Is Rental Housing Affordable in the U.S.?
June 16, 2019 by Marty Orefice | Real Estate
How much do you think people in your state need to make to be able to afford housing?
The federal minimum wage is $7.25 yet, according to the National Low Income Housing Coalition, a full-time worker needs an hourly wage of $22.96 on average to afford a modest two-bedroom rental home in the U.S.
Upon first glance, these statistics make it appear that minimum wage Americans can’t afford to rent housing in the United States. More so, the recommended hourly wage to afford a modest home is three times that of the minimum wage.
These statistics, however, are misleading.
Do Americans Make Enough to Afford Housing?
There are several aspects of the above information that can cause confusion to those who don’t give it further inspection.
1. How many bedrooms does one person need?
A modest two-bedroom home isn’t necessarily modest. Two bedrooms imply two or more people living in the home. In the case of a single-parent, this would mean that someone at minimum wage could be struggling to afford a place to live.
However, in the case of two adults living together with their own bedrooms, there would be two incomes working to pay for rent – making the cost of living more affordable for someone who is making the minimum wage. For these two people, housing would account for about 37% of their monthly salaries.
Thirty-seven percent of a person’s income does leave them in the cost burdened bracket (i.e. those who pay more than 30% of their income to housing). However, it is not far off from the ideal scenario.
For couples who are romantically entwined or single residents, a two bedroom home is a luxury.
There’s a whole slew of housing options available that would fit people in these situations perfectly that would be more affordable, like studios and one-bedroom units.
The average cost of a one-bedroom in the United States was $979 last year. A full-time employee would need to make about $17 an hour to afford a one-bedroom unit without being cost burdened. While that’s less extreme than $22.96, it’s still more than twice the minimum wage.
2. Average and Median are two very different words
There are some VERY expensive units out there for rent that can throw off the nation’s average rental costs – like this $1.5 million per month home in Bel Air.
The average monthly rental home in the United States is $1,326 a month, while the median monthly rental home is $1,185. A $141 difference may not seem like much, but it’s the difference between needing $22.96 per hour and $20.70 to comfortably afford a two-bedroom home. Or in a more commonly understood fashion, it’s the difference between making $47,757 per year and $43,056 per year.
What Does That Mean?
While national finances are not as bad as the report makes them out to be, there are flip sides. There are plenty of single parents out there or people stuck in a lease for a home that’s too large for them after a roommate backs out.
Original statistics may have been high, but the revised ones aren’t much more promising. There are 1.8 million Americans who make minimum wage – or less, according to the Bureau of Labor Statistics. Therefore, this circumstance is real for many people in America.
Nonetheless, the Bureau of Labor Statistic also states that the median U.S. worker makes about $47,000 per year – enough to afford both the median and average homes in the country.