Document Type

Capstone Project

Publication Date

7-25-2022

Keywords

Housing, Minimum Wage, Rent, Affordability

Abstract

There is a severe shortage of affordable housing in the United States. In 2011, the number of low-cost rental units (units renting for $800 or less per month) stood around 23.5 million, but by 2017, this number dropped to 19.5 million, roughly a 17% decrease (Joint Center for Housing Studies, 2020). The result is that in 2020, only 37 affordable units exist for every 100 of the nation’s 10.8 million extremely low-income renters (those earning 30% or less of the area median income) (National Low Income Housing Coalition, 2021). One contributing factor is that higher-income households are beginning to rent more. The number of households with a real income of greater than $75,000 was 7.3 million but rose to almost 12 million in 2018. Developers have noticed the growing demand for this population and are building units for them because they are more profitable than affordable housing units. In addition to fewer affordable housing units being built, the existing affordable housing stock is also being bought up by wealthier households, further shrinking the options for low-income households. Another factor that affects the supply in some regions is the increased frequency of natural disasters due to climate change. Between 2000 and 2009, the average annual damage from natural disasters in the US was around $45 billion. In 2018, this number more than doubled to $105 billion (Joint Center for Housing Studies, 2020). Low-rent housing is usually structurally weaker compared to high-end units, so when there is a disaster (hurricanes, wildfires, etc.) these units make up much of that damage. The federal government has deprioritized funding for housing assistance over the past decade. The Budget Control Act of 2011 signed by the Obama administration decreased funding for non-defense discretionary spending, which includes housing assistance. By 2017, funding for public housing fell by $1.8 billion, or 22%. This was part of an overall cut in non-discretionary spending, which decreased HUD program funding by $4.2 billion (9%) over the same time period (Center on Budget and Policy Priorities, 2017). The central question addressed in this paper is whether or not an increased minimum wage could alleviate some of this affordability crisis.

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