Demand for luxury lifestyle apartments is way up, and investors are pouring money into hot markets like the Twin Cities. Some developers are constructing new buildings, but many are renovating older apartments by freshening up the paint, upgrading the appliances, adding a yoga room, and jacking up the rent.
As a result, affordable apartments are disappearing faster than they can be built or preserved, giving rise to a raft of problems. If people can’t find affordable housing, there are serious negative repurcussions for communities, businesses, and even schools.
Any list of basic necessities includes shelter—a roof over your head. But roofs, it turns out, are really expensive. In 2017, the federal minimum wage remains just $7.25/hour, although some states have gone as high as $11.50/hour. According to the National Low-Income Housing Coalition’s 2017 Out of Reach report, you’ll need to put in at least 51 hours at minimum wage in order to afford a one-bedroom apartment in South Dakota, the cheapest state.
Even in states with higher-than-the-federal minimum wage, you will still need overtime or a second job to afford a one-bedroom apartment. Your best bet is in South Dakota, it turns out, where just 49 hours a week at minimum wage will get you a one-bedroom apartment. You’ll need to work longer hours if you plan to eat, of course.
There are (at least) two ways to interpret this report:
As evidence of the “suburbanization of poverty,” the Brookings Institution reports that the almost half of housing voucher recipients shifted from cities to suburbs from 2000 to 2008. This major demographic shift is a good indication that the poor have followed the relatively-affluent middle class to the ‘burbs en masse.
The shift has probably grown more dramatic since 2008, according to the Freakonomics blog, since many suburban dwellers wound up underwater on their mortgages as a result of the subprime meltdown—and in need of vouchers to pay for housing.
Housing vouchers are basically just a check that can be used towards rent. Vouchers are available to eligible low-income renters, although there is a waiting list to get into the program.
The San Francisco Chronicle ran a feature last Friday on the surprises that may be in store for a new homeowner in an “inclusionary housing” unit. Inclusionary housing is a popular form of affordable housing that is designed to integrate affordable housing into “regular” housing. For example, if a builder puts in a 10-unit apartment building, one or two of those units would be subsidized as affordable housing.
Of course, this means that, while a tenant or owner may pay less for rent or a mortgage than the rest of the building, they share the rest of the fees. Overall, we think inclusionary housing schemes are positive, but as this article shows, there may be a few surprises, and tenants and owners need to be prepared.