04-01-98 PCWorking Doesn't Always
Pa !) For A Home
The Twin Cities area enjoys a strong
economy and an enviably low
unemployment rate. Unfortunately,
with housing costs rising faster than
wages, even working full-time does not
guarantee access to affordable housing.
The Twin Cities metropolitan area
faces a severe shortage of decent, safe
housing at prices that working families
can afford.
A typical two-bedroom apartment
in the metro area rents for $621 per
month, and a modest three-bedroom
house sells for an average of $93,000.
A home is usually considered to be
affordable if a family pays no more
than 30 percent of its income in
housing costs. Any more than this,
and families often must cut back on
other necessities such as food and
clothing. By the 30 percent measure,
a family would have to earn $24,840
per year (S 12 per hour) to afford to
rent a two-bedroom apartment or
$33,000 per year (S 16 per hour) to
afford to buy a three-bedroom house.
Many jobs pay far lower salaries.
Households with only one full-
timd.wage earner, such as single -
parent families or families in which
1
one parent doesn't work outside the
home, face particular difficulty finding
an affordable home. Even with two
family members working full-time in
jobs that pay close to minimum wage
(S5.15/hour or $10,700/year),
however, a family cannot afford the
typical two-bedroom apartment or
three-bedroom house.
The need for affordable housing
for working families is especially
acute in communities with high levels
of employment growth but few lower-
priced apartments and houses. Many
developing suburbs are experiencing
significant job growth, but most
affordable housing is concentrated in
the center cities and first -ring suburbs.
As a result, while many workers
earning low wages are providing
essesntial services for residents of
local communities --child care, food
service, or health care, for example—
they often are priced out of housing in
the communities in which they work.
The following graphs and table
show what people in different
professions can afford to pay for
housing and what homes for families
actually cost.
$15,000 PER YEAR OR LESS
(ONE FULL-TIME WORKER AT $6.00 - $7.20 PER HOUR)
$900
$800
$700
$600
$500
$400 # * *_
Amount Can Afford
For Housing
$300 _ $312-$375
(30% of Income)
Monthly Rent For
2 -Bedroom Aartment
$62f
(50-60% of Income)
T
"tttt
Monthly Cost To Own
3 -Bedroom House
$825
(66-79% of Income)
Jobs in this wage range include host/hostess, counter/rental clerk, cashier, retail
sales, dining room/cafeteria attendant, and child care worker. Housing costs take
up a majority of income for families with one wage earner at this level. A typical two-
bedroom apartment (5621 per month) costs more than half of income. The average
cost of a modest three-bedroom house (S825 per month) is far out of reach, at up to
four-fifths of the family's income.
2
$15,000-$
(ONE FULL-TIME WOR
OR ONE FULL-TIME WORKE
LESS THAN $
$900
$800
$700
$600
$500 _ —
0 *
Amount Can Afford
$400 _ For Housing —
$375-$450
(30% of Income)
$300
Jobs in this wage range include ban"
cleaner, home health aide, teacher
bank teller. Households with one
close to minimum wage, also would
apartment costs up to half of income
bedroom house costs up to two-•hirc
3 PER YEAR
7.20 - $8.65 PER HOUR
,NE PART-TIME WORKER AT
HOUR EACH)
f
Monthly Cost To Own
3 -Bedroom House
$825
(55-66% of Income)
. t
mt For
'ment
>od preparation worker, housekeeping
!staurant cook, janitor, file clerk, and
and one part-time worker, each earning
;n this income category. A two-bedroom
=holds in this group, and owning a three -
'me.
$18,000 - $23,000 PER YEAR
(ONE FULL-TIME WORKER AT $8.65 - $11.00 PER HOUR
OR TWO FULL-TIME WORKERS AT LESS THAN
$5.50 PER HOUR EACH)
$900
$ 800
$700
$600
$500— fft
Amount Can Afford
For Housing
$450-$575
$400 (30% of Income)
$300
iR t
t
Monthly Rent For
2 -Bedroom Apartment
$621
(32-41 % of Income)
Monthly Cost To Own
3 -Bedroom House
$825
- (43-55% of Income)
Jobs in this wage range include school bus driver, receptionist, nursing aide, orderly,
medical assistant, and medical records technician. A household with two persons
working full time for minimum wage also would fall within this income category. For
these households, rent for a two-bedroom apartment still exceeds 30 percent of income.
