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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.