Where Idaho childcare and rent are unaffordable

This is part two of a three-part series.

Here is what one single mother told the Idaho Business Review (IBR) last week: “When I got this job a couple of years ago, I felt like I was finally going to get out of scraping by. But rent increases are what have happened to Boise and Idaho in the last couple of years. Two years ago, I was paying $1,125 a month in rent and now I’m paying $1,725 in rent. I’ve already been notified by my landlord that this fall, it will go up another $425 a month.”

Those are the words of Ceci Thunes, who opened her home and her heart to two adopted children, ages 3 and 8. By many measures, Thunes is a successful professional. She’s a Boise State University graduate with a full-time position as the state advocacy manager for the Center for Consumer Engagement in Health Innovation at a large health care nonprofit called Community Catalyst (CC). Thunes previously worked at Idaho Voices for Children, where her job was funded by a grant from CC . When the grant ran out, CC offered her a position before the pandemic at what she described as “Boston wages.” She now works remotely from Boise, where she’s lived since 1981.

Thunes rearranged many things in her life after she accepted the CC position: “I sold my house (in 2018) because I wanted to pay off my student loans so that I could have kids…I wish I could have my house back that I owned. But you know, those are choices that people have to make when they don’t have a lot of money or they don’t have a partner.”

Both rent and child care costs have affected Thunes during the pandemic, though she believes she’s been luckier than many. The loss of the 2021 Child Tax Credit (CTC) from the American Rescue Plan Act will still bring some hardship to her household: “I just feel so lucky that I was already remote; I still have a job, right? I can pay for the rent, because I live on Boston wages. I knew the Child Tax Credit wasn’t like a forever thing. I’m prepared for it; I can tighten my belt a little bit more; maybe have to dip into savings again. But I can guarantee that there are just millions of people across the country who are not prepared for this.”

Thunes has a $1,200 child care bill every month for care that’s close to her home. The $550 she received from the CTC really helped with that. With the double whammy of the loss of the CTC plus a rent increase, she does not know what she’ll do come the next school year; it’s likely she will have to move to find affordable rent for herself, her two children and the household dog.

What if Thunes did not have that “Boston wages” job at CC? She remarked: “If I were still working on Boise wages, I’d be living with my mom now…Just childcare and rent alone suck up most of my net income.”

Who can afford Idaho rent?

In our first installment on housing affordability, it was no surprise that median home prices controlled affordability around Idaho. In this installment, we take a deeper look at rent and childcare and how it affects housing affordability.

We first looked at rent, assuming a household like Thunes’ with one adult and two children. We assumed the household had the same used car from part one of this article series, with the same bare-bones liability car insurance, gas and a car loan of $10,000. We also adjusted the expenses for the change in household size.

In the IBR cost-of-living model, we used Thunes’ apartment rent to find the affordability threshold income for living in Boise in three different scenarios: her rent from last year at $1,125/mo., her rent currently at $1,725 and her projected rent in the fall of $2,150. We also added one scenario for the December 2021 Ada County median price home listing at $546,000 with 2021 property tax, and a 30-year fixed, 20% down mortgage at 3.5% for comparison.

All of our cost-of-living calculations used subsidized health insurance payments determined using the payment estimation tool at Your Health Idaho, which is Idaho’s medical insurance exchange, and included food stamp benefits from the Supplemental Nutrition Assistance Program (SNAP) and subsidized child care co-pay expenses through the Idaho Child Care Program for household incomes low enough to qualify for those benefits.

We calculated the threshold income needed to not go broke in Boise for Thunes’ household, which is the gross income needed to pay all expense estimates in our model. The threshold income for the $1,125/mo. rent was over $68,177 for Thunes and her two kids. At the $1,725/mo. rent, the threshold income was $83,111. At the $2,150/mo. rent, it was $93,688. For the Ada County median-priced house, the threshold was $105,482. These calculations used the 2020 tax tables and tax credits so they do not show the effect of the 2021 American Rescue Plan Child Tax Credit.

Rent by location

To examine how rent in different locations affected affordability, we returned to the five locations we used in the first installment of this article series: Boise, Coeur d’Alene, Idaho Falls, Lewiston and Twin Falls. We looked at renting one- or two-bedroom apartments respectively for a single parent with one child and a family of four with two working adults and kids aged 4 and 8.

Average apartment costs for one- and two-bedroom apartments were from apartmentlist.com for Boise and Coeur d’Alene. Rents for the other locations were estimated from the range of costs available from apartments.com and from local apartment listings in the three areas.

While Boise was the least affordable city to buy the median-priced single-family home, followed by Coeur d’Alene, these cities swapped places in the rental

affordability calculations: Coeur d’Alene had the most expensive rents of the five cities we looked at. Idaho Falls apartments were just as expensive as those in Boise, which was a surprise. Rents in Twin Falls and Lewiston were much more affordable.

For the single parent and one child household renting a one-bedroom unit, the threshold income for Coeur d’Alene was just over $60,000. The threshold income in Idaho Falls and Boise was approximately $50,000, and for Twin Falls and Lewiston was around $40,000.

For the family of four, the Coeur d’Alene threshold income for affordability was over $80,000. For Idaho Falls and Boise, the threshold income was over $70,000, and for Twin Falls and Lewiston it was over $60,000.

