Policy: Income

On average, a full-time worker earning minimum wage earns just 47% of what is needed to afford a two-bedroom apartment at FMR.

A full-time worker earning even the average wage for renters cannot afford a two-bedroom apartment at FMR anywhere in the country.

What We Know about Income

• Affordable housing is inaccessible to families working full time at minimum wage.
• Nationally, families receiving the maximum monthly TANF benefit would have to spend 210% of their monthly income to afford a two-bedroom apartment at FMR.
• 21 states have refundable Earned Income Tax Credits.
• Child care vouchers help families maintain employment and access job training opportunities, but only one state (Massachusetts) prioritizes homelessness when distributing its vouchers.

Homelessness results from a shortfall between a family’s income and housing affordability. Increasing a family’s monthly income is a critical way to ensure that they are able to escape homelessness and remain housed or that they never become homeless. When examining state income policies, we highlight gaps between the income of families living in poverty and housing options.

One way to examine the gap between income and housing is to compare the minimum wage and the average wage for renters with the “housing wage” – the hourly wage needed to afford a two-bedroom apartment at Fair Market Rent (FMR).¹¹⁶

• The federal minimum wage is $6.55/hour.
• Twenty-four states have minimum wages that exceed this amount, with Washington having the highest at $8.07/hour.

Percentage of TANF Benefits Needed to Afford 2-Bedroom FMR Apartment

As the National Low Income Housing Coalition’s Out of Reach report has described year after year, a minimum wage earner working full-time cannot afford a two-bedroom apartment at FMR anywhere in the country.¹¹⁶ On average, a full-time worker earning minimum wage earns just 47% of what is needed to afford a two-bedroom apartment at FMR: The five states with the greatest disparity between minimum wage and housing affordability are Hawaii (25%), Maryland (31%), New York (31%), New Jersey (32%), and California (33%). The five states with the least disparity between housing affordability and minimum wage – Arkansas (58%), South Dakota (59%), Iowa (61%), North Dakota (63%), and West Virginia (67%) – still fall woefully short.

Another way to examine the gap between wages and housing costs is to consider the average wage for renters, which is slightly higher than the minimum wage.¹¹⁶

• The average wage for renters nationally is $12.50/hour.
• West Virginia has the lowest average wage for renters, at $9.11/hour, while New York has the highest, at $21.05/hour.

TANF benefits are the primary source of income for families who are homeless. Nationally, families receiving the maximum monthly TANF benefit would have to spend 210% of their monthly income to afford a two-bedroom apartment at FMR. The chart illustrates the percentage of income by state for the top five and bottom five states.

Another strategy for increasing family income is through the State Earned Income Tax Credit (EITC). The EITC is a “tax reduction and a wage supplement for low- and moderate-income working families.”¹¹⁸ It allows states to provide an economic “boost” to low-income families that can “reduce child poverty, increase effective wages, and cut taxes for families struggling to make ends meet.”¹¹⁹ Refundable EITCs mean that even if families have no income tax liability, they receive the entire EITC as a refund. Non-refundable EITCs are helpful to families who owe taxes, but not to families who have no tax liability. In other words, more families benefit when EITCs are refundable.¹²⁰

Twenty-three states have EITCs. Of these, 21 are refundable. The chart below illustrates what it would cost each of the other states to enact a refundable EITC at 5% of the Federal EITC.

The National Center for Children in Poverty estimates that if every state instituted a state-level refundable EITC set even at 50% of the federal credit, it would lift an additional 1.1 million children out of poverty.¹²² Many communities have come to regard the EITC as an investment in their local economy. EITCs also raise family income levels, support parents as they move from welfare to work, and help pay for transportation and child care.¹²³ This program has been most effective in urban areas.

Child care is a significant expense for all working families and may become a barrier to work for families who are homeless. Care for children of any age is expensive and the cost of sending children to high-quality care (e.g., an accredited center) is even more substantial.¹²⁴ In every region of the country, infant child care consumes a larger portion of a family budget than food. For families in need of assistance, states are given federal funding through the Child Care and Development Block Grant (CCDBG) to provide child care vouchers. These vouchers supplement a family’s income by subsidizing child care expenses, enabling them to maintain jobs and become economically stable.¹²⁵ Many states choose to exercise their option to transfer up to 30% of their TANF funds into their CCDBG or spend a portion of their TANF funds directly on child care.¹²⁶ States have the opportunity to prioritize families (according to subgroup) to determine who receives CCDBG vouchers. Currently, only one state – Massachusetts – gives priority to children who are homeless when distributing their vouchers.¹²⁷

The U.S. Child Care Bureau documented how families use their vouchers:¹²⁸

• 77% of families report using their vouchers to maintain employment.
• 10% of families report that they use their vouchers so that they can attend educational or job training opportunities.
• 6% of families report that they use their vouchers for both employment and job training.