Rental Housing a Growing Burden on Low Wage Earners

Finding an affordable place to rent within a reasonable distance of employment is becoming increasingly difficult according to Freddie Mac executive David Leopold.  Leopold, writing in the company's Executive Perspectives blog says that there is no state in the U.S. where a full-time minimum wage worker can afford the market-rate rent for a one or two bedroom apartment.

More than one of every four renters must pay over half their family income to pay for housing and utilities.  Since the recession ended new jobs have been heavily concentrated in low-wage industries while the growth of affordable housing has failed to meet the growing demand.  Leopold cites a recent Joint Center for Housing Studies (Harvard University) that found that even families with incomes at high at $75,000 can be burdened with housing costs.  Housing costs are generally considered burdensome when they consume more than a third of household income. 

Leopold says most people agree that more affordable housing is needed, but few focus on how it benefits families and our communities, or how the lack of it affects society.  Cost-burdened households are forced to cut back on food, healthcare, and other critical expenses. But if they were spending less on housing and utilities, then they could have more money to put toward serving nutritious food, receiving necessary medical care, and providing reliable day care for their children.  These families often must cut back further to afford the additional expense of commuting to work. 

Further, sometimes the impact of unaffordable housing can resonate throughout the community.  The author cites emergency situations such as a snow storm when bus drivers, day care workers, medical assistants, ambulance drivers, and other low wage workers may not be able to get to work because they can only afford housing far from their jobs.  Services - perhaps critical ones - become unavailable and business have to close for lack of staffing, costing the economy as a whole.

Building affordable housing provides jobs during construction and new consumer spending after it's occupied. The increased spending for goods and services boosts the local economy and is a revenue source for local governments. The National Association of Home Builders estimates building 100 apartment units generates $11.7 million in local income, $2.2 million in taxes and other revenue for local governments, and 161 local jobs in one year. And when workers have shorter commutes, their transportation costs go down, roads are less congested, and they have time for other activities.

Leopold, vice president for affordable housing production, Freddie Mac Multifamily, touts his company's contributions to affordable housing.  More than 90 percent of the apartment loans purchased by Freddie Mac, he says, are for properties offering rents that are affordable to individuals who earn Area Median Income or less and many would likely have trouble securing funding elsewhere.  A large majority of these properties are more than 10 years old, and many are in need of capital improvements, which Freddie Mac's funding helps to provide. The Targeted Affordable Housing group of Multifamily provides financing for properties that are specifically restricted for low-income households, often with rent levels affordable as low as 50 percent of Area Median Income. Freddie Mac Multifamily settled roughly $2.7 billion in targeted affordable loans last year and expects to do even more this year to support this important market and help families have safe, stable housing.