The United Ways of Iowa and United for ALICE recently released a new report Alice in the Cross Currents: Covid and Financial Hardship in Iowa. The report is an update to United Way's analysis of Asset Limited, Income Constrained, Employed (ALICE) households across Iowa. It also provides major new insight into how low- and moderate-income families saw their situations change through the COVID-19 pandemic.
The report's key finding highlights the financial struggle facing many Iowa families:
According to United Way, 36% of Iowa households do not have the financial resources to afford a basic budget for financial survival.
While we often speak of people in our community who live in poverty, the ALICE report authors argue the government's official poverty measure falls short of identifying all the people struggling financially. ALICE households earn more than the Federal Poverty Level (FPL) yet still struggle to meet basic household expenses. The FPL, developed in the mid-1960s by Mollie Orshansky of the Social Security Administration, provided the first measurement of poverty in America.
The FPL operates under the assumption that a household spends about a third of its income on food. The USDA developed the Economy Food Plan that meets the nutritional needs of an individual at the lowest possible price. The FPL takes this number and triples the amount to produce poverty thresholds. There have been some changes since the inception of FPL, but these basic calculations form the poverty thresholds today.
The ALICE threshold provides an alternative--and arguably far more complete--measure of financial hardship by updating the assumptions of what financial hardship constitutes in the 21st century. Rather than a blunt tripling of an economical food basket, the ALICE Household Survival Budget includes housing, childcare, transportation, healthcare, taxes, technology (including a smartphone), and food. For a family of four, the 2021 FPL was $26,500, and the ALICE threshold was $61,308, providing a much higher threshold that better reflects financial hardship in Iowa.
Federal Poverty Limit, Iowa, 2021
ALICE threshold, Iowa, 2021
The ALICE report found 36% of Iowa households were below the ALICE threshold. A single person working full-time to exceed the threshold would have to make more than $12.10 per hour compared to $36.65 per hour for a family of four. In Polk County, 23% were below the ALICE threshold, and 9% were below the FPL.
In addition, the report sheds more light on who is struggling in Iowa communities.
Many workers in the most common occupations were below the ALICE threshold, including half of waitstaff, fast food, and counter workers.
Financial hardship was not evenly distributed across the various races of Iowa households, with 60% of Black households below the ALICE threshold compared to about 30% of White households.
The family form strongly affects financial hardship with over half of Single-Female-Headed (with children) households below the threshold compared to 14% of married (with children).
The Polk County Housing Trust Fund partners with many organizations and developers to create affordable housing for struggling families. We want to thank the United Way for its leadership and the creation of a novel measurement of financial hardship. You can find additional cost of living calculators and other local housing data in our Housing Policy Reading Room.
In 2021, Iowa had the second highest homeownership rates in the country following only West Virginia (Urban Institute, 2021). Our state offers lower cost of living, and Des Moines was named the 14th best places to live by U.S. News.
Unfortunately, not all groups are able to access homeownership at the same rate as white residents. Non-white Iowa residents have much lower homeownership rates as shown in the figure. Only 39.0% of Black households in Polk County own their homes compared to 72.1% of White households. A higher share of Polk County Black households are homeowners compared to the rest of the state at 32%. Other non-White households have higher rates of homeownership in Polk County with 41.6% of Hispanic households and 58.9% of Asian or Pacific Islander households.
The Polk County Housing Trust Fund partners with community organizations such as HOME, Inc., Neighborhood Finance Corporation, and the Greater Des Moines Habitat for Humanity to help households reach their goal of homeownership. These organizations, together with many lenders and others, recently contributed to an affordable homeownership guide available for download here. It details many of the free, confidential services available to help community members overcome barriers to owning a home.
Arie True-Funk is PCHTF's director of research and planning. She periodically shares key insights about local housing data here on PCHTF's blog. Have a housing topic you'd like to see us explore in a future post? Leave a comment below with your suggestion or idea.
As we speak with the community about the need for housing options people can afford, we’re often asked, “So how much housing do we really need?”
Today the Polk County Housing Trust Fund is making available a new report that gives one answer: About 11,635 additional units of rental housing are needed that would be affordable and available for extremely low-income people living in Polk County. To be considered Extremely Low Income in our area, a person or family is trying to get by on around $25,000/year or less.
But where does that number come from? And what does it really tell us?
To arrive at that estimate, we use a methodology designed by our colleagues at the National Low Income Housing Coalition to produce their annual report called The Gap. Overall, this method uses U.S. Census data to compare the number of low-income renters to the number of housing units in our community they can afford.
Pretty quickly, this data reveals two key problems:
First there is an absolute shortage of rental homes that are affordable to extremely low-income renters. In Polk County, that absolute shortage is about 8,600 units.
Then there is a second problem: About half of the rental units that could be affordable for an extremely low-income household are instead occupied by people with higher incomes. This squeezes out the most vulnerable people and leaves them living elsewhere, often paying rents they struggle to afford.
Adding those two issues together is why we say there is a significant shortage of rental housing (11,635 units) that is both affordable and available for extremely low-income people and families. The consequences of this problem are severe.
One note: The Census data we use to complete these calculations lag somewhat behind current trends. Our current calculations are based on pre-pandemic 2019 data. We will update our report as new information becomes available.
Over two-thirds of these extremely low-income renters are paying more than half of their income in rent. That puts the health and safety of these people and families at risk and can even leave them one unexpected major expense away from serious financial peril including homelessness.
You can download our complete white paper to learn more about this local data.
So what do we do about it? This data is why the Polk County Housing Trust Fund specifically tries to help fund rental units that will be affordable for extremely low-income people earning at or under 30% of what’s typical in the area. They are the people and families struggling most to find a place to live. Here’s recent media coverage about efforts to provide this income restricted housing in Greater Des Moines:
Federal housing programs are also key to assisting these most vulnerable families – especially forms of assistance like the section 8 program that ensures rent will be affordable for people and families based on the amount they earn.
Our community’s need for housing is multifaceted and people with higher incomes can also find themselves in conditions where their housing is unaffordable. In addition, the Polk County Housing Trust Fund helps with several other housing challenges, such as funding owner-occupied repair programs so that low- and moderate-income people who do have a place to live are able to safely remain stably housed.
We will keep working so people and families have the housing choices and stability they need.