Housing’s Hurdles

wage. In some states, the two-bedroom housing wage is even higher — up to more than $40 an hour. The average worker earning minimum wage would need to work almost 96 hours per week to afford a two-bedroom rental at the national average fair market rent of $1,324.

By Cody Porter and Jennifer Horton

Lingering fallout from the COVID-19 pandemic placed an immense economic burden on countless Americans. Since 2020, the housing market is one area experiencing the brunt of its weight, remaining in a volatile state due to significant reductions in jobs and wages.

Deemed at an “inflection point” by the Joint Center for Housing Studies of Harvard University, the homebuying market’s record 2021 was followed by increased interest rates in 2022 that helped slow purchases in a market lacking inventory. Due to limited supply, costs for homes and rentals alike continued to soar in unison with rising rates.

Those most directly impacted by the active shortage of affordable and available rental homes are extremely low-income households, which includes those with incomes at or below the poverty guideline, or 30% of their area median income, whichever is higher. There are just 36 affordable and available rental homes for every 100 low-income households — a deficit of 7 million homes nationwide. For extremely low-income renter households, 71% are severely cost burdened, meaning they spend more than half of their income on housing, making it more difficult to afford healthy food and health care.

Attaining Affordability

In its February policy brief on housing prices and affordability, the Kem C. Gardner Policy Institute at the University of Utah noted that housing affordability comes in two forms that are not mutually exclusive: affordable housing and housing affordability.

In 2022, a person working full-time in the U.S. needed to earn $25.82 an hour on average just to rent — not purchase — a modest, two-bedroom home. That hourly wage is $18.57 higher than the $7.25 federal minimum

With the rapid increase in home and rent prices over the last several years, millions of low-income renters struggled to afford their rent even before the pandemic. The economic impacts of COVID-19 exacerbated the problem even further as low-wage workers lost income. While temporary eviction moratoriums and Treasury Emergency Rental Assistance programs kept millions of disadvantaged renters housed during the pandemic, as these programs end, the need for affordable housing for the lowest-income renters will not.

Homes suited for low- or middle-income earners to rent or purchase have been quickly consumed by investors in recent years for rental income or for quickly upgraded resells. During 2022’s first quarter, investors accounted for 28% of single-family home purchases, which is 9% higher than the year prior, according to CoreLogic data cited by The Joint Center for Housing Studies in its 2022 housing report

More densely populated areas, such as Atlanta, Los Angeles, Phoenix and San Jose, and were favored by investors in recent years due to higher home values compared to those in smaller cities. This factor, combined with the workforce’s ability to work remotely, promoted substantial population growth from 2020-22 in the likes of Idaho, Montana and Utah. Axios reported Idaho’s population increase of nearly 4.9% as the most for any state during the two-year span, while Utah came in just under 3%.

Utah, ranking fourth overall in growth from 2020-22, experienced similar increases from 2020-21 by adding 56,000 new residents, or 1.7%. Much of the state’s continued growth can be attributed to its lure as an employment hub, including in the tech space. The Milken Institute’s 2023 “Best-Performing Cities” featured many impacted by Utah’s employment boom, including Provo-Orem — its best-performing city for a third consecutive year — in addition to Logan and St. George as viable options among smaller cities.

A common theme for the states without dense populations has been determining how to best offer sufficient housing. Plagued by challenges stemming from the pandemic, funding for new projects has been difficult to obtain. When available, new housing projects are marred by issues associated with zoning mandates.

Former Utah Sen. Wayne Niederhauser, a real estate broker by trade, was involved in many affordable housing efforts prior to assuming his current role as Utah homeless coordinator in the Office of Homeless Services. While proud of his state’s ability to attract new employment opportunities, he said it doesn’t come without “a little caveat.”

“With all of these new, high-paying jobs there’s more money chasing a limited supply of housing,” Niederhauser said. “Our population could not have sustained such employment growth, so we’ve had huge in-migration from places like California where real estate values are higher. You’ve got all this equity coming in from a state with higher property values chasing after a limited housing supply, and it only multiplies our problem.”

In October 2021, The University of Utah Kem C. Gardner Policy Institute revealed in its “State of the State’s Housing Market ” report that more than half of the state households could not afford median-priced homes. In the time since, prices have only increased.

“Our children and grandchildren are priced out at this point unless you’re making a lot of money — almost six figures at this point,” Niederhauser said. “We’ve had unprecedented home appreciation, and we have got great economy, but that does price out social workers, case managers, firefighters, police officers and teachers. Compared to the national level, [Utah] ranks near the top in appreciation and that’s why it’s different here.”

Avenues For Resolution

In Maine, where the population grew quicker from 2020-21 than its previous 10-year average, state leaders have remained active in identifying avenues for additional housing.

It’s quite possible the state has even underproduced housing for quite some time, according to Ryan Fecteau, senior advisor of community development and strategic initiatives for the Maine Governor’s Office of Policy Innovation and the Future. However, as Fecteau noted, the issue of affordability and availability has only emerged in the past few years due to in-migration.

“We’ve had net migration of around 37,000 people. For most states, that might not sound like a lot, but for a state of 1.3 million people that is a pretty significant number of individuals moving here,” Fecteau said. “The vast majority of the people moving here as part of the in-migration have been under age 45. So, we’re not talking about retirees calling Maine home; we’re talking about working-age folks. We now have this real gridlock, this stalemate, in our housing sector, where older adults might [be prepared to] downsize but [unsure if] they’re going to be able to find another housing opportunity.”

Maine Gov. Janet Mills appointed Fecteau to his current role in January as part of a string of efforts to address the state’s pressing need for housing. Maine’s House Speaker from 2020-22, Fecteau sponsored many bills on housing and community development. Among them was LD 1645, which created the Maine Affordable Housing Tax Credit that — to date — remains the state’s largest investment in affordable housing.

Maine’s Affordable Housing Tax Credit is an eight-year program granted $10 million per year, including shares for senior and rural housing. As a result, the state’s investment is matched with federal low-income housing tax credit dollars. To qualify for the program, individuals must earn below 60% of the area’s median income and monthly rent cannot exceed 30% of an individual’s monthly income.

“We’re very lucky that here in our state, we have the leadership of the governor, legislature and lawmakers on both sides of the aisle,” Fecteau said. “This is probably one of those rare issues in today’s politics where you have members on both sides of the aisle resoundingly in favor of tackling this problem.”