Home ownership remains out of reach, with costs for a three-bedroom house taking up
43-55 percent of income.
Position
Cashier
Child Care Worker
Counter and Rental Clerk":.
$13,187 $330
514,560 " " $364
$12,792 $320
57% :
75%
51%
68%
58%
77%
Dining Room/Cafeteria Attendant
$13,312
_ $333
56%
File Clerk
$16,931
~�'. -5423
44%
Food Preparation Worker
$15,600
- •$390
48%
Home Health .Aide
S15,912
$398
47%
Host/Hostess
$12,480
$312
60%
Janitor,. Cleaner
$16,640
5416
45%
Maid, Housekeeping Cleaner
$15,600
$390
48%
Medical Assistant -
$21,403
$535
35%
Medical Records Technician ._
$22,277
$557
33%
Nursing Aide, Orderly, Attendant
S19,656
$491
38%
ReceptionistA_'
$18,720
5468
40%
Restaurant Cook ='
$16,640
$416
45%
Salesperson, Retail -
$13,208
$330
56%
School Bus Driver
$18,408
$460
40%
Teacher Aide $15,928 $398 47%
74%
58%
63%
62%
79%
59%
46%
44%
50%
53%
59%
75%
54%
62%
Teller , _;� S 17,098 $427 44% 58%
7-
' Source: Minnesota Department of Econon ie $eciuiry, 1996 Minnesota Salary Survey.
r Based on 30% of income. ,
Based on 1997 HUD Farr Mailrk Rent of $621 for a two-bedroom apartment in the Twin Cities
metropolitan area.
' Based on Regional Multiple Listing Service average cost of $93,000 (5825 per month) for a
three-bedroom, 1,000-1,500 square foot single-family home sold in the Twin Cities metropolitan
area in 1996.
4
This publication is part ofa
Public Education Initiative on
affordable housing sponsored by
the Family Housing Fund. The
Family Housing Fund is a
private, nonprof t corporation
created in 1980 to help bridge
the gap between the housing that
people need and the housing they
can afford. The Public Education
Initiative is designed to provide
informational materials on a
variety of issues related to
affordable housing in the Twin
Cities metropolitan area.
For more information about the
Public Education Initiative and
other publications available in
this series, please contact:
FAM I LY
HOUSING
FUND
MIDWEST PLAZA WEST
SUITE 1840
801 NICOLLET MALL
MINNEAPOLIS, MN 55402
TELEPHONE: (612) 375-9644
FAX: (612) 375-9648
February 1998
The Need F=or Af fordakle,
Housing I n The Twin Cities
SHORTAGE OF AFFORDABLE
HOUSING UNITS
77— a, M900
mne� Mwvhn(d,
with amus! it ej
IV/— SI0.(XV)in the
bur unh. 31.200
!nosing —in wish
Tm, aff-d,lbi, w
this inrnmr hc%
11.100 41NT41 ,10V,1NC
UNiT14v.�iU�l1
THE TWIN CITIES AREA
FACES A SEVERE AFFORDABLE
HOUSING SHORTAGE
Few human needs are more fundamen-
tal than the need for a home. We speak
of shelter, along with food and clothing,
as one of the elements for human
survival. The significance of a home
runs deeper than the immediate need for
four walls and a roof, homeownership
is often referred to as the fulfillment of
the American Dream.
Unfortunately, the dream of
finding any type of decent, affordable
housing, whether rented or owned, has
become increasingly elusive for many
people in the Twin Cities. Much of the
problem stems from a shortage of
lower-priced housing combined with
the failure of incomes to keep pace
with rising housing costs:
► There are 68,900 renter
households with annual incomes
below $10,000 in the metropolitan
area, but only 31,200 housing
units with rents affordable at this
income level.
