Housing Poverty Is More Than Just An Issue Of The Wallet

Jun 15, 2018

Nowhere in the United States can a person working full time at minimum wage afford a simple two-bedroom apartment. While that is a problem in itself, it raises concerns far beyond just having a place to live. In this week’s Friday Forum, WNIJ’s Victor Yehling looks at details of the situation in Illinois and Wisconsin and possible resolutions.

The average renter in Illinois must earn $20.87 per hour on a full-time job to afford a two-bedroom apartment and stay within federal guidelines for housing costs, according to a study by the National Low Income Housing Coalition (NLIHC) for fiscal year 2017.

That’s more than two and a half times the state’s minimum wage of $8.25 and the 16th highest affordable “housing wage” in the country. Chicago and Cook County had minimum hourly wages of $11 and $10, respectively, but the hourly wage needed for an affordable two-bedroom rental in that metropolitan area was $23.69.

The study, called “Out Of Reach,” reports that the average hourly wage of Illinois renters is just $16.32 – a shortfall of $4.55 per hour that totals to nearly $9,500 a year based on working 40 hours per week for 52 weeks.

The study used housing costs based on Fair Market Rent (FMR) – typically the 40th percentile of gross rents for standard rental units as determined annually by the federal Department of Housing and Urban Development (HUD). Those figures are used to set payment standards for federal housing assistance programs like Housing Choice Vouchers and Section 8 housing contracts.

The NLIHC reports 1.6 million renter households in Illinois, accounting for 34 percent of the householders in the state.

Dr. Norman Walzer
Credit NIU CGS

Dr. Norman Walzer, senior research scholar at the Northern Illinois University Center for Governmental Studies, sees various factors contributing to the housing situation for low-income workers:

  • The growth of the  elderly segment as Baby Boomers retire – often with lower and/or fixed incomes
  • The large segment of millennials unable to acquire the kinds of high-paying jobs available to previous generations
  • Lower housing construction, causing higher demand – and prices – for rental properties
  • High property-tax rates in Illinois that cause upward pressure on prices as well

“The bottom line for the housing situation, really, is having a good, high-paying job,” Walzer said. “We can kind of look at it from two perspectives: One is we can help people have higher incomes, and that could be raising the minimum wage; or we need to construct cheaper housing or somehow make cheaper housing available, either through subsidies or whatever the case might be.”

Licensed counselor Dr. Suzanne Degges-White, chair of the NIU Department of Counseling, Adult and Higher Education, notes that there’s no easy solution.

“Trying to get out of poverty requires that people really focus on not the immediate feeding of a need but on a long-term solution,” she said. “It requires that people work together with their families, with their support systems, to allow them to plan for long-term success”

Both of them see education and training as an important component of resolving the inability to afford housing.

“[It] might include education, it might include job training,” Degges-White said. “It includes things beyond making sure they’re sleeping somewhere other than the car.”

Walzer says that, in light of automation and the higher technical skills needed for better-paying jobs, we need to focus on educational efforts both for younger people who will be entering the work force and for those who currently are underemployed. That would enable those workers to participate more effectively in the economy.

“If that were to happen,” Walzer said, “hopefully their incomes would be higher and their ability to be able to not spend more than 30 percent of their income on a rental house will partially subside.”

He says it’s imperative for Illinois to bring in or develop more jobs within the state to improve the situation within its borders.

“Not necessarily only really high-paying jobs,” he said, “but more jobs that people in the lower-income levels can hold and – through better education, better training – might advance.”

The stresses that build up on low-income earners working two or more jobs often are not seen at work, Degges-White says.

“It’s an interesting conundrum that people who work two jobs don’t suffer on the job; what happens is they suffer at home,” she said. “So employers might not realize the stresses that their employees are experiencing by having to have two jobs, so it really requires we rethink what a healthy life-work balance might be.

“Not only does the lack of affordable housing mean insecurity in terms of where a family will live, it also means parents are seldom available as emotionally and physiologically as they need to be for their children,” Degges-White said.

Walzer said society also needs to look at the role of the elderly – especially in smaller rural towns – where they may be staying on in large older homes because there are no suitable facilities for senior citizens in those areas.

Statewide, the typical Fair Market Rental for a two-bedroom apartment in Illinois is $1,085 per month.

An Illinois renter earning minimum wage would have to work 101 hours per week – two and a half full-time jobs – to afford a two-bedroom apartment under federal guidelines and 85 hours per week to afford a one-bedroom unit.

Housing is considered “affordable” by federal standards when rent and utility costs do not exceed 30 percent of the household’s gross income.

“Truly,” Degges-White said, “the major response is for the government to chip in, make a difference, and pass governmental policy that supports people who are lower working wage earners or find ways to raise the minimum wage.”

For counties in the WNIJ listening area, DuPage, Kane and McHenry counties were the least affordable for renters, who would need to earn $23.69 per hour in a full-time job to afford a two-bedroom apartment. That’s the highest rate in the state, shared by Cook, Lake and Will counties as well.

The most affordable Illinois counties were Carroll, Jo Daviess and Stephenson, where the full-time hourly housing wage to afford a two-bedroom rental was $12.58. That’s the lowest rate in the state, which is shared by 54 largely rural counties – more than half the counties in Illinois – but still more than 50 percent higher than the Illinois minimum wage.

