Economic Conditions in Low- and Moderate-Income Communities

Transcription

1 Economic Conditions in Low- and Moderate-Income Communities 2017 Housing Innovation Marketplace Nebraska Investment Finance Authority March 21, 2017 La Vista, NE Kelly D. Edmiston, Senior Economist Federal Reserve Bank of Kansas City DISCLAIMER The views in this presentation are those of the speaker and do not necessarily represent the views of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

2 The Federal Reserve projects that the economy is expected to continue its moderate expansion over the near term. Long-run economic growth will be slower than in previous decades. 4% 4% 3% 2% 2.7% 1.8% 2.5% 1.6% 2.2% 1.7% 2.4% 2.6% 1.6% 2.3% 2.2% 2.0% 2.0% 3% 2% 1% 1.9% 1.8% 1.8% 1.8% 1% 0% 0% -0.3% -1% FOMC Projections -1% -2% -2% -3% -2.8% -3% -4% -4% LR Sources: Bureau of Economic Analysis; Haver Analytics; FOMC, Summary of Economic Projections (March 15, 2017) March 21, 2017 K. Edmiston, FRBKC 2

3 Tenth Federal Reserve District (Kansas City) March 21, 2017 K. Edmiston, FRBKC 3

4 Accessing the LMI Economic Conditions Report Click here from KC Fed home page to get to Community Development Research Page Click here from Community Development Research Page Captured from with SnagIt 11 March 21, 2017 K. Edmiston, FRBKC 4

5 LMI Survey Five three-part questions on economic conditions Overall assessment (LMI Financial Condition Index) Demand for Services (LMI Services Needs Index) Job availability (LMI Job Availability Index) Availability of affordable housing (LMI Affordable Housing Index) Access to credit (LMI Credit Access Index) Based on perceptions, but questions are objective (are things better, worse, or about the same?) Responses used to construct a diffusion index (a rolling benchmark) Indexes range between 0 and 200, where 100 is neutral An index below 100 indicates deterioration, even if the index is moving higher; and index above 100 indicates improving conditions even if it is declining March 21, 2017 K. Edmiston, FRBKC 5

6 The overall consensus of LMI Survey respondents is that economic conditions in LMI areas continue to deteriorate. The LMI Financial Condition index is significantly lower than 2013 highs. 120 Diffusion Index: 100 = Neutral Diffusion Index: 100 = Neutral Next Quarter Projection Relative to Previous Quarter Relative to Previous Year 20 0 Q Q3 Q Q3 Q Q3 Q Q3 Q Q3 Q Q Q Source: Federal Reserve Bank of Kansas City, LMI Survey March 21, 2017 K. Edmiston, FRBKC 5

7 Inflation-adjusted family income fell for all quintiles over the course of the recession and early recovery, but especially for families with the lowest incomes. Incomes have not recovered for those with the lowest incomes. 110 Index: 2000 = Lowest fifth Fourth fifth Second fifth Highest fifth Third fifth Data Source: Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements. 60 March 21, 2017 K. Edmiston, FRBKC 7

8 The consensus view of survey respondents is that jobs are more widely available for LMI workers. But large swings in the LMI Job Availability Index have been common in recent months. 140 Index (Neutral = 100) Index (Neutral = 100) Relative to Previous Quarter Next Quarter Projection Relative to Previous Year Q Q3 Q Q3 Q Q3 Q Q3 Q Q3 Q Q Q Source: Federal Reserve Bank of Kansas City, LMI Survey March 21, 2017 K. Edmiston, FRBKC 8

9 Other Labor Issues Highlighted by LMI Survey Reports In most larger places in the District, jobs are available for LMI workers (especially retail) if they are willing to accept the conditions and wages offered and are not especially difficult to employ (work, credit, and criminal histories) But many of the job gains have been part-time jobs Most survey respondents suggested that wages have been stagnant with job growth excepting regional changes in minimum wage Source: Federal Reserve Bank of Kansas City, LMI Survey March 21, 2017 K. Edmiston, FRBKC 9