Rents in Idaho increased 64% in the five-year period from January 2017 to January 2022. The year-over-year (YoY) increase for 2020-21 was 12% and for 2021-22 it was 22%.

YoY rent growth in the Boise Metropolitan Statistical Area (MSA) currently stands at 21%, compared to 15% at this time last year. The city of Boise ranked No. 31 for the fastest rental increase among the nation’s 100 largest cities. Rents in Boise are up by 32.4% since the start of the pandemic in March 2020.

YoY rent growth in the Coeur d’Alene MSA currently stands at 24%, compared to 9% for YoY in 2020-21. Rents have increased 60% in Coeur d’Alene MSA over the last five years.

In comparison, the median home price in Boise has gone up 144% from the January 2017 price of $224,000, according to the January 2017 median price at realtor.com.

The affordability of childcare

The reason we included childcare as a major factor in the affordability of housing is visible on every plot of income vs. expenses for households with dependent children who need childcare. There were two programs in 2021 that helped eligible families with child care costs: an increase in federal CTC for federal income taxes and the Idaho Child Care Program (ICCP).

The federally supported ICCP is administered by the Idaho Department of Health and Welfare. This program is the culprit behind those sudden increases in household expenses at lower incomes for households with dependent children. For families eligible for the ICCP, below certain income levels, a household pays only a small co-pay for each child in care. Once a household reaches a certain income, it loses the subsidized care and the family must shift to paying market rates. The loss of this benefit  increases childcare cost by several thousand dollars a year.

The cutoff income varies depending on how many children are in child care, the ages of those children and whether the care is for half days or full days. For example, the cutoff income for this program for a household of two is $25,260; for a household of four, it is $38,000 and for a household of six, that income is $51,600. The co-pay amounts vary between $20 to $75 per child.

If there were no maximum incomes at which the ICCP subsidy was cutoff, for the case of Thunes, it would move the threshold income of affordability for a $1,125/mo. apartment from $68,117 to $56,310, and from $83,111 to $77,527 for a $1,725/mo. apartment.

The other childcare benefit IBR looked at was the CTC for the 2021 tax year. The American Rescue Plan legislation increased the federal CTC from $2,000 per dependent child for the 2020 tax year to a maximum of $3,600 for the 2021 tax year. Because Congress did not extend  the CTC increase beyond 2021, the CTC has reverted for now to its 2020 level for the 2022 tax year of $2,000 per child.

An additional feature of the American Rescue Plan gave half of this tax credit to families upfront, instead of making families wait all year to claim the CTC on their federal income tax return. Starting in July 2021, eligible families received half of their monthly CTC as a payment sent to them by the IRS.

The IBR cost-of-living model was built using the 2020 tax tables. To look at the effect of the 2021 CTC, we adjusted the model for the increase in the CTC from the 202 tax year to the increased amount in the 2021. For our example, we once again took the Thunes’ household as a starting point for one parent, two children, where one was under age 6.  Assuming a monthly rent of $1,725/mo., we found the effect of the 2021 CTC was not as large as the loss of the ICCP subsidy, though it did give some affordability relief at higher incomes. The affordability threshold income without the 2021 CTC was $83,111. With the 2021 CTC, the threshold affordability income was $77,832, for a net income improvement of $5,279.

What all this number crunching shows is a rather depressing result — that most families need to have a household income substantially greater than mid-$70,000 average median incomes for the Treasure Valley or the mid-$60,000 average median incomes for Coeur d’Alene to get by and not be broke by both housing and childcare costs.

Calculating Housing Affordability

The Idaho Business Review (IBR) built a cost-of-living model for Idaho, using data available as of Jan. 14. We generated hard numbers showing that an Idaho household must make more than the average median income (AMI) to buy a median-price single-family home in Idaho’s two hottest housing markets of Boise and Coeur d’Alene.

We explained how the model worked and the data we used in detail in part one of this series, titled Who can afford to buy a house in Idaho?

Cost-of-living examples

In our model, the threshold income where housing becomes affordable is just the gross income where the net income goes from negative (expenses exceed gross income) to positive (gross income exceeds expenses). For convenience, we call this the affordability threshold (gross income = expenses). It’s the minimum amount a household needs to earn to avoid going broke.

Using Boise as an example, to reach the affordability threshold in January 2022, a single person needs to make a minimum of $2,848 more than the Fannie Mae area median income (AMI) of $74,900 to afford the $546,000 December 2021 median-priced home, assuming a 30-year fixed conventional mortgage at 3.5% interest with a 20% down payment, which was the interest rate for excellent credit on Jan. 14. In this example, the single-person household has a new car loan of $21,500 and comprehensive-and-collision insurance for a new 2021 Ford Maverick.

If we swap out the new Maverick for a used car with a $10,000 loan and legal-minimum liability-only insurance, the affordability threshold shifts to $67,995. If we get rid of the car and buy a ValleyRide transportation pass instead, $288/year, the affordability threshold is $64,267.

To compare the effect of increasing household size, we gave every household in the rent and child care affordability analysis the same used car with the same $10,000 60-month loan at 4.5%. For a household of a single parent with one child, income has to be $13,194 more than the Fannie Mae AMI to buy the median-priced home in Boise. For a household of two working parents and two children, that amount goes up to a minimum of $27,786 over the AMI. These results for the three different households are shown in the accompanying expenses/income graph for a Boise median-priced home.

The Fannie Mae AMI data is good through March 2022.