‘Out of Reach’ Report Demonstrates Critical Need for Expanding the Housing Credit

The National Low Income Housing Coalition (NLIHC) recently released its 2017 Out of Reach report with staggering statistics; renters need to earn a wage of $21.21 per hour, or more than 2.9 times higher than the federal minimum wage of $7.25 per hour, in order to afford a modest two-bedroom unit in the U.S. These findings reinforce the importance of supporting the Low Income Housing Tax Credit (Housing Credit), which is essential for preserving and expanding the supply of affordable rental housing.

According to NLIHC, a full-time minimum-wage worker cannot afford a modest two-bedroom rental unit in any state, metropolitan area or county in the U.S. On average, a renter earning the federal minimum wage would need to work 94.5 hours per week to afford a one-bedroom rental unit at Fair Market Rent, and 117 hours per week (three full-time jobs) to afford a two-bedroom. According to NLIHC, the national gap between the average renter’s wage and the “housing wage,” which is the hourly wage full-time workers must earn to afford modest rental housing without spending more than 30 percent of their incomes on housing, is $4.83 per hour.

Twenty-nine states, the District of Columbia and a number of local jurisdictions have minimum wages higher than the federal minimum wage. However, a full-time minimum-wage worker can only afford a one-bedroom rental home in twelve counties in the U.S. The report also finds that more than 20 million renter households live in “housing poverty,” meaning they are unable to pay for all of their other basic needs like food, transportation and medical care after paying rent.

There are 11.2 million severely cost-burdened renter households and a national shortage of 7.4 million affordable rental homes for extremely low-income households, indicating the critical need for more affordable housing. However, the supply of affordable rental housing has not kept pace with rising demand over the past decade. Between 2007 and 2015, the median gross rent for a rental unit increased by six percent (after adjusting for overall inflation), while the median income for renter households increased by only one percent, and the national median income dropped by four percent.

It is not economically feasible for developers to build affordable housing without a subsidy, which is why strengthening and expanding the Housing Credit – a successful public-private partnership that is responsible for nearly all of the affordable housing built and preserved since the program was created in 1986 – is so critical. Since it was created in 1986, the Housing Credit has financed nearly 3 million apartments since 1986, providing roughly 6.7 million low-income families, seniors, veterans, and people with disabilities homes they can afford.

The Housing Credit also serves many of the households with the greatest needs; over 80 percent of Housing Credit tenants are considered very low-income (at or below 50 percent of AMI) and nearly half of Housing Credit tenants are considered extremely low-income (below 30 percent of AMI). Expanding the Housing Credit and increasing the supply of affordable housing cannot come soon enough for the 11.2 million severely cost-burdened families who must make tradeoffs between necessities like transportation, healthy food and medical bills.

The ACTION Campaign strongly supports the Affordable Housing Credit Improvement Act of 2017, introduced by Senator Maria Cantwell (D-WA) and Senate Finance Committee Chairman Orrin Hatch (R-UT) in the Senate (S. 548), and by Representative Pat Tiberi (R-OH-12) and Ways and Means Committee Ranking Member Richard Neal (D-MA-1) in the House (H.R. 1661). To read more about this legislation, read our bill summary for the House and Senate bills, and visit our Advocacy Toolkit for more resources to strengthen and expand the Housing Credit in your state and district.