By Tricia Holser
Editor’s note: This article was researched and drafted before the Coronavirus crisis; therefore the projections do not reflect current economic realities or anticipated ramifications. In all probability, the housing crisis will intensify, due to shuttered businesses and high unemployment (among many other economic factors) when we emerge from the pandemic.
The high cost of housing adversely impacts millions of Americans and calls for solutions at the national, state and local levels. According to a 2018 report by the National Low Income Housing Coalition, a renter working full time (40 hours a week) at the federal minimum wage was locked out of the market for a typical 2-bedroom apartment in every county in the nation. A year earlier, studies showed more than 35 million renter and owner households paid out at least 30% of their incomes, and 18+ million people channeled 50% or more of their incomes, toward housing.
Over the past 80 years, housing prices have risen substantially. In 1940, the median home value in the U.S. was just $2,938; even when we take inflation into account, the median home price in 1940 would only have been $30,600 in 2000 dollars (source: data from the U.S. Census). According to Realtor.com, in May 2019, the U.S. median home price was $315,000. Renters fared no better: in 2017, real median gross monthly rent—at $1,012—represented an increase of $113 over 2007. This figure is substantial, especially when you consider that the federal minimum wage has been unchanged since July 24, 2009.
Since the late 1960s, inflation has gradually reduced the buying power of a minimum wage income; with raises too small to counter the decline in value. In fact, the minimum wage hit its peak in 1968 when $1.60/hour represented the equivalent of $10.15 in 2018 dollars (adjusted for inflation). This equals a 28.6% loss in buying power.
Also driving the housing crisis are policy decisions, changing demographics and market forces, which combine to make building affordable housing difficult. Generally, legislative and tax policy favors homeowners over renters. Any increase in the costs of labor and materials has a negative impact on the bottom line. Nationwide, another roadblock to building affordable housing is the NIMBY (not in my backyard) attitude, with current residents fighting for the status quo. Lastly, the problem is interlinked with transportation: Rising rents and home prices frequently push low- and middle-income households farther from where the jobs—and public transportation—are found. The result? Wage earners find that, as the price of housing their family decreases, the portion of their income spent on transportation soars (up to five times as high, according to a 2017 report from Harvard’s Joint Center on Housing Studies).
As a nation, we have a long way to go in making sure America’s working families have affordable housing. Doing so will benefit our society as a whole in numerous ways—not the least of which is allowing parents to raise healthy, secure individuals ready to make a difference as productive citizens.