► Only 36% of families living in
poverty in the Twin Cities area
receive housing assistance
from government. Cutbacks in
federal housing programs
threaten to make this situation
even more severe.
► In the past five years, vacancy rates
for apartments in the Twin Cities
have fallen from over seven
percent to less than three percent,
further reducing the supply of
affordable housing.
Housing is usually considered to be
affordable if it costs no more than
30% of income. In the Twin Cities
area, however, 185,000 households
with annual incomes below $30,000
pay more than this amount for
their housing.
u
► Between 1974 and
„
1993, rents climbed
13% in real dollars,
o
but renters' real
incomes actually
' uuon.cs
declined by eight percent.
► There are 68,900 renter
households with annual incomes
below $10,000 in the metropolitan
area, but only 31,200 housing
units with rents affordable at this
income level.
► Only 36% of families living in
poverty in the Twin Cities area
receive housing assistance
from government. Cutbacks in
federal housing programs
threaten to make this situation
even more severe.
► In the past five years, vacancy rates
for apartments in the Twin Cities
have fallen from over seven
percent to less than three percent,
further reducing the supply of
affordable housing.
Housing is usually considered to be
affordable if it costs no more than
30% of income. In the Twin Cities
area, however, 185,000 households
with annual incomes below $30,000
pay more than this amount for
their housing.
WHO IS AFFECTED
BY THE LACK
OF AFFORDABLE
HOUSING?
Median wages for these jobs
are too law to allow
workers to afford a typical
two-bedroom apartment.
Preschool Teacher
Teacher Aide
Medical Records Technician
Retail Salesperson
Cashier
Teller
Receptionist
File Clerk
Host/Hostess
Cafeteria Attendant
Restaurant Cook
Medical Assistant
Nursing Aide
Home Health Aide
Maid
Janitor
Child Care Worker
School Bus Driver
I'?
HIGH HOUSING COSTS CAN
LEAD TO FINANCIAL STRAIN,
SUBSTANDARD HOUSING,
HOMELESSNESS
As housing costs consume a growing
portion of household income, families
have less money left over to pay for
other needs. Because families risk
losing their homes if they do not meet
their rent or mortgage costs each
month, they often must skimp on other
necessities such as food, child care,
or health care. Also, with so few
affordable units available, many
families are forced to accept any -
housing they can find, even if it is in
unsafe or substandard condition.
In the worst cases, individuals and
families who cannot afford housing
face eviction from apartments or
foreclosure on their homes and may
become homeless. In one night, the
Minnesota Department of Economic
Security found over 3,900 people who
were living in emergency temporary
housing in the metropolitan area.
Others without homes of their own
double up with family and friends or
are forced to live on the streets.
ENTRY-LEVEL WORKERS
AND FAMILIES IN POVERTY
HURT BY AFFORDABLE
HOUSING SHORTAGE
People working in entry-level or
lower -wage jobs are hard hit by the
affordable housing shortage. A typical
two-bedroom apartment in the Twin
Cities metropolitan area costs $621
per month, although rents are much
higher in some communities. In order
to afford $621 in rent, a family must
cam $24,840 per year — well above
the wage level of many service
sector jobs (see list at left).
The dream of homeownership for
these working families is even farther
out of reach. A modest three-bedroom
house costs an average of $93,000
in the metro area A family would need
to earn $33,000 per year to order to
afford such a home.
Even in a household where two
family members work full-time earning
wages at or near the minimum, annual
earnings are too low to afford the rent
or mortgage costs for a three-bedroom
home. For single -parent families
or other families without two full-time
wage eamers, finding an affordable
home becomes extremely difficult.
The shortage of affordable housing
is even more severe for individuals and
families receiving public assistance.
At current benefit levels, a single adult
receiving General Assistance cannot
afford a typical studio apartment and a
parent and two children receiving
public assistance cannot afford a typical
two-bedroom apartment without
subsidies — even if they spend their
entire grants on rent. Changes in
benefits because of the federal welfare
reform law will make it even more
difficult for some public aid recipients
to maintain stable housing.