10 The LMI Survey highlights a number of structural labor force issues leading to unemployment. Lower-skilled jobs filled by higher-skilled workers out of work Credit histories Criminal histories (especially drug charges) Transportation and childcare needs Change in residency Job readiness Significant turnover noted Source: Federal Reserve Bank of Kansas City LMI Survey March 21, 2017 K. Edmiston, FRBKC 10

11 Long-term unemployment (> 26 weeks) has declined sharply, but remains well above typical highs in previous recessions. Long-term unemployment is marginally higher for LMI workers Sources: U.S. Bureau of Labor Statistics; National Bureau of Economic Research; Haver Analytics; Federal Reserve Bank of Kansas City (internal data) March 21, 2017 K. Edmiston, FRBKC 11

12 120 Long-term unemployment is likely a key driver for continuing increases in the demand for social services. Diffusion Index: 100 = Neutral Next Quarter Projection Relative to Previous Quarter Relative to Previous Year Q Q3 Q Q3 Q Q3 Q Q3 Q Q3 Q Q Q Source: Federal Reserve Bank of Kansas City, LMI Survey March 21, 2017 K. Edmiston, FRBKC 12

13 Data on recipients of public assistance echo findings of the LMI Survey. 50,000 40,000 30,000 Thousands of Participants TANF Caseloads (families) Millions Share of Labor Force Unemployed SNAP 15% 12% 9% 20,000 6% Unemployment Rate 10,000 3% Sources: U.S. Department of Agriculture; U.S. Bureau of Labor Statistics; Office of Family Assistance March 21, 2017 K. Edmiston, FRBKC 13 0%

14 Data suggest that the ACA has significantly reduced the share of the population that is uninsured, but LMI Survey contacts have expressed concerns around some issues, especially cost. 25% 25% Urban Institute Gallup-Healthways Census 20% 20% 15% 15% 10% 5% Mandate, exchanges, and subsidies effective in fall of % 5% 0% Sources: U.S. Census Bureau, American Community Survey; Gallup Healthways Well-Being Index; Urban Institute Health Reform Monitoring Survey 0% March 21, 2017 K. Edmiston, FRBKC 14

15 Summary of LMI Economic Conditions The LMI economy is recovering, but lags the recovery of the national economy. Labor market conditions have improved for LMI workers (with a lag), but available jobs generally are not high quality. Long-term unemployed LMI workers are more likely to require services, and the demand for service remains very high by historical standards. March 21, 2017 K. Edmiston, FRBKC 15

16 Rental Housing Affordability Economic Conditions in Low- and Moderate-Income Communities March 21, 2017 K. Edmiston, FRBKC 16

17 Housing Wages Housing wage is the full-time (40 hours/week) wage necessary to rent a home at Fair Market Rent without spending more than 30 percent of gross income on housing. Fair Market Rent (FMR) is an alternative measure of residential rents calculated by the HUD. FMR is computed primarily to determine payment standard amounts for the Housing Choice Voucher program and several other assisted housing programs. FMR typically is set at the 40th percentile point within the rent distribution of standard-quality rental housing units to ensure that a sufficient supply of rental housing is available to program participants (to qualify for subsidies, rent cannot exceed the FMR). The housing wage can be used to suggest the number of hours (with caveats) of work required to rent a unit at FMR Hours = (HW/Wage) x 40 March 21, 2017 K. Edmiston, FRBKC 17

18 2016 Housing Wage by MSA $45 $40 $35 Source: Kelly D. Edmiston, Residential Rent Affordability Across U.S. Metropolitan Areas, Economic Review, Federal Reserve Bank of Kansas City, December, 2016 (available at National Low-Income Housing Coalition $45 $40 $35 $30 $30 Housing Wage $25 $20 National Housing Wage: $20.30 $25 $20 $15 $15 $10 $10 $5 $5 $ MSAs $0 March 21, 2017 K. Edmiston, FRBKC 18

