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Publication Date

June 2000

Author(s)

George McCarthy, Michael A. Stegman, Roberto G. Quercia

This nation is experiencing unprecedented economic prosperity, yet one out of every seven American families has a critical housing need, including millions of working families.

This nation is experiencing unprecedented economic prosperity, yet one out of every seven American families has a critical housing need, including millions of working families.

There are 13.7 million families with critical housing needs—from all walks of life. Some are elderly. Others are unemployed and dependent on welfare. Some have physical or emotional handicaps that limit their full participation in the economic mainstream. Others are working families whose modest incomes do not support the costs of decent housing. Still others have incomes that place them squarely in the ranks of the middle class and, in some cases, even higher.

For most of the last 20 years, federal housing policy has implicitly or explicitly linked the housing problems of American families to issues of poverty and welfare dependency. While the poor have by far the highest incidence of housing needs, an exclusive focus on very low-income families fails to appreciate the full extent of the country’s affordable housing problems.

Housing America’s Working Families focuses on a segment of the population that is largely ignored by current housing policy—the roughly three million moderate-income families who have critical housing needs despite working the equivalent of a full-time job. The issues discussed here are not about welfare and poverty. On the contrary, our focus is on families who work and play by the rules, yet pay more than half their income for housing or live in severely dilapidated units.

The goal of this report is to provide the housing community, the housing industry, and policy makers at all levels of government with the information necessary to broaden housing policies to recognize, and deal with, the needs of working families. Given the extraordinary role that housing plays in the lives of all Americans—and the possibility that the scarcity of affordable housing could put a brake on economic development in communities across the country—the housing needs of working families clearly justify a higher place on the policy agenda. The stability and economic well being of our communities will be tied directly to the ability to meet the housing needs of these working families.

More Than Three Million Moderate-Income Working Families Have Critical Housing Needs

Having a job does not guarantee a family a decent place to live at an affordable cost.More than three million working households had critical housing needs in 1997 (the latest year for which data are available). Throughout this report, we use the term “working families” to include households who earned at least half their income from employment, and whose total income fell between $10,700 a year—the equivalent of a full-time job at the minimum wage—and 120 percent of the local area median income.

Excessive housing costs account for the majority of critical housing needs among working families. Seventy-six percent of all working families with critical housing needs—or some 2.4 million households—spend more than half of their incomes on housing. Twenty-one percent—or about 650,000 working families—occupy seriously substandard housing.

Critical housing needs of working families are growing rapidly. Between 1995 and 1997, the number of moderate-income working families with critical housing needs rose by about 440,000—a 17 percent increase in just two years.

Homeowners account for the majority of all working families with critical housing needs. Fifty-one percent of all working families with critical housing needs own their homes.

Critical housing needs are not confined to the nation’s cities. In fact, the number of working families with critical housing needs is higher in the suburbs (1.3 million) than it is in the central cities (1.2 million).

Today, it takes more than one working adult to keep families out of serious housing stress. Moderate-income families with only a single earner are 1.6 times more likely to have a critical housing need than families with two or more working adults.

Minimum wage workers are particularly at risk. Not surprisingly, the incidence of critical housing needs is greatest among workers at the bottom rung of the economic ladder.

Many workers whose wages are tied to the old economy are struggling. More than 730,000 working families with one or more blue-collar workers spend more than half their incomes for housing, as do more than 550,000 service workers and a similar number of retail sales workers.

Vital municipal workers like teachers and police officers are increasingly vulnerable. More than 220,000 teachers, police, and public safety officers across the country spend more than half their income for housing, and the problem is growing worse.

In some metropolitan areas, the incidence of critical housing needs among working families is at least double the national rate. Local variations in critical housing needs are caused by many factors, including differences in population growth, regional variations in economic growth and job mix, and housing market conditions.

The lack of decent, affordable housing is increasingly being seen as a significant impediment to local economic growth. In Los Angeles and Orange counties, California, for example, more than 278,000 new jobs have been created since 1984, but only 78,000 new homes have been built.

Policy Implications

The first lesson that can be drawn from the study is that national policy must strive to meet the housing needs of moderate- and middle-income American families, and not just the very poor. This does not suggest that any resources should be diverted from the housing needs of the very poor, but rather that more resources must be devoted to housing for moderate-income working families. In America, families who work and play by the rules should not have to pay more than half their income for housing nor live in severely dilapidated homes. A decent home in a suitable environment is a basic tenet of
American life, yet our housing policy does not support this promise for working families of moderate income.

The second lesson is that because conditions vary so much from place-to-place, the federal government should provide a menu of flexible housing resources supported by tax code incentives and annual appropriations, along with financial incentives to encourage local regulatory reforms, which enable states and localities to custom-tailor their own affordable housing strategies.

Finally, the analysis contained in this report supports the significant expansion of supply-side assistance and the need for increasing existing demand-side programs.


Topics(s): Affordable Homeownership, Housing Policy, Mortgage Finance