HOUSING AFFORDABILITY IS
NOT JUST A CITY PROBLEM
The affordable housing shortage affects
communities throughout the region, not
just the center cities. According to the
Metropolitan Council, 50,000 suburban
households earning less than $20,000
per year pay more than 30% of their
income for housing. The problem of
housing affordability is compounded by
the mismatch between the location of
affordable housing and the location of
new jobs in the metropolitan area.
While much of the new job growth in
the metropolitan area is taking place in
outlying suburban communities, most
affordable housing is concentrated in
Nlinneapolis and Saint Paul and in
nearby suburbs. As a result, people
living in the center cities and first -ring
suburbs become isolated from job
opportunities, and people working in
lower -wage jobs in the suburbs face
either long commutes or excessive
housing costs.
Without affordable rental and
homeownership opportunities located
throughout the region, young adults and
families may find it difficult to stay in
the communities where they grew up,
and senior citizens may have a hard
time staying in their communities
after retirement.
NEWAND DIVERSE HOUSING
CAN ADDRESS AFFORDABLE
HOUSING NEEDS
In response to the need for affordable
housing in the Twin Cities, communi-
ties have worked with the public and
private sectors to create innovative
solutions to the affordable housing
problem. These initiatives operate in
two basic ways: through planning for a
diverse housing stock and through
providing additional affordable
COMPARE INCOME AND
THE COST OF HOUSING
MIMIAWM IHCOM[ DKOMA
WAL[ MUDED MEEDED
[ORA FORA
2-[[DROOM "IDROOMA
AIARTMLNT MOM[
M
rental housing and homeownership
opportunities using government
assistance and private funds.
Fust, cities and towns can plan for
the private development of a variety of
housing types, such as apartments,
townhomes, and starter homes, that will
provide affordable housing opportunities
for young families and the elderly. Local
governments can examine planning,
zoning, and building requirements to
find ways to diversify the housing stock
while meeting community standards for
high-quality, well-managed housing.
Second, communities can work
with private and non-profit housing
providers to build new affordable
apartments and homes. to preserve and
renovate older buildings occupied by
low-income households, and to provide
counseling and financial assistance
to promote homeownership among low
and moderate -income families. These
4
initiatives can be funded through a
combination of public subsidies and
private grants and loans.
The philanthropic and business
communities also can be part of the
affordable housing solution. Foundations
can contribute funds to non-profit
groups that provide affordable housing.
Corporations can provide funding and
volunteer leadership for affordable
housing initiatives, assist employees with
housing costs, and invest in the
development of new affordable housing.
With the growing need for affordable
housing, these strategies will need to be
pursued with increased commitment
in order to close the affordable housing
gap. Working together, government
agencies, non-profit organizations,
foundations, and businesses can ensure
that the dream of decent, safe,
affordable housing for all members of
the community becomes a reality.
TWO WAYS TO CLOSE THE AFFORDABILITY CAP
PLAN FOR DIVERSE ADD HOUSING WITH
HOUSING STOCK GOVERNMENT
♦ PRIVATE FUNDS
This publication is part of a
Public Education Initiative on
affordable housing sponsored by
the Family Housing Fund
The Family Housing Fund is a
private, nonprofit corporation
created in 1980 to help bridge the
gap between the housing that
people need and the housing
they can afford The Public
Education Initiative is designed
to provide informational
materials on a variety of issues
related to affordable housing in
the Twin Cities metropolitan area.
For more information about the
Public Education Initiative
and other publications available
in this series, please contact:
FAMILY
HOUSING
FUND
MIDWEST PLAZA WEST
40 SUITE 1840
801 NICOLLET MALL
MINNEAPOLIS. MN 55402
TEL 612-375-9644
FAX 612-375-9648
October 1997
pinions, reactions, dialogue and disagreement
—1 U.... ,,..n o. Earx TTwnu
Metro area needs more
affordable housing
By Michael O'Keefe
Question: What do bank tell-
ers, cooks, nursing aides, medical
records technicians, child-care
workers and school bus drivers
have in common?
