Frequently Asked Questions about Paycheck to Paycheck

What is Paycheck to Paycheck?

Paycheck to Paycheck is an online, interactive database prepared by the Center for Housing Policy – the nonprofit research affiliate of the National Housing Conference (NHC) – that compares wages for selected occupations with the costs of owning and renting a home. The purpose of the database is to examine how working families relying on these earnings fare in housing markets around the country. Paycheck to Paycheck uses a common set of data applied in a consistent way to examine housing affordability. The user can compare one occupation across five metro areas or up to ten occupations in a single metro area. If no occupations are selected, Paycheck to Paycheck analyzes the following default set of occupations: teacher, police officer, licensed practical nurse, retail sales worker, and janitor.

The most recent update to Paycheck to Paycheck features a look at five occupations that are likely to experience job growth as a result of investments in the nation’s infrastructure through the economic stimulus package: carpenters, construction laborers, construction managers, equipment operators, and longhaul truck drivers.

A link to the Paycheck to Paycheck database is available on NHC’s home page at www.nhc.org. To access the database directly, please go to www.nhc.org/chp/p2p/.

What does the Paycheck to Paycheck database show?

With a few selections from a drop-down menu, Paycheck to Paycheck provides custom charts examining the affordability of homes for workers in your choice of up to ten occupations (from a total of 65 included) in any one of more than 200 metropolitan areas nationwide or the U.S. as a whole. (Alternatively, Paycheck to Paycheck can show the affordability of homes in up to five metropolitan areas for any one occupation that you select.)

Paycheck to Paycheck printouts include two charts: The homeownership chart shows the income needed to qualify for the median priced home in the metropolitan area and compares that income to what workers in the selected occupations actually earn. Similarly, the rental chart shows the amount per hour a worker needs to earn to afford a one- or two-bedroom rental unit—that is, so that rent does not exceed the generally accepted standard of 30 percent of income. This wage is then compared to the median hourly wage actually earned by workers in the metro area(s).

"Which cities and counties are included in a metropolitan area?"

The U.S. government uses census data to define official metropolitan areas. Go to http://www.census.gov/population/www/metro areas/metrodef.html for a list of metropolitan area definitions.

What if my metropolitan area is not listed. What can I do?

The Center strives to include as many metropolitan areas as possible, but limits on data availability and size of the database mean we can’t cover all geographic areas in the country. However, Paycheck to Paycheck does provide a template that can be used for similar analyses in metropolitan areas, counties, cities, or other communities of any size.

See our Step-by-Step Instructions on how to produce a Paycheck to Paycheck analysis for your community.

I live in a large metropolitan area. Do you have Paycheck data for the smaller cities or counties that comprise my area?

No, the data sources we use to prepare Paycheck to Paycheck report home price data and salary data at the metropolitan level only. Because of limits on data availability and size of the database, we cannot provide data on smaller geographic areas. However, Paycheck to Paycheck does provide a template that can be used for similar analyses in communities of any size.

See our Step-by-Step Instructions on how to produce a Paycheck to Paycheck analysis for your community.

Who produces and sponsors Paycheck to Paycheck?

 Paycheck to Paycheck is produced by the Center for Housing Policy, which specializes in developing solutions through research. The Center is the research affiliate of the National Housing Conference (NHC). In partnership with NHC and its members, the Center works to broaden understanding of the nation’s housing challenges and to examine the impact of policies and programs developed to address these needs.

Combining research and practical, real-world expertise, the Center helps to develop effective policy solutions at the national, state and local levels that increase the availability of affordable homes.

How frequently is Paycheck to Paycheck updated?

At present, the Center is updating the database annually. We are considering updating the database more frequently in the future.

How has Paycheck to Paycheck changed since the last update??


In addition to providing more recent wage and housing price data, the updated version includes one occupation that it did not include last year and has a few differences in the metropolitan areas covered.

The new occupation in the database, equipment operator, is referred to by the Bureau of Labor Statistics as an operating engineer. The addition of this job category, mainly consisting of operators of heavy equipment, such as bulldozers, scrapers, and graders, allows users to look in more depth at housing affordability for workers in the construction industry.

The changes to the metropolitan areas covered by Paycheck to Paycheck are in the removal of nine areas for which home price data had not consistently been available (Anderson, IN; Anderson, SC; Burlington, NC; Essex County, MA; Holland, MI; Lebanon, PA; Muskegon, MI; Oshkosh, WI; and Pascagoula, MS) and the inclusion of nine new areas (Anchorage, AK; Bellingham, WA; Burlington, VT; Erie, PA; Ithaca, NY; Salisbury, MD; Santa Fe, NM; Scranton, PA; and Wheeling, WV).

Does the Center publish a hardcopy report?

Although it began as a series of spreadsheets and charts in printed reports, Paycheck to Paycheck quickly evolved into an online interactive database. With a few selections from a drop-down menu, Paycheck to Paycheck provides custom charts for some 65 occupations in more than 200 metropolitan areas and the U.S. as a whole. The sheer volume of occupations and markets makes it impossible to produce a hardcopy report summarizing all the data. However, custom charts can be printed from the database for one or more metropolitan areas and occupations of interest to the user. A brief analysis focused on the five construction-related occupations and five key community workers can be found below, as well as summary listings of the most and least affordable metropolitan areas:

 

For the occupations in the metro area I checked, wages are much lower than what is needed to afford a home. What does this mean?