The hourly wage needed in other northern Illinois counties was:

  • Livingston County, $12.81
  • Putnam County, $12.98
  • Whiteside County, 13.12
  • Lee County, $13.56
  • Ogle County, $13.87
  • Bureau County, $13.96
  • LaSalle County, $14.00
  • Boone and Winnebago Counties, $14.77
  • DeKalb County, $17.65
  • Grundy County, $19.92
  • Kendall County, $21.15

“As far as Illinois,” Degges-White said, “what needs to happen is to raise the minimum wage or provide more housing that is affordable and to recognize that, when you’re hurting the poorest of the poor, you’re also hurting society as a whole.”

In Wisconsin, the average full-time housing wage to afford a two-bedroom rental is just $16.11 – still more than double the state’s $7.25 minimum wage. There were no local minimum wages in the state during the study period. Wisconsin has the 31st highest affordable housing wage in the U.S. It would take 89 hours of work weekly at minimum wage to afford such an apartment.

Wisconsin has 751,910 renter households, according to NLIHC, which amounts to 33 percent of the households in the state.

The study found that the average Wisconsin renter earns $12.89 per hour – a difference of $3.22 per hour from the wage needed for a two-bedroom rental and almost $6,700 less per year based on working 40 hours weekly, every week of the year.

Lafayette County, in southern Wisconsin, was among 27 counties where the full-time hourly wage needed to afford a two-bedroom apartment was $13.10 – the lowest rate in the state. The counties where the highest wage needed for such a rental were Pierce and St. Croix, both in the Minneapolis-St. Paul market area in northwest Wisconsin. The hourly wage needed there was $20.88.

The hourly wage needed in other southern Wisconsin counties was:

  • Green County, $13.46
  • Rock County, $14.75
  • Racine County, $14.92
  • Jefferson County, $15.29
  • Walworth County, $16.10
  • Kenosha County, $17.12
  • Waukesha and Milwaukee Counties, $17.83
  • Dane County, $18.54

According to NLIHC, the high cost of rental housing has resulted in more than 11.2 million severely cost-burdened renter households nationwide spending more than half of their income on housing. Many low-income households cannot spend as much as half of their income on housing without sacrificing other basic necessities.

The extent of the resultant stress, according to Degges-White, is greater than many people realize. “When your home ownership or rental home is threatened,” she said, “that’s more significant a psychological stress than losing a spouse to divorce or losing a job.”

More than 20 million renter households live in housing poverty across America, meaning they cannot afford to meet their other basic needs like food, transportation, medical care, and other goods and services after they pay for their housing.

While renters across income groups experience challenges with housing affordability in some communities, the difficulties that extremely low-income households face in finding an affordable home are pervasive and exist in every community. Extremely low-income households account for nearly 73 percent of all severely cost-burdened renters.

The situation is exacerbated by the fact that apartment rental costs continue to increase, according to Apartment List, Inc. Nationwide, rents have increased modestly for the past three months in a row, but the cumulative effect is just under one percent over that period, according to their latest report. That translates to a $10 monthly increase on a $1,000 rental cost.

Year-over-year growth in rents is 1.5 percent, according to the report. That rate of increase is lower than the 2.8 percent increase for the previous year and less than half the 3.2 percent increase reported in May 2016.

The Apartment List report finds that rents in Chicago are up 0.3 percent month over month. In Wisconsin, rents are up 0.5 percent in Milwaukee and 0.6 percent in Madison. Apartment List reports that rents are up in 85 of the nation’s 100 largest cities.

Year-over-year growth is 1.0 percent for Illinois and 0.9 percent for Wisconsin. The group also provides year-over-year rent data for these other cities in Illinois and Wisconsin, as of March 1, 2018:

  • Arlington Heights, down 1.6 percent
  • Aurora, up 2.9 percent
  • Bolingbrook, up 2.3 percent
  • Crystal Lake, up 2.6 percent
  • Elgin, up 1.8 percent
  • Elk Grove Village, up 2.5 percent
  • Evanston, up 0.6 percent
  • Glen Ellyn, up 4.8 percent
  • Oswego, down 2.6 percent
  • Peoria, down 0.3 percent
  • Rockford, up 1.4 percent
  • Roselle, up 7.3 percent
  • Round Lake, up 1.8 percent
  • Springfield, up 0.7 percent
  • St. Charles, up 2.7 percent
  • Woodstock, down 0.1 percent
  • Hales Corners, Wis., up 5.1 percent
  • Waukesha, Wis., up 1.5 percent

The solution to the lack of affordable housing, according to NLIHC, is tax reform that redirects the government expenditures of more than $65 billion annually for home mortgage-interest deductions to programs. Roughly 84 percent of the deductions go to taxpayers with income greater than $100,000, and more than half of that goes to taxpayers earning more than $200,000.

Federal assistance to low-income renters is approximately $40 billion in the Housing and Urban Development budget for fiscal 2017.

NLIHC endorses federal legislation that would redirect mortgage-interest deductions to tax credits and invest the resulting savings for the government in the national Housing Trust Fund, designed to support extremely low-income renters. The program is funded by a small mandatory contribution from the Federal National Mortgage Association, commonly known as “Fannie Mae,” and the Federal Home Loan Mortgage Corporation, or “Freddie Mac,” based on the volume of their business. It also backs additional funding to end homelessness by providing vouchers and other support for persons in need.