10/8/01
KUFM / KGPR
T. M. Power
Exaggerating Our
Economic Problems, Misunderstanding their Source
Recent news stories detailing the difficulties Montanans face in paying for housing, appeared to lay out yet more evidence of the economic deprivation Montanans have to live with because our a “failing” economy. The federal Department of Housing and Urban Development, HUD, calculates what it calls “fair market” housing costs for different areas around the nation to reflect the cost of moderate-income housing. 40 to 50 percent of housing in an area costs less than these “fair market rents.” HUD also calculates that a low or moderate income household should spend no more that 30 percent of total household income on housing if it is going to have money to cover food, clothing, medical care, etc.[1]
Based on these federal standards, one can ask whether low and moderate income Montana households can afford the housing that is available. The answer is no. A median income household would have to spend almost half of its income, not 30 percent, to cover “fair market rent” for a two-bedroom house in Montana. In total, about 40 percent of Montanans have to violate the HUD guideline on the percentage of income that should be spent on housing. A minimum wage worker in Montana would have to work almost two full-time jobs in order to stay within the 30 percent of income guideline for housing costs while renting a two-bedroom house.
If a senior citizen in Montana who relies on Social Security sticks to the HUD housing budget guidelines, she should spend only $154 per month on rent, but a one bedroom apartment costs $388, almost two and a half times what the budget guideline would allow. A household supported by a minimum wage worker should only spend $268 per month on housing but will have to pay $513, almost twice as much.
Since the market for owner-occupied housing tracks closely the market for rental property, both, after all, are part of the local real estate market, similar points could, no doubt, be made about families trying to buy rather than rent homes.
Clearly the combination of low incomes and high rents places considerable financial pressure on Montana’s low and middle-income households.
But while this documents that many Montana households struggle to make ends meet, this is not evidence that there is something particularly wrong with the Montana economy. Quite the opposite.
While incomes are low in Montana, according to the HUD data, housing costs are even lower. Median family income in Montana is 20 percent below the national level but housing costs are 30 percent below. If housing costs were a good proxy for the overall cost of living, and they may not be, Montana’s apparent 20 percent income deficit would be turned into a 10 percent real income advantage because of the lower cost of living. Instead of being near last among the states, we would be near the middle.
Our minimum wage workers, as hard pressed as they are to make ends meet, would not be better off living in most other states because, although overall incomes are much higher, minimum wages are not, and rents are much, much,higher. As a result, instead of Montana appearing to be near dead last among states in terms of economic well-being, from the point of view of minimum wage workers being able to pay their rents, Montana is in top quarter of the states. For those senior citizens trying to pay rent out of their Social Security checks, Montana is in the top ten states, not near the bottom. In terms of the percentage of households that pay more then 30 percent of their income for rent and the share of family income that goes to pay rent, Montana is near the middle of all the states, not near the bottom.
The point I am trying to make is not that low and moderate income households have it easy in Montana, and so we can ignore the financial pressures they are under. That emphatically is not true. The point is that their problems are not tied to living in Montana. Stagnant or falling wages and rising housing and other household costs have put many families across the nation in a financial pressure cooker for almost three decades now. We in Montana can and should recognize that problem and work to reduce it. But exaggerating the local problem and mis-diagnosing its source are not useful steps on the way to effective action.
The citizens of Montana are not uniquely deprived compared to their fellow citizens across the nation. There is not something unusually wrong with the Montana economy. The Montana economy is not collapsing. The sources of the economic pressure our citizens are under are not local in character but have their sources in national and international economic forces.
None of this means that we should complacently sit back and not try to solve the very real problems we face. It does mean, however, that there is no reason for us to act like beggars and losers who have no choice but to surrender the state to the forces of greed and bigotry. In hard times we need confidence in the decisions we have made to live here, pride in the sprawling magnificence of the landscape that holds us here, and solidarity with our neighbors with whom we share the present and future.
[1] The study that draws this HUD data together was carried out by the National Low Income Housing Coalition. The study, Out of Reach 2001: America's Growing Wage-Rent Disparity, can be found at