Chapter 2 -- Continued

The failure of worst case needs to drop despite a robust economy becomes more understandable if one looks at the nature of the growth in worst case needs during a somewhat longer period of time: 1991-1995. Underlying the growth in worst case needs in the early 1990s were structural problems not alleviated -- and even exacerbated -- by the mid-1990s economic boom. These problems included lags in wages for the lowest paid workers. Working poor families and individuals faced a diminishing supply of housing at rents they could afford, as people with stronger income growth put upward pressures on rents.

• Between 1991 and 1995, worst case needs among working families grew by 24 percent. The share of all households experiencing worst case needs that had earnings at least the equivalent of one full-time worker at minimum wage rose from 22 to 26 percent.

As very-low-income families enter the workforce, increases in income often are not enough to make rents affordable and alleviate worst case housing needs. In fact, housing problems can be even more vexing for very-low-income workers than for those who receive their income from public assistance. Housing affordable to a family with low wages may be far from work. Finding and renting in the right location to get and keep a job may mean spending so much for housing that other needs go unmet. It may be impossible to keep up with the rent because of unexpected expenses such as car repairs or specialized clothing for work. Missing rent payments and possible eviction is a serious concern just at the time when the family is coping with child care and other new pressures associated with keeping a job.

Between 1991 and 1995, worst case needs overall rose from 4.9 million renter households to 5.3 million, a growth rate of 7 percent. For unassisted very-low-income renters with children in the family and someone working the equivalent of at least full-time at minimum wage, worst case needs rose at double that rate, or 13 percent (see exhibit 10). Renters without children experienced the same pressures: Among those working at least full-time, worst case needs rose by 37 percent. Together, these two groups of working households were 1.1 million, or 22 percent, of renters with worst case needs in 1991 and grew to 1.4 million, or 26 percent, by 1995.

• A family that moves to work as a result of welfare reform will likely still have worst case needs for housing assistance.

The very-low-income threshold of 50 percent of the area median is at a level well above both the poverty threshold and welfare benefit levels.⁴ Even extremely-low-income families -- those with incomes below 30 percent of median or roughly the poverty level -- are as likely to be working as they are to be receiving income from public assistance (see exhibit 11). In the income group between 21 and 30 percent of median, almost two-thirds of families with children have earnings as their main income source and half are working the equivalent of full-time at minimum wage. It is not surprising, then, that more than one-half of families with children and worst case housing needs rely primarily on work to support themselves.

The Clinton administration strongly believes that those capable of working should do so and that housing assistance should play a key role in rewarding work and family responsibility. Helping families with worst case needs and rewarding work are not incompatible priorities. In 1995 more than 1.6 million renters with worst case needs had incomes below 30 percent of the area median and earnings as their primary income source (see exhibit 12). Proposed changes that would raise income eligibility for Federal housing assistance could -- in the name of helping low-income workers -- divert resources away from the working poor who most need assistance.

A very large number of the families that will go to work as a result of welfare reform will continue to have incomes below 30 percent of the area median. A recent study found that the median annual income of families leaving welfare for work was just $5,000 in the first year and $9,000 after 5 years.⁵ These incomes are well below the national extremely-low-income cutoff of $12,900. If a family is working yet has an extremely low income, that family will probably have worst case housing needs. Two of every three unassisted extremely-low-income working families with children have worst case needs.

• Current housing assistance programs effectively reach the working poor.

Housing assistance can be crucial to working poor families, helping them to stabilize their lives and continue their climb out of poverty. Of the 4.3 million households living in public housing or receiving assistance from one of the Section 8 programs, more than 1.1 million report earnings as their primary source of income.⁶

Current housing assistance programs are well targeted, not just to workers but to the working poor. Nearly one-half (48 percent) of assisted families with children who report incomes between 21 and 30 percent of median have earnings as their primary source of income. Even at the very lowest income range (below 20 percent of median), almost one-fifth (18 percent) of all families with children living in assisted housing have earnings as their primary income source. Work is even more common among extremely-low-income households without children when that household is headed by an individual who is not elderly and does not have disabilities (see exhibit 13).

Housing assistance programs could be even more explicitly targeted to reward work. The Clinton administration supports providing housing assistance to working families and to families preparing themselves for work through job training and education. This change is most critical in public and assisted housing projects, where the growing children urgently need adult role models who work and adhere to mainstream values of the society. To achieve this objective, however, it is not necessary to serve families with incomes above 50 percent of median income. These families are unlikely to have severe needs for housing assistance. Instead, housing authorities and managers of privately owned assisted housing can design admission priorities that direct assistance to those who work and have incomes within the very-low- and extremely-low-income ranges.

4. In 1995, a family receiving the maximum Aid to Families with Dependant Children (AFDC) grant for a family of three would have been at 16 percent of the area median income in New York City, 10 percent in Chicago, 5.5 percent in Houston, and 16 percent in Los Angeles. It is not surprising that many families with incomes below 30 percent of the area median receive no welfare.

5. Daniel R. Meyer and Maria Cancia, Life After Welfare: The Economic Well-Being of Women and Children Following Exit from AFDC, Institute for Research on Poverty, University of Wisconsin, Discussion Paper No. 1101­96. August 1996.

6. The difference between these 4.3 million units and the 4.5 million total HUD-assisted rental units occurs because Indian housing and units in the Section 8 moderate rehabilitation program have not been included in the analysis for this report.