Answer: 1) They all provide vi-
tal services for local communities,
and 2) Most of their jobs do not
pay enough to provide decent,
safe, affordable housing in the
Twin Cities area.
With housing costs rising fast-
er than incomes, the metropoli-
tan area lacks thousands of units
of housing at prices that working
families can afford. This is espe-
cially true in the suburbs, where
most of the region's job growth is
occurring.
For this reason, the McKnight
Foundation recently pledged $4
million to the Family Housing
Fund to support the creation of
affordable housing in the sub- .
urbs. The new resources will be
added to the $3 million that the
foundation has already contribut-
ed for this purpose.
Originally formed by the
McKnight Foundation and the
cities of Minneapolis and St. Paul
to provide housing in the central
cities, the nonprofit Family Hous-
ing Fund expanded its mission
this year to include the seven -
county metropolitan area.
Since 1981 the fund, working
in partnership with local agencies
and private and nonprofit devel-
opers, has supported creation or
preservation of more than 16,000
units of affordable housing. More
than 700 of these housing units
are in the suburbs.
What is affordable housing?
Housing is usually considered
affordable if it costs no more than
30 percent of household income.
Any more, and the family may be
forced to skimp on other necessi-
ties such as food, health care and
transportation. Currently, people
in more than 50,000 households
in the suburbs pay more than
they can afford for housing.
The average two-bedroom
apartment costs about $700 per
month in the southern and west-
ern suburbs. By the 30 percent
measure, a family would need to
earn $28,000 per year, or $13.50
per hour, to afford an apartment.
However, the jobs listed above —
and many others — pay closer to
$6 to $10 per hour.
Home ownership is even far-
ther out of reach for people with
lower -wage jobs. A modest three-
bedroom home costs an average
of $93,000 in this area. To afford
one of these homes, a family
would need to earn $33,000 per
year or almost $16 per hour.
As a result, households with-
out two full-time workers, such as
single -parent families or families
in which one parent stays at
home, face difficulty finding af-
fordable housing. For those
forced to pay too much for hous-
ing, an everyday crisis such as a
car repair or illness can bring
about financial ruin.
Moreover, with apartment va-
cancy rates below 3 percent, the
suburban rental housing supply is
becoming tighter, and rents are
skyrocketing. In one suburban
development, a family living in a
three-bedroom apartment saw its
rent increase from $980 to S1, 150
in just two years. In other devel-
opments, families are moving
from three-bedroom apartments
to smaller units because large
apartments are becoming too ex-
pensive.
Affordable housing in the sub-
urbs: Why now?
Ultimately, the lack of afford-
able housing could depress the
suburbs' phenomenal employ-
ment growth. With Minnesota's
unemployment rate below 4 per-
cent, analysts predict that em-
ployers will face increasing labor
shortages. If more affordable
housing is not located in the sub-
urbs, lower -wage workers may
not be able to reach new job
opportunities, and employers will
have difficulty attracting workers.
Public transit is part of the solu-
tion to the lack of affordable
housing near jobs, but the cre-
ation of additional housing is an-
other key piece.
Now is the right time for a
concerted regional effort to pro-
vide affordable housing for sever-
al other reasons:
> The federal governmer
no longer adding to its supply
rent subsidies for low-income
families, even though only 36
percent of low-income families
now get assistance.
> Welfare reform requires
parents receiving benefits to be-
gin working. Since new workers
most likely will find lower -paying
jobs, affordable housing will be
critical in helping former welfare
recipients become financially in-
dependent.
> Minnesota's Metropolitan
Livable Communities Act provides
new incentives and funds for sub-
urbs to create affordable housing.
Government and the private
sector will need to pool resources
to fill the gap between the amount
families can afford and the actual
cost of housing. Equally impor-
tant, local residents will need to
support efforts to locate affordable
housing in their communities.
I urge employers who are con-
cerned about their workers, com-
munities that are concerned
about their residents, and citizP^�
who are concerned about(
neighbors to join us in the et..._.
to provide decent, affordable
housing for working families in
the Twin Cities suburbs.
— Michael O'Keefe is executive
vice president of the McKnight
Foundation.