John Edward, who teaches economics at Bentley and UMass Lowell, frequently contributes columns on economic issues.
The May 17 edition of The Boston Globe reported, “Housing costs a burden to many.” The Globe North article used census data to illustrate how unaffordable housing is in our area. It failed to reveal how bad the situation really is.
The article focused on home ownership burdens. For example, 1 out of 6 homeowners in Lowell spend more than half of their income on housing.
That is bad. However, it gets worse.
The Census Bureau classifies paying more than 30% of gross income (before taxes) on housing as “housing-cost burden.” Forty-four percent of Lowell homeowners with a mortgage exceed that standard; for homeowners without a mortgage – twenty-two percent.
In other words, housing costs are a burden for roughly one-third of homeowners. That is bad. However, it gets worse.
Over half of renters in Lowell are burdened. Half of renters in Chelmsford are burdened. In Middlesex County 46 percent of renters pay more than 30 percent of their income for housing.
Burdened homeowners may have the option of “downsizing” to a rental unit. Renters often have nowhere else to go.
A big part of the problem is low wages. The median household income for Lowell homeowners is $73 thousand. For renters it is only $33 thousand. In Chelmsford the medians are $109 thousand for homeowners, $44 thousand for renters.
Housing and Urban Development (HUD) establishes “Fair Market Rents.” For example, HUD says the fair market rent for a two-bedroom apartment in Lowell is $1,109 per month. That includes utilities (electricity/heat/water).
Finding an apartment that cheap is not easy. Paying for it may be hard. At $33 thousand, fair market rent is 40% of income. At $20 thousand it is two-thirds of income.
Another way of looking at this is to consider a “housing wage.” A housing wage is how much a household would need to earn to afford fair market rent. Afford means spending no more than 30% of income on housing.
According to the National Low Income Housing Coalition, the housing wage for Massachusetts is $24.64 per hour. The average wage of renters in the state is $18.20. That creates one of the largest rental affordability gaps in the country.
That is bad. However, it is much worse for some.
The minimum wage in Massachusetts is $9.00 per hour. HUD’s fair market rent for a one-bedroom apartment is $864. To afford that, a minimum wage worker would need to work 74 hours a week.
That helps explain why our affluent Commonwealth has the 4th highest rate of homelessness in the United States. In the state with the most highly educated workforce, 1 out of 6 children live in poverty.
Burdened renters must make difficult choices. Avoiding homelessness often means getting by without something else.
Paying the rent may require skimping on a nutritionally adequate diet. According to the Merrimack Valley Food Bank, 700,000 people in Massachusetts are food insecure. Every day in Massachusetts 200,000 children skip a meal, according to Project Bread.
Prescriptions may go unfilled. Well over a million Medicare patients leave prescriptions unfilled every year. For three out of four the reason is cost.
It may mean putting off school. One year of tuition at Middlesex Community College is $5,430. A minimum-wage worker has to work about 600 hours to earn that much.
Rent does not always include utilities. According to the Bureau of Labor Statistics (BLS), low-income earners spend over 20% of their pre-tax income on utilities, heat, and public services. Paying the rent may mean a cold apartment in the winter or unpaid utility bills.
Most burdened renters go into debt. According to the BLS, consumers with incomes below $40,000 spend more, on average, than their pre-tax income.
The lack of affordable housing is a social crisis. Further, burdened renters are not the only ones suffering.
Lack of affordable housing is a burden on the Massachusetts economy. The Northern Middlesex Council of Governments produced a Comprehensive Economic Development Strategy for Greater Lowell. Their evaluation states that we need to “create more affordable and market-rate housing throughout the region to ensure that businesses can expand and relocate to the region.”
Government policy is part of the problem. Government policy has to be part of the solution. Our elected officials must also make choices. More on government choices in an upcoming column.