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.
It is important to note that the most recent update to
Paycheck to Paycheck also provides users with the option to choose five health care occupations automatically: registered nurse, licensed practical nurse, nursing aide, physical therapist, and home health aide.
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 63 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/estimates/metro_general/List1.txt 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, the nonprofit research affiliate of the National Housing Conference (NHC). The Center for Housing Policy combines state-of-the-art research with the insights and expertise of housing practitioners. The Center works to broaden understanding of America’s affordable housing challenges and examines the impact of policies and programs to address those needs. For more than 75 years, the nonprofit NHC has been the nation’s premier public policy and housing advocacy organization.
Funding for
Paycheck to Paycheck has been provided by
Freddie Mac. Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible for one in six homebuyers and nearly four million renters in America.
How frequently is Paycheck to Paycheck updated?
At present, the Center is updating the database annually. However, look for bi-annual updates in the near future.
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 60 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. Also, summary listings of the most and least affordable metropolitan areas are below:
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.
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.
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 recently updated Department of Labor’s list of occupations with the largest expected growth through the years 2002 to 2012 includes retail salespersons (510,000), food preparation workers (454,000), cashiers (454,000), and janitors (414,000). 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, stock clerks, construction laborers, and home health aides 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, teachers and firefighters, have been selected for the vital role they play in our communities. The same can be said for librarians, 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.
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 60 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.
