The National Low Income Housing Coalition pulled together their annual Out of Reach 2016 report for income housing this year.
Any adviser or financial expert worth his or her salt will tell you that to be safe, only 30% of your income should be allocated to your rent (or mortgage). Higher than that, and you risk default. And, as the report indicates in its fancy definition section:
“Affordability in this report is consistent with the federal standard that no more than 30% of a household’s gross income should be spent on rent and utilities. Households paying over 30% of their income are considered cost burdened. Households paying over 50% of their income are considered severely cost burdened.”
Hawaii comes in as the most expensive state, requiring a minimum hourly wage of $34.22 to be able to comfortably afford a modest two bedroom apartment. Note the word modest. Definitely subjective. Secondly, the report is using “fair market rent” to determine the price of the units. By going to the report itself (not just the very cool interactive map linked below), the Fair Market Rent is determined as the 40th percentile of rents in a given area. That means that 60% of apartments are more expensive than what’s included in the report.
As a renter myself, I immediately went to California, ranked number 3 in most expensive states, and requires a minimum hourly wage of $28.59 for a two bedroom unit while working 114 hours a month. For those concerned with the great California vs. New York cost of living debate? New York loses, placing 4th, needing an hourly rate of $26.69.
There are actually 52 territories on the list. I use the term territory for a reason as Washington DC is included and it is not technically a state (and it ranks 2nd most expensive) as well as Puerto Rico (which comes in as the cheapest). The least expensive state to rent in is West Virginia, needing a $13.17 hourly wage.
What’s glaringly apparent is this nugget: “In no state, metropolitan area, or county can a full-time worker earning the prevailing minimum wage afford a modest two-bedroom apartment.”
See the report here: http://nlihc.org/oor