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Housing is top-of-mind in the US and for good reason. Recent data shows that as the cost-of-living has increased, wages have predominantly stayed flat - which has created an urgent disparity in the housing sector. A report from the Housing Coalition illustrates the wage gap in a complete map of the US.
In the below illustration, the regions and municipalities with the darkest color would require an employee to work 80 hours or more a week (on the average wage) in order to afford the average rental of a one-bedroom in their area.
Less than 1/3 of the map shows regions that have a match to the average wage, a 40-hour workweek, and the average rental cost. Most of the US would require a person to work 51+ hours per week to afford a rental.
At a glance, we can see there is an affordability issue as the expectation of working 51+ hours per week isn't sustainable, and in some regions is non-compliant with health and safety legislation. Simply put, even if they could get 51 hours per week to work, many regions cap the hours per week allowed (with good reason).
Combine this earning gap with record low vacancies, a rise in luxury buildings instead of affordable, multi-family units, and the report projects a dim future without clear and fundamental intervention across the US.
The states that see the highest gap in average earnings vs. average rental cost are listed below, and include what the average hourly wage SHOULD be for rentals in that state to be affordable to the average worker.
The quickest and most effective solution is for states to increase their minimum wages to be comparable to the increases seen in the cost of living.
Many states are answering that call, with minimum wage increases effective in 2021, and more to come in 2022. However; even with these increases, you can see that across the US, the majority of minimum wage workers will not be able to afford housing in their region without adding roommates or over-crowding the unit, or working 51+ hours per week with multiple jobs.
What are some other solutions both the private and public sectors can consider? We recently wrote about a new trend for real estate developers to build RENTAL properties instead of ownership-based ones - and this is definitely a step in the right direction. Addressing the shortage and switching to affordable rental units instead of luxury sales could definitely turn the tide. High-density legislation in urban areas often bottle-neck these proposals, and cities and municipalities can review policies that might be working against developing new, affordable housing.
In short, there is no quick or easy solution to address the complex issue of affordable housing - in either the US or Canada.
But seeing the issue illustrated with the above data analysis we hope has helped understand the gap in real terms.
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