Where there are gaps between wages earned and what is actually required to purchase or affordably rent a home, working families must make adjustments. For example, they can devote a disproportionate share of their income to housing while cutting back on other necessities. Indeed, a separate study by the Center for Housing Policy, Something’s Gotta Give showed that compared to working families in affordable housing, those spending half or more of their household budget on housing spend less on healthcare and insurance, transportation and other necessities. As documented in the Center’s publications A Heavy Load and Beltway Burden, workers faced with unaffordable housing may also “drive til they qualify” and end up spending as much or more on the combined burden of housing and transportation as if they lived in higher priced housing closer to work.

Instead of or in addition to cutting expenditures, families can obtain additional income either through increasing the number of hours they work or adding a second (or even a third) income earner. Or they can crowd in with other working individuals or families to pool their resources to obtain housing they can afford—at a considerable cost to their quality of life.

In areas where wages are not sufficient to afford to affordably rent or own a home, states and localities can adopt policies to increase the availability of affordable housing. A wide array of high-impact solutions that meet the needs and realities of both slow-growth and high-growth markets can be found on HousingPolicy.org.

How did you choose the occupations on the list?

These specific occupations were selected for several reasons. First, despite the so-called “new economy,” high -tech jobs are not eliminating “traditional” occupations. In fact, the demand for many of these occupations is expected to increase. The Department of Labor’s list of occupations with the largest expected growth through the years 2006 to 2016 includes retail salespersons (587,000), food preparation workers (452,000), customer service representatives (545,000), and home health aides (384,000). These and other occupations included on the Paycheck to Paycheck list—for example, truck drivers and elementary school teachers—are among those with large numbers of practitioners as well as with substantial projected growth in the labor force. In short, these traditional jobs with traditional wages are the types of occupations that will continue to be the primary source of income for many working families.

Second, the Administration’s economic stimulus package is projected to create or save between 1 million and 3 million jobs, mainly through increased investments in public works and other infrastructure. According to the Bureau of Labor Statistics, the main occupations represented by heavy and civil engineering construction are carpenters, construction laborers, construction managers, equipment operators (referred to by the BLS as operating engineers, a category mainly consisting of operators of heavy equipment, such as bulldozers, scrapers, and graders), and longhaul truck drivers. These infrastructure occupations may grow even during the economic downturn as the infrastructure investments in the stimulus package get off the ground.

In addition, stock clerks, construction laborers, and landscapers represent occupations that are attracting recent graduates from welfare and other first-time entrants into the workforce, including recent immigrants. Their relatively lower qualifications make these occupations suitable for workers moving up the economic ladder. They also represent occupations important to the continued expansion of local economic growth.

Finally, some occupations on the list, such as police officers, librarians and firefighters, have been selected for the vital role they play in our communities. The same can be said for child care workers, social workers, and other job categories we have included.

Where do the data come from?

The structure of Paycheck to Paycheck is much like that of the proverbial three-legged stool, with the legs representing home prices, rents, and wages, respectively. On the homeownership side, we gather data on the median priced home in each of the metropolitan areas from respected data sources. The National Association of Homebuilders (NAHB) obtains data from a third party, a private company which gathers home sales information from title companies and public records. We use the NAHB median home price figure, which includes sales of both new and existing homes, if available; otherwise, we substitute the median price data from the National Association of Realtors (NAR), which include only existing homes.

On the rental side, we use the Fair Market Rents (FMR) established by the U.S. Department of Housing and Urban Development. Generally the FMRs for a one-bedroom and a two-bedroom apartment are set at the 40th percentile of prevailing rents, based on a survey of recently rented units. For a small number of metropolitan areas, the FMR is set at the 50th percentile, or median rent. Between 2007 and 2008, HUD revised the methodology for calculating FMRs in order to better reflect market rents. The new methodology yields higher FMRs for some areas and lower FMRs for other areas. Due to the revised methodology, the analysis this year does not examine trends in rents between 2007 and 2008.

Information on prevailing wages for the selected occupations comes from a proprietary database maintained by Salary.com.

How is affordability calculated?

For homeownership, we calculate the income required to qualify for a mortgage on the median priced home by assuming a 90 percent loan-to-value ratio (that is, a 10 percent downpayment plus the use of private mortgage insurance). Monthly payments are calculated to include loan principal and interest as well as estimated taxes and insurance. These payments are annualized and assumed to comprise no more than 28 percent of annual income in accordance with conventional underwriting guidelines. The salaries for each of the 65 occupations are then compared with this “qualifying income” for each metropolitan area.

For rental housing, we compute the “housing wage” needed to afford the unit. This concept, developed by the National Low Income Housing Coalition, is the hourly wage that must be earned so that gross rent does not exceed 30 percent of income, a commonly accepted standard of affordability. Actual wages for the selected occupations are then compared to the housing wages.

For more details on both homeownership and rental calculations go to Calculating Homeownership Affordability and Calculating Rental Affordability.

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