentals or condos. Others stand empty — or have already been razed — because their owners didn’t maintain them.

Meanwhile, for various reasons, publicly-subsidized low-cost units are going-going-gone — 150,000 lost in the last 15 years, says HUD Secretary Shaun Donovan.

At the same time, more households are seeking rental housing.

The recession and related foreclosure crisis are partly responsible for this. They’ve driven more households into the rental market. Other households are staying there because they’re leery of buying — or unable to get credit because lenders have become leery too.

Needless to say, the recession has also pushed many more households into the low-income category. They’re now more than a quarter of all renter households.

What Now?

Public policies have helped create the affordable housing crisis for low-income — and even not-so-low-income — renters. Public policies will have to help solve it.

Growing the economy — even if combined with policies and programs that get more workers into so-called living wage jobs — won’t be enough.

Policymakers, including our own Mayor and DC Council, have to invest in creating and preserving housing that’s affordable for low-income people.

The Mayor doesn’t have to wait for a report from his Comprehensive Housing Task Force to know that. Nor does the Council.

DC Rental Costs Far Out Of Reach For Low-Income Households

Seems this is affordable housing month for my blog. Because I could hardly pass up the National Low Income Housing Coalition’s new figures. These show, in detail, how far out of reach affordable rental housing is for low-income households in the District and nationwide.

NLIHC slices and dices figures in various ways — all based on the U.S. Department of Housing and Urban Development’s annual fair market rents, i.e., the average costs of modest rental units, with basic utilities in every metropolitan area in the country.

The affordable standard also comes from HUD — 30% of gross household income. As you probably know, this is the standard commonly used by policymakers, analysts and advocates.

HUD is the prime source for the estimated area median income as well, though NLIHC had to do some calculations of its own to come up with current averages.

Both the FMRs and the AMI are somewhat crude tools for the District because it’s part of a metropolitan area that also includes nearby parts of Maryland and Virginia. This skews the AMI — and thus affordability estimates — upward.

That said, here are some of the key NLIHC (un)affordability indicators for low and not-so-low-income District renters.

• A household would have to have an income of $58,440 a year to afford a two-bedroom apartment at the FMR rate.
• This translates into a wage income of $28.10 an hour, assuming full-time, year-round employment — $4.68 more per hour than the estimated average hourly wage in the area.
• The cost of the apartment is 153% of what a household earning the estimated average income for area renters could afford.
• It’s unaffordable for 68% of D.C. renter households. That’s more than 93,600 renter households with excess rental burdens — well over a third of all households in the District.
• A full-time minimum wage worker would have to put in 136 hours per week to afford the apartment — or share the apartment with another full-time minimum wage worker and a third working part-time.
• The monthly rent on the apartment is $678 more per month than a household with an income at 30% of the AMI could afford.
• Even a household with an income at 50% of AMI would be short $157 a month.
• For someone dependent on Supplemental Security Income, even a studio apartment at the FMR rate is well out of reach — about one and two-thirds times the total SSI stipend.

One of the reasons to welcome these dismal figures is that they’re the latest in an annual series. They thus provide a barometer for the worsening housing affordability crisis that’s afflicting the District — and a large majority of other communities nationwide.

On the other hand, we’ve had more than enough figures to tell us that rental costs are threatening the well-being of low-income households — and from a number of sources too.

It’s lack of political will, not ignorance that’s allowing this problem to fester.