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Housing cost as a benchmark

by Tod Massa 3. June 2016 23:34

This article from Vox covers the latest report, Out of Reach 2016, from the National Low Income Housing Coalition (NLIHC) which estimates the hourly wage needed to afford a modest two bedroom apartment without rent exceeding 30% of income. The NLIHC rent estimates use the 40th percentile of rents to establish a "fair market rent" and for Virginia the estimate is $22.44/hour. The interactive report on the NLIHC website allows drill-down by locality with plenty of additional information for context. 

For example, in Chesterfield County, where I live, the estimated fair market rent for a one bedroom apartment is $835/month and the annual income needed to afford that at 30% is $33,400. With a median wage of $31,592 for recent bachelor degree recipients, that doesn't seem too much of a stretch. However, when you add student loan payments, even under the most generous income-based repayment programs, transportation and other costs, one can see how much of a stretch this can be. As a side note, I have seen a number of apartments at this price point (and below), and I don't find them particularly appealing.

This is one of those reasons that there is such interest nationally about post-completion wage outcomes. To my mind, understanding the economic realities of recent graduates, at all levels, is key to understanding and addressing college affordability and student debt. It's also needful that when we consider these numbers to remember, that not only did half of graduates earn less than the median, a quarter earned less than $20,000 that first year out of college. These graduates face particularly steep challenges.

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