Minimum wage workers need to either find the time to work four jobs to afford a one- or two-bedroom rental or live with several roommates, according to a new analysis released Tuesday by Zillow.
In just 10 out of the nation’s 50 largest cities, renters who earn the minimum wage are able to afford the typical two-bedroom rental with a second person, the report found.
Renters are likelier to afford average rent more easily in even the most expensive markets when the city has a minimum wage that’s higher than the federal $7.25 hourly minimum, Zillow found.
“This is perhaps the only context in which San Francisco is more affordable than San Antonio,” said Nicole Bachaud, a Zillow senior economist. “Renters have been squeezed by record-fast rent growth while incomes haven’t kept up.”
The report used data from the Economic Policy Institute and rent data from the 2021 five-year American Community Survey from the U.S. Census Bureau. It then paired that data with the Zillow Observed Rent Index.
While recent research has found it’s less expensive to rent than to buy despite a rapid run-up in rent prices, renters are still being squeezed. That’s particularly true of low-income renters.
Renters and homeowners are considered cost burdened if they spend more than 30 percent of their monthly wages on housing costs, according to the U.S. Department of Housing and Urban Development. They are considered severely cost burdened if they spend over 50 percent of their wages on housing.
“Of the 10 cities where two full-time workers earning minimum wage could afford a typical two-bedroom rental, all have a minimum wage of at least $10 an hour,” the report found.
That applies to even the most expensive markets, like New York City, where it requires the wages from 2.7 full-time minimum wage jobs to pay for the typical two-bedroom apartment.
In Austin, Texas, where the minimum wage is $7.25 an hour, a two-bedroom home costs the equivalent of 5.1 minimum wage jobs to cover the rent.
Thirty states have a minimum wage that’s higher than the federal minimum, according to the Economic Policy Institute. Forty-seven localities have minimum wages that are higher than the the state minimum wage. In seven states, there is no minimum wage law, or the minimum wage is lower than the federal $7.25 an hour minimum wage.
More reform is needed to help improve housing affordability, the report said, because raising the minimum wage alone isn’t enough to make housing attainable.
In San Francisco, where the minimum wage is $16.99 an hour, renters need to make at least $49.01 an hour just to afford a one-bedroom rental, the report found.
It comes down to supply and demand, and cities need to do more to clear the way for housing construction to make housing more affordable.
“Clearing the path for more construction, especially at entry-level prices, is needed to make housing more affordable across the board,” Bachaud said.
That could include zoning reform that allows for the construction of duplexes, accessory-dwelling units or multifamily homes.
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