19 120 Housing wages are lower in Nebraska but high enough to make fair market rent unaffordable (> 30 percent of gross income) for many low-income workers. Hours/Week 112 Source: National Low-Income Housing Coalition, Out of Reach, Min $10 $ U.S. ($7.25) Nebraska ($9.00) Omaha ($9.00) Lincoln ($9.00) Notes: Excludes any statutory overtime pay; assumes one wage-earner per household Minimum wage in (); Housing wages are $20.30 for U.S., $14.45 for the State of Nebraska, $16.08 for the Omaha MSA, and $14.65 for the Lincoln MSA. March 21, 2017 K. Edmiston, FRBKC 19

20 Rent Affordability in the U.S. 180 Index: 2005 = 100 Index: 2005 = 100 CPI Rent on Primary Residence Inferred Multifamily Rent ECEC Wage Core CPI less shelter Notes: Multifamily rents are inferred from several BLS/CPI series. The computation of multifamily rent assumes that owner equivalent rent (OER) is all single family (SF) and that rent of primary residence is ½ of each (based on micro data), implying that (approximately) (0.5)SF growth + (0.5)MF growth = growth in rent of primary residence Source: Kelly D. Edmiston, Residential Rent Affordability Across U.S. Metropolitan Areas, Economic Review, Federal Reserve Bank of Kansas City, December, 2016 (available at March 21, 2017 K. Edmiston, FRBKC 20

21 Rent, Income, and Affordability by MSA (2015) $2,500 All Other MSAs Least Affordable & Highest Dollar Rent Highest Dollar Rent Danbury, CT $2,000 Least Affordable Polynomial Trend Santa Cruz, CA San Jose, CA Napa, CA New York Oxnard-Thousand Oaks- Ventura, CA San Francisco $1,500 West Palm Beach, FL Flag Staff, AZ Vineland-Bridgeton, NJ Los Angeles Santa Barbara San Diego Santa Rosa, CA Salinas, CA San Luis Obispo Atlantic City Washington, DC Portsmouth-Rochester, NH $1,000 Hot Springs, AR Brownsville, TX Daytona Beach, FL Yuma, AZ $500 Source: Kelly D. Edmiston, Residential Rent Affordability Across U.S. Metropolitan Areas, Economic Review, Federal Reserve Bank of Kansas City, December, 2016 (available at $0 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 March 21, 2017 K. Edmiston, FRBKC 21

22 Percent Change in Affordability Ratio, % 30% 20% 10% 0% -10% -20% -30% Source: Kelly D. Edmiston, Residential Rent Affordability Across U.S. Metropolitan Areas, Economic Review, Federal Reserve Bank of Kansas City, December, 2016 (available at March 21, 2017 K. Edmiston, FRBKC 22

23 Change in Housing Affordability Across MSAs, % 60% 50% Harrisonburg, VA (James Madison Univ.) Less Affordable 40% Morgantown, WV (Univ. of WV) Manhattan, KS (KS State Univ.) MoreAffordable Midland, TX Pct. Chg. in Rent 30% 20% 10% 0% Texarkana, AR Hinesville, GA Warner Robins, GA Houma-Bay-Cane-Thibodoax, LA State College, PA (Penn. State Univ.) College Station, TX (Texas A&M) Odessa, TX -10% -20% Naples, FL Lafayette, LA (Purdue Univ.) -30% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% Pct. Chg. in Income March 21, 2017 Source: Kelly D. Edmiston, Residential Rent Affordability Across U.S. Metropolitan Areas, Economic Review, Federal Reserve Bank of Kansas City, December, 2016 (available at

24 Contact Information: Kelly D. Edmiston Senior Economist Community Development Department Federal Reserve Bank Of Kansas City 1 Memorial Drive Kansas City, MO kelly.edmiston@kc.frb.org March 21, 2017 K. Edmiston, FRBKC 24