Minimum Wage Hike Would Help a Little but Merely Dent the Rent Burden

An analysis by Zillow found that raising the federal minimum wage, which has been unchanged at $7.25 for 11 years, can improve rent affordability for the nation’s lowest paid workers but not enough in many locales to reduce the share of monthly income that these households pay for housing.

Nationwide, 29 states and the District of Columbia pay a minimum wage higher than the federal level, and an additional 48 localities have set their own wage limits. A further 25 states and several localities have minimum wage increases coming in 2021. We analyzed how rent burdens — the share of income used to pay rent — will shift for workers earning their metro area’s minimum wage or less, assuming that rents will be largely unchanged from the time of this analysis to the time raises are likely to be implemented (Jan. 1 in many cases). We found that in 37 of the 45 large metro areas analyzed, an increase in wages will lower rent burdens for minimum-wage-earners by at least 1 percentage point, and in some cases by more than 20 percentage points.

But minimum wage earners live in individual markets with their own local housing costs and pace of growth that combine to form the national aggregates — so applying these aggregates to renters in highly unique markets is misleading. Richmond, Va., is a good example: Even with its very large improvement in affordability once a wage hike is implemented, the lowest-income earners overall in the Richmond area will still be expected to pay almost half of their income on rent each month — still well above the threshold to be considered rent burdened. In just two of the large metro areas analyzed — Fresno and Bakersfield, Calif. — would the expected increase in minimum wages be enough to bring a typical renter earning the minimum wage below the 30% rent affordability threshold.

Read More