OUT OF REACH IOWA 2018 THE HIGH COST OF HOUSING

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1 2018 THE HIGH COST OF HOUSING

2 EXECUTIVE SUMMARY This publication is the second edition of Out of Reach Iowa, a report that documents the gap between wages and rent in the state of Iowa. This report builds on an annual publication of the same name produced by the National Low Income Housing Coalition. It also borrows from the work of the Minnesota Housing Partnership, who have been providing a state-level summary of this information since While Iowa is known as an affordable place to live, many Iowans struggle to pay their bills each month. Low wages and rapidly rising housing costs are squeezing budgets across the state, forcing families to make tough choices between their home, medical care, food, and transportation. One unexpected expense - a sick child, a flat tire - can send a family hurtling toward eviction, or even homelessness. Some of the key findings in this year s Out of Reach Iowa report include: Iowa s housing wage rose 3 percent last year, to $ That s a 26 percent increase since A minimum wage earner working full time can t afford even a studio apartment in any of Iowa s 99 counties. The state s lowest-income households (those earning less than 30% of area median income) can t afford a modest two-bedroom apartment in any Iowa county. In 36 counties, they can t afford a one-bedroom apartment. Even though wages are rising, they can t keep up with skyrocketing rents. Iowa s families are falling further and further behind. Without further investment in affordable homes, our communities will continue to feel the impact of rising housing costs for years to come. DEFINITIONS AFFORDABILITY A household is living in an affordable home if they spend no more than 30 percent of their income on their housing. Any more than that and they may have to sacrifice other needs like food, medical care, or transportation. MODEST APARTMENT HUD sets a standard Fair Market Rent for each housing market that is roughly the fair price of a unit. They calculate this as the 40th percentile of gross rent for a typical rental unit. We refer to a unit renting at Fair Market Rent as a modest apartment throughout this report. HOUSING WAGE The housing wage is the hourly wage a worker needs to earn in order to afford rent on a modest apartment in their community. The housing wage assumes full-time work - a part-time worker would need to earn even more. 2

3 Nearly 3 in 10 Iowans rent their homes. Statewide, that s over 350,000 households. We ve gained 35,000 of those households since 2000, raising the rental rate statewide to 29 percent. If these trends continue, more and more Iowans will be affected by rising rents in the years to come. 140,000 households are rent burdened statewide. 40 percent of all renters in Iowa pay more than 30 percent of their income on rent. That doesn t leave much for food, medical care, transportation, or other daily needs. 26% 16% Increases in wages aren t keeping up with rent. Over the past 10 years, Iowa s housing wage (the wage necessary to afford a modest twobedroom apartment) has risen 26 percent. While our state s renters are earning 16 percent more than they did in 2008, their wages aren t enough to keep up. Today, the average renter needs a raise of $2.51/hour to pay for a modest two-bedroom apartment. Iowa s renters struggle to make ends meet. The average Iowan renter makes $12.50 an hour - not enough to pay for a modest two-bedroom apartment in any of the state s 99 counties. In fifteen counties, the average renter could not even afford a one-bedroom apartment. On average, an Iowan renter would have to pay $1,600 more than they can afford each year to pay for a two-bedroom apartment. An Iowan worker making the minimum wage ($7.25/hour) couldn t even afford a studio apartment in any Iowa county. They would need to work 65 hours per week to pay for a one-bedroom apartment, or 83 hours per week for a two-bedroom. 3

4 WHAT IOWA S RENTERS CAN AFFORD Many renter households don t earn enough to afford the cost of rent in Iowa. Iowans at 30% of area median income, those working minimum wage jobs, or disabled Iowans receiving SSI payments all pay thousands more than they can afford each year. 2-bedroom rent: $781 $138/mo. $1,572/yr. $238/mo. $2,856/yr. $68/mo. $816/yr. $404/mo. $4,848/yr. $234/mo. $2,808/yr. $556/mo. $6,672/yr. $386/mo. $4,632/yr. 1-bedroom rent: $611 $650 $543 Affordable to renter average income Affordable to 30% median income $377 Affordable to full-time minimum wage worker $225 Affordable to SSI recipient 4

5 Workers in many of Iowa s most common jobs struggle to pay rising rents. Of the ten jobs projected to employ the most Iowans in 2024, five offer wages too low to a fford a 2-bedroom apartment. Those five jobs alone are projected to employ over 270,000 Iowans by about 14% of the state s workforce. $1,762 Today, 1 in 3 Iowa jobs pay less than the two-bedroom housing wage. 1 in 5 pay less than a renter needs to afford a one-bedroom apartment. $1,383 2-bedroom rent: $781 1-bedroom rent: $611 Farmers, ranchers, ag managers $544 Retail sales $994 Truck drivers $479 Cashiers $463 Food prep Registered nurses $792 Office clerks $812 Customer service $613 Janitors $699 Freight movers 5

6 Housing affordability is a statewide concern. The housing wage is what an Iowan worker needs to afford rent without paying more than 30 percent of their income on housing. An average renter in Iowa needs to earn $31,226 each year to afford a modest two-bedroom apartment. The median renter in our state earns just over that: $32,156. The statewide housing wage is $15.01 for a two-bedroom apartment, or $11.74 for a modest one-bedroom apartment. Many Iowan workers earn less, threatening their ability to pay for their daily needs. The cost of housing varies from community to community. While costs tend to be higher in larger cities and college towns, even smaller and more rural communities face housing affordability challenges. Rural Iowa is the most affordable on average, at a housing wage of $13.05 (or $27,154 annually). Iowa City is the most expensive community in Iowa, at $18.38 (or $38,240 annually), and Waterloo- Cedar Falls is the least expensive metropolitan area at $ The most expensive non-metropolitan county is Guthrie County, where the housing wage is $

7 Housing prices are rising quickly. Iowa s housing wage has risen substantially over the past ten years. In 2008, the statewide housing wage was $ The wage has risen 26% since then, to $ Over the past year, housing wages have increased dramatically across the Midwest. While Iowa s housing wage grew at a faster rate than any surrouding states last year, this year s data indicates that housing wages across neighboring states have increased at faster rates; Minnesota at a 28% increase, South Dakota at 28% and Nebraska at 29%. Iowa s housing wage has risen between 3-4% annually for the past three years. At that rate, Iowa s housing wage will be $18.26 by 2023, meaning a requirement of an annual income around $38,000 to afford a two-bedroom apartment. The housing wage has risen faster in some communities than in others. Among metropolitan areas, Des Moines had the lowest increase over the past ten years at 20%. The largest metro area increases took place in Dubuque (39%) and Iowa City (35%). Among non-metro counties, the housing wage increased the most in Washington County, where the wage increased 45% since The next largest increases were in Jefferson County (41%) and Clark County (35%). 7

8 Renters struggle to pay our state s rising rents. In 25 Iowa counties, a median income renter couldn t afford a modest two-bedroom apartment. These counties include both rural and urban areas, reflecting the fact that housing affordability is a challenge across the state. In two counties (Johnson and Story), a median income renter can t even afford a modest one-bedroom apartment. The gap is largest in Johnson County, where median income renters would need to earn an additional $3,036 annually to afford a modest twobedroom apartment. Behind Johnson and Story Counties, the largest gaps between rent and income are found in primarily rural counties and those containing smaller cities: Decatur, Wapello, Harrison, Appanoose, Mills, and Floyd counties all have gaps larger than $90 On the other hand, a median income renter in Cedar County has $416 to spare after paying rent on a modest two-bedroom apartment. This reflects the fact that Cedar County has the second-highest median renter income in the state combined with lower-thanaverage rents. 8

9 The lowest-income Iowans are at the highest risk of homelessness. While median income Iowa renters often find affordable homes, the situation is much more dire for our state s extremely low income renters. Statewide, an extremely low income renter can only afford $543 per month. That leaves these thousands of households $238 short of the average 2-bedroom apartment each month, or $68 short of a 1-bedroom apartment. Even efficiencies are unaffordable in 36 counties, leaving these renters at the highest risk of eviction and ultimately, homelessness. A renter making less than 30 percent of area median income cannot afford a two-bedroom apartment in any Iowa county. One-bedroom apartments are also unaffordable in 71 counties. Des Moines County has the largest gap, a county where extremely low income renters are $154 short of being able to afford a one-bedroom apartment each month. Linn County (Cedar Rapids) is the only metropolitan county in the state where an extremely low income renter can afford a one-bedroom apartment. 9

10 Minimum wage earners can t find affordable homes in Iowa. Minimum wage earners in Iowa must work more than 50 hours a week to pay for a one-bedroom apartment anywhere in the state. They must even work more than 40 hours to afford an efficiency apartment in any of Iowa s 99 counties. A minimum wage earner working 40 hours a week would come up $132 short each month for even an efficiency. This is worse than in neighboring states Minnesota, Nebraska, and South Dakota, largely because of their higher statewide minimum wages. Minimum wage workers in 24 rural counties would have to work 50 hours each week to afford a modest onebedroom apartment. They would have to work 67 hours each week to afford a two-bedroom apartment. Workers in the state s metropolitan areas face the greatest challenges. In Johnson County, a minimum wage worker would have to work 82 hours each week to afford a one-bedroom apartment. In the Omaha area, workers would need to work 76 hours a week, and in the Des Moines area, they would need to work 71 hours. 10

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16 ACKNOWLEDGMENTS Writing, data analysis, mapping, and design by Polk County Housing Trust Fund Data provided by the National Low Income Housing Coalition Report format and content based on Minnesota Housing Partnership s Out of Reach Minnesota 2017